CARTEL OFFENCE: THE UK EXPERIENCE Philipp Girardet, SJ Berwin 44 th FIW Symposium, 11 March 20111580970v1
Overview The road to criminalisation in the UK Enforcement in the UK to date Marine Hoses case BA / Virgin case Challenges ahead
Criminalisation in the UK Extensive debate ahead of criminalisation A World Class Competition Regime White Paper, July 2001 The Hammond / Penrose Report, Nov 2001 Key considerations Hard core cartels damage the wellbeing of the UK economy Corp. fines under-deter given the low probability of detection Introduce a stronger element of personal responsibility Impact on OFT and DG COMP leniency UK survey suggested that 83% supported criminalisation The experience in the US and Canada Key omission in the debate Common law offence of conspiracy to defraud
The statutory cartel offence Section 188 of the Enterprise Act 2002: An individual is guilty of an offence if he dishonestly agrees with one or more other persons to make or implement, or to cause to be made or implemented, arrangements of the following kind relating to at least two undertakings Covers price-fixing, bid-rigging, market sharing and limitation of production and supply OFT and SFO can both investigate and prosecute Applies to conduct from June 2003 onwards
The statutory cartel offence Statutory sanctions Up to 5 years imprisonment Unlimited criminal fine Additional sanctions Asset recovery orders for proceeds of crime Director Disqualification Orders Extradition risks Adverse impact on employment prospects
Dishonesty Critical issue: what is dishonesty? To encourage juries to impose custodial sentences & to avoid juries having to consider complex economic evidence re effects The test in R v Ghosh [1982] Objective part - Does the jury think what the defendant did was dishonest according to the ordinary standards of reasonable and honest people? If the answer is no, the defendant is not dishonest. Subjective part: Did the defendant realise that reasonable and honest people would regard what he did as dishonest? 7 years, no jury has so far had to consider the matter
Dishonesty The notorious man on the Clapham omnibus test
53% of people interviewed thought it was not wrong for a carer to persuade a patient to change their will in the carer s favour
Recognised challenges Who should be the principal prosecutor? Government s preference was OFT Hammond/Penrose suggested SFO Enterprise Act both OFT / SFO Relationship between civil / criminal investigations All OFT investigations carried out to a criminal standard Hammond/Penrose suggested do criminal cases first Would cause significant delays to civil enforcement Role of leniency Admissions of dishonesty vs witness of fact role Pressure on witnesses to be helpful
Lessons learnt (1): Marine Hoses First criminal prosecution and conviction, May 2008 Involved global cartel with UK contracts alone worth 17m US co-prosecution and plea agreement Involved set-off provision for US jail terms UK guilty pleas meant UK hearings limited to sentencing First instance: Sentences in excess of US agreements (eg 3 yrs) Court of Appeal reduced terms to US length not having had the benefit of the kind of argument from counsel to which the court is accustomed Court had considerable misgivings about the case and urged that the sentences are not to be treated as guidance for future cases
Lessons learnt: BA / Virgin First prosecution in a contested case Allegations of criminal collusion regarding fuel surcharges for passenger flights between BA and Virgin between August 2004 and September 2005 Allegations of many millions of pounds worth of unlawful costs OFT prosecuted and relied heavily on Virgin for disclosure purposes All four BA defendants entered not guilty pleas in July 2009 Full criminal trial started on 14 April 2010 Trial collapsed four weeks later
Lessons learnt: BA / Virgin What happened? Oversight led to non-disclosure of some 70,000 emails Some of which had the potential to assist the defence Unrealistic to adjourn & OFT offered no evidence Defendants acquitted OFT said it would review Virgin s immunity grant BA said it would review its earlier civil settlement ( 121m) Key concerns OFT s reliance on leniency applicant for disclosure Reliability of prosecution witnesses? Threat to privilege Settling civil cases early?
What s next It is early days for UK criminal enforcement Slow and rocky start but continued commitment More active use of CDOs in civil cases Key issues going forward Separation of investigation and prosecution Role of immunity applicants Dishonesty Development of plea bargaining (cf leniency)
Philipp Girardet EU & Competition SJ Berwin LLP philipp.girardet@sjberwin.com