UK: Criminalising Cartels – The New Rules

Summary and Implications

The Enterprise and Regulatory Reform Act 2013 makes significant changes to the criminal cartel offence, coming into force on 1 April 2014. This is intended to make it easier in future for the Competition and Markets Authority (CMA) to bring successful prosecutions against company executives for anti-competitive conduct.

From 1 April 2014 the functions of the OFT and the Competition Commission will be transferred to the CMA.

The consequence of these amendments is that company directors and other employees will need to exercise even greater caution to protect their own personal position when entering into co-operative arrangements with competitors which might fall within the scope of the cartel offence. The removal of the "dishonesty" test means that they will have to take active steps to avoid personal criminal liability.

Cartel offence

Under section 188 of the Enterprise Act 2002 (as amended by the new Act), the cartel offence applies where individuals enter into "hardcore" anti-competitive agreements aimed at:

  • price fixing;
  • limiting the supply/production of goods or services;
  • market sharing; and
  • bid-rigging.

It covers agreements between competitors, and runs alongside the normal civil provisions of UK and EU competition law applying to companies. The maximum penalty under the cartel offence is five years' imprisonment and/or unlimited fines.


The most significant and controversial change under the new Act is that there will no longer be any requirement to show that individuals acted "dishonestly" in entering into these agreements. The need to prove that the defendant's behaviour is "dishonest" was regarded as a major hurdle in bringing criminal proceedings.  There has previously been only one successful prosecution in the UK, in the marine hose cartel case. The OFT previously suffered a major set back in 2010 following the collapse of its prosecution against four BA executives in the airline passenger fuel surcharge case.

The removal of the "dishonesty" requirement has raised concerns that the cartel offence could in principle apply to a broader range of legitimate business transactions between competitors, including:

  • co-operative supply/distribution agreements which determine prices or output;
  • merger transactions where there are reciprocal non-compete covenants on the vendor and the purchaser; and
  • production/supply JVs which include non-compete covenants on the JV parties.

In future, these types of transactions will require careful assessment, not only under the general provisions of UK and EU competition law, but also with specific reference to the cartel offence.

The CMA has prepared draft Guidelines (Prosecution Guidance) on the cartel offence, which are due to be adopted shortly.


The new Act aims to mitigate these concerns by introducing a number of exclusions.

The cartel offence will not apply where:

  • customers are notified of the arrangements before entering into any supply agreements (the notification exclusion). This, however, requires something more than a broad, general disclaimer to customers;
  • in the case of bid-rigging, the customer inviting tenders is informed of the arrangements by the time the bid is submitted; and
  • details of the arrangements are publicised in the specified manner before they are implemented (the publication exclusion). The Government intends to draw up secondary legislation providing for publication of agreements in the London Gazette, Edinburgh Gazette and Belfast Gazette.

Company executives will therefore need to consider carefully the need to publicise business transactions which involve co-operative arrangements with competitors, utilising one of these exclusions, in order to protect themselves from possible prosecution.


There are also three new defences to any prosecution where the individual can show that:

  • he or she did not intend that the arrangements would be concealed from customers before entering into supply agreements with them;
  • he or she did not intend that the arrangements should be concealed from the CMA; and
  • prior to entering into the arrangements, he or she took reasonable steps to take legal advice.

As stated above, the prosecution will not have to establish "dishonesty", and the burden of proof will be on the employee to establish that he or she acted openly and that there was no intention to conceal the agreement. It will also be important for company executives to ensure that the company takes legal advice from either in-house or external lawyers. Curiously, there does not appear to be any requirement that the individual acts in accordance with any legal advice which the company receives or that the advice is favourable. It remains to be seen, however, how the CMA will interpret the scope of these defences.


These amendments may well mean that more business transactions involving industry competitors, such as co-operative JVs, will in future need to be disclosed, to take advantage of the notification/publication exclusions. There will also be a stronger incentive for employees to check that the company takes specialist legal advice before entering into any agreements with competitors. The changes are likely to create even greater scope for conflicts of interest between a company and individual executives, as well as a greater risk of whistle-blowing by employees.

The OFT has recently announced that criminal charges have been brought against an executive, Peter Snee, for his involvement in a suspected cartel in the supply of galvanized steel tanks for water storage. Although the case is being brought under the existing cartel offence, it is a sign that criminal investigations are likely to increase in future as part of a tougher enforcement regime.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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