Civil Fraud Quarterly Round-Up: Q1 2021
The Competition and Markets Authority (‘CMA’) has warned that UK companies and in particular large pharmaceutical companies are to expect “substantial fines”. Alex Chisholm, Chief Executive of the CMA wants to see “a big step up in the scale and impact of [their] enforcement activity”. Whilst he acknowledges that this is not the goal by which the CMA’s success should be measured, it is, however one element which acts as a credible deterrent. He goes on to say that in high value markets involving big players, such players should be ready to face big fines.
On the criminal cartel side, the CMA still appears to be lagging with only one on-going case reported on the CMA website compared to ten active civil investigations. The CMA’s new chief of enforcement, Dr Michael Grenfell was appointed in July 2015 and in his first speech in November last year, he vowed to put an end to “anti-competitive agreements, arrangements and concerted practices, abuses of dominance and criminal cartels”.
This comment comes on the back of the CMA’s defeat in the galvanised steel tanks case – a prosecution commenced by the OFT into cartel conduct in respect of the supply in the UK for galvanised steels tanks for water storage. Three individuals were charged with an offence under section 188 of the Enterprise Act 2002; one individual, Mr Nigel Snee pleaded guilty to dishonestly agreeing with others to fix prices, divide up customers and rig bids between 2005 and 2012 in respect of the supply in the UK of galvanised steel tanks for water storage. Following a trial the jury for the two co-defendants, Clive Dean and Nicholas Stringer were not persuaded that they had acted dishonestly and they were accordingly acquitted.
In his speech Grenfell does not attempt to hide the CMA’s disappointment at the verdicts) however he believes the CMA has learned from and is building on its previous mistakes and all is not lost. His takeaways include the judge’s comment on the “very thorough and comprehensive review” that the CMA team carried out on disclosure. This is undoubtedly following on from the procedural failure by the OFT which led directly to the collapse in the BA case in May 2010. Furthermore Grenfell is keen to highlight the judge’s comments in relation to Snee who was sentenced to 6 months’ suspended sentence with a community order thus avoiding time in prison. The judge commented that but for his cooperation with the OFT (and then the CMA) Snee would normally have been given a prison sentence of two years.
The message is clear: the CMA wants to prosecute individuals who engage in criminal cartels and those individuals (where appropriate) will be sentenced to prison as well as other consequences (for example disqualification of directors). The challenge for the CMA is going to be their ability to investigate and effectively prosecute such cases.
According to Grenfell it has invested in specialist expertise in digital forensics and better intelligence-gathering to uncover secret cartels (albeit to complement information received through its leniency programme). Crucially the law that applies to an agreement made after April 2014 which falls within the prohibited activity under section 188 of the Enterprise Act has changed with it no longer being a requirement for the CMA to prove dishonesty. The CMA (and the OFT before it) claimed that this was one of the biggest challenges in prosecuting criminal cartels. With this hurdle out of its way, it will be interesting to see what the future holds for the prosecution of the criminal cartel offence .
For further information, please contact Eve Giles or Maya Silva, or visit our page, Cartels, Competition and Price Fixing. You may also be interested in our related blog, "Scorecard for UK competition regime".
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