It is a well-known feature of antitrust (or competition) law in the United States that violations carry criminal penalties, which are borne by individuals directly involved in anti-competitive conduct. Senior executives and employees of corporations who have facilitated serious anti-competitive agreements often face lengthy jail sentences and/or substantial personal fines in the US. The US aspects of the on-going global investigations into price fixing in automotive components have, for example, resulted in four Japanese nationals – executives of Yazaki – being sentenced by US courts to prison sentences ranging from 15 months to two years.10
Until relatively recently, however, competition laws elsewhere in the world did not carry criminal penalties. Under EU competition law, which has been in place for over 50 years, businesses that engage in anti-competitive agreements or conduct can face substantial (administrative) fines, but individuals are not fined, let alone subject to imprisonment.
Yet this is changing, and in recent years a number of major antitrust jurisdictions across the world have acquired a criminal law component. In the past few months alone, there have been significant developments in that respect in the UK, Belgium and New Zealand.
At one level, it might be seen as intrinsic to the most basic kind of anti-competitive agreement – competitors agreeing fixed prices, or allocating product markets or territories as between themselves – that it should be regarded as a crime. In the famous formulation of Adam Smith, the great 18th-century economist, when competitors agree on a "contrivance to raise prices", that is "a conspiracy against the public".11 There is, arguably, a sense in which an anti-competitive agreement, say, to fix prices is a form of fraud against the participants' customers: the parties are pretending to the customers that they are selling goods at a price that is a result of market competition, whereas in fact the price is a higher price resulting from collusion between them. Indeed, a decade ago, an attempt was made in the UK to prosecute companies for alleged price-fixing in generic medicines on the basis of the English common law offence of "conspiracy to defraud", although the criminal charges in this case were quoshed after the (then) House of Lords limited the basis on which any case could proceed.12
Moreover – moving from the theoretical to the practical - it is thought that, if individual executives and employees face personal liability for serious anti-competitive agreements (rather than the liability attaching only to the companies they work for), this will concentrate their minds and deter them far more effectively from involvement in such anti-competitive agreements. In turn, greater deterrence should result in fewer anti-competitive agreements, which is to the benefit of consumers and the economy generally. As the UK Government stated when it first proposed a criminal offence for seriously anti-competitive agreements:
United Kingdom - toughening the cartel criminal offence
For a decade, the UK has had a criminal offence for cartels. Individuals directly involved in the most serious kind of agreements between competitors – price fixing, output limitation, market sharing or bid-rigging – can be convicted of a criminal offence, with penalties of up to five years' imprisonment and/or substantial personal fines.
In the decade since the introduction of this "cartel offence", however, only two prosecutions have been brought and only one of these has resulted in a conviction – the prosecution relating to the marine hoses cartel (which was also being prosecuted in the United States), as a result of which three executives were imprisoned for periods ranging from two-and-a-half to three years.
The relative paucity of prosecutions under the UK criminal offence for cartels has had the effect, of course, that the deterrent effect of the offence is correspondingly weakened; if there are very few prosecutions, people think that there is only a remote risk of facing criminal penalties.
There has been a belief, within the UK Government and within the UK competition authorities, that the low level of prosecutions under the UK's "cartel offence" is, at least partly, attributable to the high statutory threshold for bringing prosecutions under the offence as formulated: namely, that the prosecution needs to prove not only that the individual was directly involved in the agreements concerned, but also that the individual acted "dishonestly". The concept of "dishonesty" in this context has been thought by the UK competition authorities to be vague, problematic and difficult to establish.
As a result, new UK competition legislation – the Enterprise and Regulatory Reform Act 2013, which will take full effect on April 1, 2014 – has sought to toughen the offence by removing the need to establish "dishonesty". Mere participation in the agreement concerned is sufficient to constitute commitment of the offence.
However, by way of counter-balance to provide some protection against the new tougher offence being applied in an excessively draconian fashion, the new legislation also contains a range of new exclusions and defences:
- Broadly speaking, an individual will not be liable under the offence if the anti-competitive agreement has been disclosed to customers or potential customers, or to the competition authorities, or has been published. Thus it is only secret anti-competitive agreements that will give rise to criminal penalties.
- It will also be a defence if an individual concerned can show that, before making the agreement, he or she took reasonable steps to disclose the nature of the agreement to his or her legal advisers. This defence will apply even if the legal advice was that the agreement is anti-competitive – offering potentially a loophole to individuals involved in serious anti-competitive agreements.
Belgium – new Competition Act
In September 2013, Belgium's new Competition Act entered into force, as part of the country's new Code of Business and Economic Law. One innovation is that it will now be possible to impose fines on individuals, as well as on companies, for cartel infringements. Personal fines will be up to a level of €10,000 (about GB Ł8,350 or US $13,350).
New Zealand – new criminal offence for cartels
There are comparable developments in New Zealand, where proposed legislation is under consideration – the Cartel Criminalisation Bill. This is to provide that individuals directly involved in the most serious kinds of anti-competitive agreement – price-fixing, market-sharing, output limitations and bid-rigging – will face criminal penalties, including up to seven years' imprisonment.
The legislation is controversial, and debate continues on some of the aspects that have also been the subject of controversy in the UK, such as whether it will be a defence to show that an individual honestly believed that his or her conduct was reasonably necessary for the purpose of legitimate collaborative activity.
Meanwhile, in the US...
At the same time as Britain, Belgium and New Zealand are in adopting or toughening legislation on criminal sanctions for serious anti-competitive behaviour, in the United States – the birthplace of criminal antitrust law – the rules are being applied with ever-increasing severity. In 2013, the Antitrust Division of the US Department of Justice announced that:
- the percentage of individuals convicted who are sentenced to imprisonment in the US has increased from 37 per cent in the 1990s to 71 per cent in the period 2010-2012
- the average prison sentence for those individuals has increased from 8 months in the 1990s to 25 months in 2010-201214.
As shown by the example of the Japanese executives imprisoned by US courts in the automotive components cartel case (see above), the reach of US antitrust law is such that it needs to be a concern for any individuals around the world whose products are sold (directly or indirectly) on US markets.
The reach of criminal enforcement for anti-competitive agreements grows ever wider around the world, and the laws are applied with ever-increasing severity. There is every incentive – for individuals as well as for companies – to ensure that their conduct is compliant with antitrust and competition law.
10 US Department of Justice press release,
"Yazaki Corp, Denso Corp and Four Yazaki executives agree to
plead guilty to automobile parts price-fixing and bid-rigging
conspiracies," January 30, 2010.
11 Adam Smith, The Wealth of Nations, Book I, Chapter 10, Part II.
12 See, for example, UK House of Lords judgment, R v GG  UK HL 17.
13UK Department of Trade and Industry, Productivity and Enterprise: a world class competition regime, Cn 5233, July 2001, paragraph 7.16.
14US Department of Justice Antitrust Division, Division Update Spring 2013.
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