UK: First UK Prison Sentences For Criminal Price-Fixing Will Encourage Greater Competition Law Compliance

Last Updated: 17 July 2008
Article by Guy Lougher

The sentencing, on 11 June 2008, of 3 former executives to significant terms of imprisonment for their part in a global cartel to fix the price of marine hoses will send a powerful message around the UK business community that the courts will not tolerate serious anti-competitive behaviour such as bid-rigging, customer sharing and price fixing.

The convictions and sentences relate to a sophisticated cartel, involving companies in several jurisdictions, that is alleged to have caused purchasers to pay at least 15% more than the competitive price for the goods in question.

Guy Lougher , Head of the EU and Competition Group at international law firm Pinsent Masons, stated that "this first UK criminal prosecution for unlawful anti-competitive behaviour has set a benchmark for subsequent courts to follow. The trial judge's observation that prison sentences could be even higher for any cartels initiated after the implementation in the UK of the criminal law provisions in June 2003 demonstrates that the UK courts are prepared to use the full spectrum of the 5 year maximum prison sentence. These judicial comments, coming on top of the OFT's recent unilateral offer of £100,000 for information leading to the uncovering of cartels, as well as the OFT's use of powers to raid domestic premises, will have a major unsettling effect on any companies and individuals presently engaged in cartel activity. I expect these three developments will make the OFT's already successful leniency provisions even more attractive for any cartelists tempted to break ranks."

The UK prison sentences of between 30-36 months exceeded the duration of the sentences imposed by the US courts in 2007 on the same individuals in relation to the same cartel. The US prison sentences, which at the time were the lengthiest ever imposed in the US on foreign nationals for antitrust violations, will not now need to be served separately. This is because the UK sentences satisfy the terms of an arrangement between the US and UK authorities that permit the US prison sentences to be served in the UK.

All three individuals were also the first in the UK to be disqualified from acting as company directors for periods up to 7 years because they had infringed EU or UK Competition Law. Given that this is the first such case, the Court has again set the punishment at a high level because the maximum duration for which an individual can be disqualified from acting as a director for breaching the competition rules is 15 years.

Alan Davis, The European Commission is undertaking a separate civil investigation into the marine hose cartel and potential heavy fines for the companies could be imposed, if an infringement is found. Potential third party claimants for damages will have to decide whether to await any new factual information that may be uncovered following a Commission infringement decision or to proceed now with a damages claim on the basis of the information flowing from the UK and US criminal proceedings. The OFT's successful conclusion of the UK criminal proceedings is likely to increase the US competition authorities' confidence in the UK procedures, which was dented somewhat by the House of Lords' ruling in the Norris extradition case in 2007.

This case clearly indicates the magnitude of the risk taken by companies and individuals that ignore EU or UK competition rules. Without an effectively implemented competition law compliance policy and guidelines, companies and their directors and employees will not be in a position to assess and manage that risk. They should therefore act now to review (or put in place) appropriate policies and guidelines and undertake staff training.

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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