OFT to take a tougher stance with directors 30 Jun 2010

As part of its efforts to ensure that there are effective deterrent measures to prevent anti-competitive behaviour, the OFT has published its revised guidance on Competition Disqualification Orders (CDOs) in competition cases (the Revised Guidance). This guidance is likely to mean that the OFT will apply for more CDOs, and that directors who were not directly involved in, or even aware of, an infringement may face disqualification.

The Company Directors Disqualification Act provides that, where a company breaches UK or EU competition law, the OFT or sectoral regulators may apply to the court for a CDO. Under such an order, a director can be disqualified from acting as a director for up to 15 years if the court deems them unfit to be involved in the management of a company. A director includes any person occupying the position of director regardless of his or her title. Members of limited liability partnerships are also covered.

Publication of the Revised Guidance follows a lengthy consultation on proposed changes to the previous guidance on CDOs. The OFT was concerned that the policy contained in the previous guidance setting out how and when the OFT would take action did not maximise their deterrent effect.

The Revised Guidance has been published in response to this consultation. The important policy changes include:

•The OFT will be concerned not only with directors who were directly involved in an infringement, but also those directors who should have known or suspected competition law breaches at a company.
•Directors who fail to co-operate with any leniency process in an OFT investigation will not be offered immunity from CDOs whereas those that do co-operate and whose company benefits from leniency will be immune.
•Exceptional cases may exist where the OFT believes it would be appropriate to apply for a CDO irrespective of the fact that no prior decision or judgment has been issued on the breach of competition law. In such instances, there would be a burden on the OFT to satisfy the court that an infringement had been committed.

The Revised Guidance illustrates the importance of implementing a rigorous compliance policy throughout a company and of encouraging a culture of compliance. It also emphasises the need for all directors to be fully aware of competition law. Indeed the Revised Guidance states, “While the OFT and Regulators do not expect that directors should have specific expertise in competition law, they do expect that every director of every company ought to know that price-fixing, market sharing and bid-rigging agreements are likely to breach competition law.”

The ability of the OFT to seek an order where a director ought to have known or suspected a competition law breach means that directors should implement clear reporting requirements for commercial arrangements that may involve competition issues, should check on a regular basis the level of compliance in a company by using compliance training and audits and should take action immediately where any breach is discovered.

The OFT intends to develop further guidance for directors on their responsibilities under the Competition Act 1998 and in light of the conclusions of the OFT’s Drivers of Compliance report.

This article first appeared in Law-Now, CMS Cameron McKenna's free online information service, and has been reproduced with their permission. For more information about Law-Now, please go to www.law-now.com.