Daniel Aston, managing director of Trod Ltd (“Trod”) became the first director to be disqualified by the UK’s Competition and Markets Authority (“CMA”) after having been found to infringe competition law. The power to make such disqualification has been held by the CMA since 20 June 2003, but this is the first time that the power has been exercised, showing the CMA’s commitment to pursue companies and individuals for infringing competition law.
The CMA’s Powers Competition Disqualification Orders (CDOs) were introduced by the Company Directors Disqualification Act 1986, as amended by the Enterprise Act 2002. A CDO can be made against a director for up to 15 years if they are director of a company which is found to be in breach of competition law, and their conduct as a director makes them unfit to be concerned in the management of a company. It is a criminal offence for any person to contravene a CDO. This is in addition to any other powers that the court has to disqualify any director convicted of an indictable offence such as being part of a criminal cartel.
The alternative tool for the CMA is obtaining a Competition Disqualification Undertaking (“CDU”) from the person that they are pursuing. This is where the individual undertakes not to be a director of a company for a period of time without the leave of the court. This normally results in a shorter period of disqualification than the CMA may otherwise accept, but has the advantage to the CMA of avoiding court proceedings.
One of the anti-competitive behaviours that are commonly seen is price fixing. If two or more companies or businesses agree with each other to do one of the following:
• Charge the same prices to customers; • Offer discounts or increase prices at the same time; or • Charge the same fees to intermediaries, such as retailers selling your products
The activities may be regarded as anti-competitive.
The Facts Trod was found in August 2016 to have been participating in an agreement to fix prices with another seller of posters and frames, GB Eye Ltd (“GBE”), on Amazon’s UK website. The agreement to not undercut each other’s prices was implemented through the use of automated repricing software. Trod were fined £163,371, whilst GBE were not fined as they received immunity by “blowing the whistle” and reporting the infringement, and co-operating with the investigation.
In November 2016, having served a notice in October on Mr Aston, the CMA determined that it would bring proceedings for a CDO unless Mr Aston agreed to give a CDU for a period of five years. By accepting the undertaking, Mr Aston faces a shorter period of disqualification than he may have received if court proceedings were commenced. The CMA considered that as a result of Mr Aston’s conduct, both in his capacity as Managing Director of Trod and as a result of his personal contributions to the breach of competition law, he is unfit to be a company director.
Looking Ahead This decision is indicative of the CMA’s desire to be tougher on directors of companies involved in competition law breaches. The CMA now has a complete set of methods through which they can target both companies and their directors. It is also clear, through the 2010 guidance note “Director disqualification orders in competition cases” that CDOs will not only be sought against directors who are directly involved in competition law infringement, but also those who had reasonable grounds to suspect that competition law had been breached, and took no steps to prevent it.
Clearly, expectations are high, and the CMA should not be underestimated. Companies, directors, and employees should ensure that they are aware of the importance of compliance with competition law – especially given that actual knowledge of infringements is not necessary to run the risk of a CDO. The CMA will continue to look at the conduct of directors of companies who have broken competition law and will continue to exercise this power they have. The CMA has said that all directors must comply with competition law. Therefore, directors should be aware of what constitutes an infringement of competition law in relation to their business interactions within their market.