21 Sep 2010

(by Andreas Stephan) News that the Office of Fair Trading made an arrest last week in connection with a cartel investigation shows the authority’s determination to press on with criminal sanctions in cartel cases. However, following the , does the criminal offence really have a future in its current form?

The latest arrest came in connection with an alleged cartel between major international lorry (truck) manufacturers operating in the UK. Both criminal and civil investigations have been launched and a senior executive at Mercedes-Benz’s UK operation was apparently arrested and released on bail. According to the , the individual has 40 years experience in the commercial vehicles industry and sits on the board of the Freight Transport Association. He had also previously worked for a number of Mercedes-Benz’s competitors. All the companies under investigation say they have agreed to cooperate, and the OFT has stressed that their investigations are at an early stage.

Following the collapsed trial of four British Airways employees, the OFT faces three challenges in trying to breathe new life in the failing cartel offence, in its current form:

  1. Evidence Gathering – the British Airways trial revealed a seemingly blind over-reliance on evidence gathering by the cooperating party’s lawyers through the leniency programme. This leaves prosecutors particularly vulnerable in a case where there is only one cooperating party. In order to ensure this does not happen again, the OFT must do more good old fashioned police work.
  2. Dishonesty and Credibility – in order to secure convictions, the OFT must convince a jury that the defendants behaved dishonestly. This hurdle requires ‘hardcore’ evidence that the individuals knew what they were doing was wrong, such as efforts to conceal cartel arrangements. The BA trial seriously damaged the credibility of the criminal offence, and of the OFT, not least because the alleged evidence primarily consisted of e-mails rather than physical meetings. Juries may initially be unwilling to convict individuals on the basis of such evidence, especially when faced with defendants who are otherwise presented as upstanding members of society. While there is a general understanding that cartel practices are bad, the British public and business communities are yet to be convinced that they should be treated as criminal.
  3. Case Selection – The only convictions under the criminal offence (Marine Hoses) were seriously criticised for arising out of duress following a US plea bargain, and for concerning an obscure (upstream) industry with little popular appeal or recognition. The OFT keenly pressed forward with British Airways in response to those criticisms, but overlooked fundamental weaknesses in the case. Unless the Trucks investigation uncovers evidence with more teeth, it risks going the same way as British Airways.

Many will argue that these challenges are irreconcilable and that the current law should be repealed. Those advocating imprisonment as being of central importance to effective cartel enforcement (this author included) would prefer a new offence not based on dishonesty, managed by an agency with greater criminal prosecutorial expertise. The danger is that the failures of the current offence will be seized upon by those preferring a purely civil approach to cartel enforcement in the UK. Meanwhile, the OFT has two further investigations open into car electrical equipment suppliers and the manufacture of polythene film, bags and sacks. On the one hand, we should hope that, if an offence is found and a case is brought to court, it is backed by robust evidence and palpable dishonesty. On the other, this may simply prolong the life of a criminal offence that many see as ineffective and unfit for purpose.