The UK’s competition enforcement body, the Office of Fair Trading, yesterday published guidance for company directors on the level of competition law knowledge expected from them and the steps they should be taking to prevent, detect and stop competition law breaches. The message from the OFT is that company directors (including non-executives) bear ultimate responsibility for competition law compliance. The required standard is high, and each director is assessed according to his role in the company and the knowledge of competition law he ought to have. If a director does not meet the required standard (for example, by not having adequate compliance procedures in place or by failing to act to prevent a breach of competition law), he risks being disqualified from acting as a director for up to 15 years.

Directors’ liability

In the UK, in addition to fines on the company itself, breaches of UK or EU competition law can lead to individual criminal sanctions or a director being disqualified from acting as a director of any company that operates in the UK. If a court is satisfied that a director’s (or a shadow or de facto director’s) behaviour in connection with an infringement of competition law makes him unfit to be concerned in the management of a company, it can impose a competition disqualification order (CDO) for up to 15 years. Although there have not been any CDOs imposed to date, the OFT is of the view that fines against companies are not sufficient to ensure deterrence and that sanctions on individuals, whether in the form of CDOs or criminal penalties, are a vital compliment to its fining powers. CDOs are therefore expected to be increasingly used.

The director’s role in the company

Executive directors are under a higher burden than non-executive directors, as they are more familiar with how the company operates on a daily basis. The specific role of the executive director is also relevant, as those with responsibility for more high risk areas, such as sales, are expected to play a more active role (for example, by identifying risk areas and ensuring appropriate policies are in place to deal with any potential issues). Executive directors in large companies, even though they cannot be expected to have knowledge of all of the day-to-day business of the company, are expected to take steps to ensure that there are appropriate systems in place to prevent competition breaches. The OFT expects non-executive directors to challenge decisions and actions of executive directors and ask appropriate questions of them.

The director’s knowledge of competition law

All directors are expected to have the standard of skill and knowledge that is appropriate for their position and the nature of the company. Directors are expected to update and refresh their knowledge regularly. Although not all directors are expected to have specific competition law expertise, all directors are expected to understand at a minimum the most serious forms of competition law infringement, such as price fixing, bid rigging and market sharing. Outside these basic areas, directors should have sufficient understanding of the principles of competition law to enable them to identify risk areas and seek legal advice where appropriate. As directors are assessed not only against their actual knowledge of competition law, but against the knowledge they are reasonably expected to have, they should ensure that they keep themselves apprised of key developments in and the principles of competition law. It is clear that ignorance is no defence.