The UK’s Competition and Markets Authority (CMA) has secured undertakings to disqualify two directors for breaches of competition law. While this is only the second time the CMA has used its director disqualification powers (having had them since 2003), it highlights the CMA’s increasing appetite to use these powers.
The undertakings in this case were secured from two directors (David Baker and Julian Frost), directors of an estate agency in Somerset. Following a Competition Act investigation by the CMA the company was held to have participated in a cartel between six estate agents in the area to fix a minimum level of commission fees in Burnham-on-Sea. The two directors were found to have been personally involved and to have failed to take steps to stop it.
The disqualifications are a timely reminder for directors to ensure they have a clear understanding of competition law and have taken steps to ensure compliance within their organisations.
Under the Company Directors Disqualification Act 1986, the CMA may seek the disqualification of an individual, either by court order or legally binding undertaking, from holding company directorships or performing certain roles in relation to a company for up to 15 years, where:
- The director’s company commits a breach of competition law; and
- The director’s conduct makes them unfit to be a director (even though they do not need to be directly involved in the breach itself).
The CMA is now considering whether to seek the disqualification of other directors involved in this cartel. However, the CMA has confirmed that it will not do so in relation to the directors of the companies that qualified for leniency under its leniency policy (which was granted for three of the six estate agents involved).
A business involved in a cartel will qualify for leniency where certain conditions are met, including the business:
- Admitting that it was involved the cartel activity;
- Cooperating fully with the CMA and providing it with all non-privileged information regarding the cartel;
- Not having coerced any other businesses to take part in the cartel.
These recent disqualifications demonstrate that the CMA is becoming more confident in seeking director disqualifications, particularly given that it was only around a year ago since it last successfully secured a disqualification.
The CMA’s Annual plan for 2018/19 confirms that the CMA “will continue to seek disqualification of directors of companies that breach competition law, to ensure unsuitable individuals cannot serve as company directors and in the most serious cases, we will pursue criminal prosecutions”.
Michael Grenfell, Executive Director for Enforcement at the CMA commented: “Company directors have an important responsibility to ensure that their companies don’t engage in illegal anti-competitive practices.” He added: “Today’s news should send a clear message to directors that if their companies breach competition law they risk personal disqualification.”
This is therefore a timely reminder for directors to ensure they have a clear understanding of competition law and have taken steps to ensure competition law compliance within their organisations.