Anti-competitive behaviour under the Enterprise Act
This guide is based on UK law. It was last updated in
April 2008.
Traditionally the Office of Fair Trading (OFT) has tried to
prevent anti-competitive activity in the UK by imposing heavy fines
upon offending businesses. However, the prospect of a fine being
levied on a business has not always been enough to deter
individuals within that business from breaching competition
laws.
Since the introduction of the Enterprise Act 2002, however,
offending individuals can also face heavy personal fines and even
imprisonment for their involvement in cartels. The rationale behind
the criminalisation of cartel-type activity is that making
individuals personally liable provides a powerful incentive for
individuals themselves not to engage in this activity.
These criminal sanctions can only be applied against individuals
who set up and maintain so-called 'hardcore' cartels (for example,
agreements between competitors to fix prices, share markets, limit
production, and rig bids). Those prosecuted for dishonestly
engaging in cartel activity can face up to five years in prison
and an unlimited fine. The Enterprise Act has also
enabled the OFT to seek the disqualification of a director of a
company for a period of up to 15 years. Disqualification may be
sought where serious infringements of competition law are
established, not just for participation in hardcore cartels.
Though the Enterprise Act has been in force since June 2003,
until now the OFT has not prosecuted any individuals for cartel
offences. However, in December 2007 it announced that three UK
businessmen were charged in relation to the cartelised supply of
marine hose and ancillary equipment in the UK. The individuals have
also pleaded guilty to similar activities in the US, though US
authorities have agreed to allow them to serve their prison
sentence in the UK.
The Enterprise Act also encourages whistleblowers and the OFT
was given discretionary powers to protect individuals who report
anti-competitive conduct within a business from prosecution in
England and Wales. In certain circumstances the OFT will also offer
'rewards' to individuals in return for information on breaches of
competition law (see: Expose a cartel and
win £100,000, OUT-LAW News, 03/03/2008).
Likewise, the OFT offers companies coming forward early with
information on an infringement immunity from or a reduction of
any fine to be imposed. For example, Virgin Atlantic prompted an
OFT investigation which ended last year by coming forward with
incriminating information about its price collusion with British
Airways. Whilst British Airways was eventually fined a record
£121.5 million, Virgin received full immunity from fines, despite
being equally implicated in the anti-competitive behaviour.
Nevertheless, Virgin did not escape completely: in the US, Virgin
and British Airways have agreed to compensate individuals who
travelled on flights affected by the collusion. (See: BA fine underlines need for strict policies, says
expert, OUT-LAW News, 02/08/2007)
In addition to criminalising cartels and introducing the
possibility of director disqualification for serious breaches of
competition law, the Act introduced new procedures to empower
consumer bodies to make claims on behalf of individuals.
In January 2008, the high street chain JJB was ordered to pay
compensation to people who were over-charged when they purchased
certain replica football shirts between 2000 and 2001, after the
consumer group, Which? launched an action on behalf of
consumers. JJB had already been fined over £8 million by the OFT,
but has agreed to pay a further £20 to every customer who joined
the damages action, and £5 or £10 to any consumer who can produce
evidence of having bought a shirt at the time of the
anti-competitive behaviour.
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