CMA campaign to crack down on cartels – but at what price?

22 March 2017

The CMA has upped its fight against criminal and civil cartels by launching an advertising campaign to promote its rewards of up to £100,000 for those who report them.  The examples the CMA gives in support of this campaign, of ‘real life cartels’, all fall within the civil competition regime where the CMA’s powers are limited to fining businesses and directors disqualification.  However, the campaign is also aimed at uncovering criminal cartels, where individuals can be prosecuted and imprisoned.  

The guidance sets out the circumstances in which rewards will be paid. It recognises the damage that competing companies may set out to cause each other with malicious reports, by making it clear that the reward will not generally be available to competitors without additional ‘inside’ information. 

These rewards have been available since 2014, but the background to this latest campaign lies in the research projects the CMA commissioned into UK Businesses’ Understanding of Competition Law and into SMEs, which established that knowledge of competition law and of the cartel offence was poor.  One of the stand-out lines from the SME Report was the comment by one participant that “you will have to enlighten me on what you mean by competition law.  To me, there is nothing I am aware of that is relevant “.  Elsewhere, a survey of public attitudes to price fixing in countries including the UK have found that when confronted with ‘non-traditional’ crime and wrong doing, the majority of respondents felt that, for example, misleading customers about the safety of goods, or driving while under the influence of drugs were more serious than price fixing and it was only the illegal downloading of music that respondents broadly felt was less serious than price fixing. 

This research only serves to re-enforce the concern of many criminal practitioners about the erosion of the mens rea required to prove a criminal cartel.  When the requirement for the prosecution to prove dishonest intent for those who enter into a cartel was removed under the Enterprise and Regulatory Reform Act 2013 (perhaps appropriately known as ‘ERRA’), the criminal law took a worrying step into the realms of potentially convicting people who were not aware that the agreements they had entered into were criminally wrong, let alone dishonest.  Prior to the change in the law, the OFT accepted that it is difficult to prove dishonesty where participants in cartels are driven by motives such as intentions to preserve jobs in the workforce or were acting under orders from superiors.  Often there is as much, if not more, evidence of fierce competition than there is of collusion.  The penalties for the offence (of up to five years in prison) are significant, as are the consequences to a business of being raided, directors arrested, staff interviewed under compulsory powers and open-ended criminal investigations commencing. 

Although the CMA’s campaign is said in part to be aimed at educating SMEs and others in respect of cartel behaviour, that message is unfortunately not very prominent.  This campaign and the rewards on offer may well lead to a number of new cartels being reported to the CMA for agreements which were made after 1 April 2014, and lead to participants being prosecuted criminally for an offence that they were not aware they were committing and for which they may have had honest motives. 

The CMA has statutory footing under the Enterprise Act 2002 to award immunity from prosecution to those involved in cartels.  It has often been at pains to point out that its intelligence capabilities are such that they will uncover cartels even if they are not reported through immunity applicants.  The fact that the CMA, in this recent campaign, is seeking to promote its US-style whistle-blowing rewards may suggest that, to date, its intelligence-led fight against cartels has not been quite as successful as it had hoped. 

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