21 May 2013
(by Peter Whelan) On 25 April 2013, after almost one year of making its way through Parliament, the Enterprise and Regulatory Reform Bill finally received Royal Assent. The UK Cartel Offence will be reformed in a number of significant ways when this piece of legislation comes into force later in the year. Unfortunately, a potentially devastating flaw has crept into what started out as a very positive reform.
First, the definitional element of ‘dishonesty’ will be removed from the offence. Prosecutors will therefore no longer need to employ the (problematic) Ghosh test and prove that the defendant ‘dishonestly’ entered into a cartel agreement with another. Second, Section 188A of the EA will set out (additional) circumstances in which the Cartel Offence will not have been committed. Essentially, following the entry into force of the ERRA, the Cartel Offence will not have been committed where: (a) the defendant’s customers are given ‘relevant information’ about the (cartel) agreement before they purchase the product or service; (b) in the case of bid-rigging arrangements, the person requesting bids is given ‘relevant information’ about these arrangements at or before the time when a bid is made; or (c) in any case, ‘relevant information’ about the (cartel) agreement is published, before it is implemented, in the manner specified at the time of the making of the agreement in an order made by the Secretary of State. Relevant information includes the names of the undertakings involved, the product or service at issue and a description of the nature of the agreement.
Both of these legislative developments should be welcomed, as I have argued in an earlier . The requirement to prove ‘dishonesty’ should be undesirable in the area of competition law enforcement. Given that cartel activity is conducted for the direct benefit of companies rather than the individual cartelists, a requirement to prove ‘dishonesty’ would allow defendants to advance dubious justifications (e.g., they were cartelising to save jobs) during trials. In addition, the requirement may undermine the efforts of the legislature and the competition authority/prosecutor to harden attitudes to cartel activity (by requiring the existence of such hardened attitudes in the first place in order to secure convictions). Furthermore, the requirement may also raise an issue of legal certainty when the actus reus of the UK Cartel Offence does not inevitably contain conduct that points to criminality. The ‘carve out’ of agreements when relevant information has been provided helps to ensure that criminal cartel activity can be conceptualised as a violation of the moral norm against deception, thereby reducing the risk that the UK Cartel Offence will be interpreted as a legislative measure adding to the phenomenon of ‘over-criminalisation’.
Interestingly, and perhaps unfortunately, the reform of the Cartel Offence goes further than these two developments. In particular, Section 47 of the ERRA provides three new defences to the UK Cartel Offence. First, where the supply of the cartelised good or service in the UK is affected by the cartel agreement, it is defence to the Cartel Offence for a defendant to show that she did not intend that the nature of the arrangements would be concealed from customers at all times before they enter into agreements for the supply to them of the product or service. Second, it is a defence for an individual charged with the Cartel Offence to show that, at the time of the making of the agreement, she did not intend that the nature of the arrangements would be concealed from the CMA. Finally, it is a defence for an individual charged with the Cartel Offence to show that, before the making of the agreement, she took reasonable steps to ensure that the nature of the arrangements would be disclosed to professional legal advisers for the purposes of obtaining advice about them before their making or implementation.
The first two defences are not really problematic. Like the ‘carve out’ of agreements which are (in effect) publicised prior to their implementation, they can be rationalised as an attempt to link (criminalised) cartel activity to deception: an absence of an intention to conceal can be interpreted as an absence of an intention to mislead. Admittedly, their impact in practice may be negligible due to the potential difficulties in proving an absence of an intention to conceal.
The third defence is problematic, however. On its face, this defence allows cartelists to escape a criminal conviction where they have contacted their lawyers and informed them of their future plans to cartelise. This is troubling. There is presumably no obligation to follow the lawyer’s advice and the lawyers would, it seems, be under no obligation to inform the CMA of their clients’ future plans: the activity in question does not fit within the recognised exceptions to client confidentiality. In fact, lawyers will face professional discipline if they breach their clients’ confidence in this manner. The worry here is that cartelists will undermine the effectiveness of the criminal Cartel Offence by routinely seeking relevant ‘advice’ from their lawyers when they are considering entering into cartel arrangements with their competitors.
This particular flaw in the reformed offence is unfortunate: there has only been one successful prosecution under Section 188 EA since the Cartel Offence entered into force on 20 June 2003 and the CMA needs to improve upon its predecessor’s credibility concerning the enforcement of this offence if deterrence of cartel activity is to be achieved in the UK. The removal of ‘dishonesty’ should help the CMA in its enforcement strategy, but the availability of the third defence could significantly undermine its future efforts.
The original offence is contained in Section 188 of the Enterprise Act 2002 (‘EA’); and the revisions are in Section 47 Enterprise and Regulatory Reform Act 2013 (‘ERRA’).
R v. Ghosh  2 All ER 689.
See P. Whelan, ‘Legal Certainty and Cartel Criminalisation within the EU Member States’ (2012) 71(3) Cambridge Law Journal 677.
On the link between cartel activity and ‘deception’, see P. Whelan, ‘Cartel Criminalization and the Challenge of Moral Wrongfulness’ (2013) Oxford Journal of Legal Studies, forthcoming.
See P. Whelan, ‘Improving Criminal Cartel Enforcement in the UK: The Case for the Adoption of BIS’s “Option 4”’ (2012) 8(3) European Competition Journal 589.