British Propose Lowering Bar For Prison In Cartel Cases

The United Kingdom’s Department for Business, Innovation and Skills (BIS), has announced that the Government plans to introduce legislation that would lower the threshold for criminal prosecution in cartel cases.

Under the proposed law, the prosecution would no longer have to prove an individual’s dishonesty in entering into a cartel agreement.    

The cartel offense was introduced by the Enterprise Act of 2002.  Under the Act, a person is guilty of the cartel offense “if he dishonestly agrees with one more other persons” to engage in price-fixing, limitation of supply or production, market-sharing, and/or bid-rigging.  The Act does not define the term “dishonestly.”  However, the traditional test for dishonesty in English law is that an individual acts dishonestly if his conduct is “dishonest by the standards of reasonable honest people, and the defendant knew what he did was dishonest by those standards.”

Critics of the proposed removal of the dishonesty requirement argue that criminal liability and imprisonment should be reserved for persons that brazenly and actively engage in hardcore cartel activity.  They fear that this change could extend criminal enforcement to peripheral participants in a scheme whose conduct may have been more naive than it was cunning and calculated.

Supporters of the amendment reject this argument and counter that persons do not accidentally participate in a hardcore cartel.  They regard doing away with the dishonesty requirement as a necessity in order to achieve the deterrent effect of the cartel offense.  Indeed, many lament that the criminal enforcement of competition in the United Kingdom has failed to deliver in that respect.  Since its adoption in 2003, the only convictions under this law resulted from plea agreements in the United States, not any proactive enforcement by the Office of Fair Trading (OFT).  The Government expressly stated that one of its goals in proposing this change to the cartel offense is to obtain more convictions that would serve as cautionary tales for individuals.

In what may seem like a paradox, the reform proposed by BIS also contemplates that the cartel offense could be avoided if the parties agree to publish key details of their arrangements in an official newspaper of record such as the London Gazette before they are implemented.  Some have commented that this “publication exception” to the cartel offense could be exploited by cartel participants, who might publish only an innocuous description of their arrangements while concealing their nefarious aspects.  Some critics argue that while the Government is seeking to expand the scope of criminal liability in one aspect, it may also be giving a way out to the most sophisticated – and dishonest – violators of competition law.

The proposed amendments to the cartel offense are but one element of a wider reform of the United Kingdom’s competition law regime proposed by the Government, which includes the merger of the OFT and the Competition Commission, Britain’s two competition authorities.  The British Parliament will ultimately decide the fate of the reform. If adopted, the reforms are expected to come into effect in 2014.