26 Jul 2012
(by Peter Whelan) In order for it to be successful, cartel criminalisation in Europe must overcome complex theoretical, legal and practical challenges. Academics have an important role to play by offering theoretically-consistent, legally-sound, practical advice on how to devise and to implement a successful strategy of cartel criminalisation. In fulfilling this role, we should acknowledge when steps have been taken in the right direction by the EU Member States concerning the process of cartel criminalisation. Three significant steps have recently been taken by Ireland in this regard.
The first step occurred on 3 May 2012, when Mr Pat Hegarty was successfully prosecuted for his involvement in a cartel in the home heating oil market. Mr Hegarty became the first individual to be convicted by a jury in Ireland (and it appears in Europe) and was sentenced to two years in prison. Although his prison sentence was suspended, Mr Hegarty also received a fine of €30,000.
The second step occurred on 3 July 2012, when the Irish Minister for Jobs, Enterprise and Innovation signed a commencement order bringing into effect Section 10 of the Competition Act 2002. Section 10 allows for certain documents to be made available to juries in competition cases (such as transcripts of opening and closing speeches, transcripts of the judge’s charge to the jury, and any charts, diagrams, graphics, schedules or agreed summaries of evidence produced at the trial).
The third step also occurred on 3 July of this year, when the relevant Minister also signed a commencement order bringing into force the provisions of the Competition (Amendment) Act 2012. Accordingly, convicted cartelists now face a maximum sentence of ten years for involvement in a cartel, rather than the five years maximum which was previously applicable. In addition to this, those convicted of cartel activity will no longer be able to request the benefit of Section 1 the Probation of Offenders Act 1907 (which, for example, allows a court to find the facts proven and nonetheless dismiss the charge at issue). Furthermore, director disqualification orders will also be available for non-indictable competition offences. Previously, only a person convicted of an offence on indictment could be so disqualified.
Each of these steps outlined is significant and should be welcomed by those who wish to see robust anti-cartel enforcement in Europe. For a start, the fact that a cartelist has been convicted following a trial by jury undermines somewhat the argument of those who feel that jury nullification is an inevitable part of the process of cartel criminalisation. Cartel activity is an activity that jurors can understand: determining the existence of a cartel does not involve sophisticated economic analysis that is beyond the comprehension of ordinary citizens. Moreover, by convicting Mr Hegarty the jurors have demonstrated either that they believe cartel activity is inherently wrong or that the existence of such a belief regarding wrongfulness is unnecessary, even when the imposition of criminal sanctions is at issue. Either of these explanations would be acceptable to advocates of cartel criminalisation.
The second step also reduces the potential for jury nullification in future cases because any confused juror may seek the benefit of Section 10 of the Competition Act 2002: the trial judge now has the power to make available documents which help to reduce a juror’s possible confusion.
In addition, the increased maximum penalty facing a convicted cartelist may emphasise the support of the Irish legislature for the criminal antitrust regime in Ireland. Admittedly, the main driver of the reform was the acceptance by the Irish Government of the ‘’ offered by the EU and the IMF (see blog post by ), which required (at page 24) that the legislature ‘introduce reforms to legislation to empower judges to impose fines and other sanctions in competition cases in order to generate more credible deterrence’. However, the fact that the maximum penalty was doubled, rather than say increased by two to three years, could be interpreted as an acknowledgment by the legislature of the harmfulness of cartels and of the need for a very serious legal response to their occurrence.
These legislative measures should have a signalling effect on trial judges, who are being encouraged to be stricter in future in the sentencing of cartelists. It is true that this signalling effect will not be as strong as that established in US federal antitrust law in the 1980s by virtue of the publication of the (detailed, methodological and specific) US Federal Sentencing Guidelines. It is also true that the actual impact of the signalling effect will depend very much on the perceptions of the judiciary regarding the seriousness of cartel activity. The point here is that, provided the judiciary understand the seriousness of cartel activity, they may well respond to this legislative encouragement. Fortunately there appears to be growing judicial support for the use of criminal cartel sanctions in Ireland. A current Justice of the Irish Supreme Court, for example, has expressly stated his (‘strong’) agreement with my assessment that cartels represent a fundamental violation of prevailing moral norms.
Some may argue that a ten year maximum sentence is too high and that a five year one would be more appropriate. I tend to disagree. Cartels can reasonably be conceptualised as violations of the moral norms against stealing, cheating and/or deception. The aggregate harm caused by cartels can be immense and involves an interference with a socially valuable interest (viz., the successful operation of the free market). Importantly, optimal fines cannot be imposed due to the negative social costs that will be engendered, and a significant term of imprisonment can help to fill this ‘deterrence gap’. A ten year maximum of course does not imply a ten year average sentence. A sentence of ten years would only be imposed in the most serious of cases, perhaps where extreme, violent behaviour was used to enforce the cartel. By employing a maximum of ten years, the Irish authorities are obviously following the lead of the US federal regime in form: convicted cartelists face an equivalent maximum custodial sentence across the Atlantic. By imposing an average sentence of, say, two to three years, the Irish judiciary could also follow their American counterparts in practice. If sufficient resources are dedicated to the fight against cartels in Ireland (such as the promised 25% increase in staff at the Irish Competition Authority), that particular jurisdiction may well achieve anti-cartel enforcement successes which are equivalent (relatively-speaking) to those apparent in the US.
None of the above should be taken to suggest that there are no potential problems with the Irish anti-cartel enforcement regime. Indeed, the Irish regime is not exactly perfect. For example, custodial sentences cannot be imposed upon convicted bid-riggers unless their bid-rigging activities can be conceptualised as a form of price-fixing. Furthermore, irrespective of the fact that juries may be prepared to convict, to date the judiciary in Ireland has only imposed suspended sentences upon convicted cartelists. In future, for the threat of custodial sentences to become a real threat judges must be prepared to send cartelists to prison. For the moment, one can perhaps take comfort in the comments of Mr Justice McKechnie in  IEHC 208, at , where he notes ‘that if the first generation of carteliers have escaped prison, the second and present generation almost certainly will not’. But naturally one will have to wait and see if this particular prophecy will unfold in future. The point here, however, is that significant important steps have been taken in the right direction by this particular Member State ― a fact which provides a glimmer of hope for those who advocate the criminalisation of cartel activity across Europe.
P Whelan, The Criminalization of European Cartel Enforcement: Theoretical, Legal, and Practical Challenges (Oxford University Press: Oxford, forthcoming).
See DPP v. Duffy and Duffy Motors (Newbridge) Ltd  IEHC 208, at .