Cartel tales: the Office of Fair Trading has intensified its campaign against price-fixing and is pressing for heavy penalties. Neil Hodge proposes ways to minimise the risk of prosecution--including blowing the whistle on suspected offenders.
| Author | Hodge, Neil |
While price-fixing has been an offence in the UK for only five years, lawyers believe that the increasing willingness of the competition watchdog to investigate alleged abuses and bring criminal prosecutions means that UK companies must learn how to comply--and fast.
Over the past year the Office of Fair Trading (OFT) has handed down large fines for anti-competitive practices and--for the first time--prosecuted directors with cartel offences. In December 2007 it charged three businessmen with dishonestly participating in a cartel to allocate markets and customers, restrict supplies, fix prices and rig bids for the supply of marine hoses and ancillary equipment in the UK over a four-year period. They face up to five years in prison and/or an unlimited fine for violations under section 188 of the Enterprise Act 2002, which made price-fixing a criminal offence for the first time when it took effect in 2003. Their companies also face fines of up to ten per cent of annual turnover if they have infringed article 81 of the treaty of Rome, the European Union's founding document, which prohibits anti-competitive practices.
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The OFT also made headlines by fining British Airways 121.5m [pounds sterling] in August 2007 after the airline admitted collusion in fixing the prices of fuel surcharges, while sending a "no-action letter"--in essence, an amnesty in exchange for information to encourage firms to inform on fellow operators--to Virgin Atlantic, which had participated in the price-fixing arrangement on six occasions before blowing the whistle. Criminal investigations regarding some of the individuals involved are still pending, according to the OFT.
Other investigations include an ongoing probe into some of the UK's largest supermarkets and dairies for their alleged collusion to increase the prices of milk, butter and cheese between 2002 and 2003, which is thought to have skimmed 270m [pounds sterling] from British consumers. Several of the accused--Asda, Dairy Crest, Safeway, Sainsbury's, Robert Wiseman Dairies and The Cheese Company--soon admitted their involvement and in December were rewarded for owning up with a reduced collective fine of only 116m [pounds sterling]. But the OFT is continuing its case against the other parties involved.
As a result, lawyers are advising all companies to tread carefully and re-examine their business practices and compliance procedures, especially as a failure to co-operate with an investigation carries a range of penalties that include unlimited fines and imprisonment for up to five years. Lawyers also warn that fines are often increased for repeat offenders, and that under section 199 of the act the OFT can conduct intrusive surveillance of those suspected of involvement in a cartel, including planting bugging devices in people's homes, hotel rooms and private vehicles. As if that...
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