30 Nov 2009

(by Andreas Stephan) The workshop, hosted by the on 12 November, highlighted concerns about Britain’s experience of criminalising cartel conduct. Approaching the subject from a multidisciplinary perspective, leading academics and practitioners in the area of criminal cartel enforcement were particularly critical of the design of the UK offence, and of the two prosecutions brought to date by the Office of Fair Trading. The workshop was organised by (University of Melbourne) and (Oxford). Programme and list of speakers available .

Comments from participants suggested growing unease with the criminalisation project, some asking whether imprisonment can be a workable sanction at all, outside the context of US Antitrust enforcement. Plea Bargains negotiated by US authorities under the shadow of a full trial, play in regularly securing custodial sentences for antitrust violations. A US-style system of plea bargaining does not exist in the UK or in other jurisdictions that have criminalised (e.g. Australia).

It was hoped that the criminal offence introduced in the UK by the Enterprise Act 2002, would lead to around six to ten prosecutions a year (, 2001 at 3.6). Only three executives have been convicted thus far () and four others are pending trial (). While criminal sanctions are being adopted by a number of jurisdictions (most recently, Australia), doubts were expressed over whether convictions could regularly be secured. A particular concern in relation to Europe was the European Commission’s inability to provide guarantees against criminal prosecution within member states. In international cases, a lack of cooperation between prosecutors was noted, raising concerns about double jeopardy.

The UK offence requires the prosecution to show that the executives ‘dishonestly agree[d]’ to fix prices, share markets etc. This was included to signal the seriousness of the criminalised conduct, but hinges on a contemporary judgement by a jury of what is dishonest ‘according to the ordinary standards of reasonable and honest people’ (R v Ghosh). In addition, the defendant must have known what they were doing was dishonest by those standards.

Given that some cartels involve only informal communication, and that others are motivated by crisis or avoiding bankruptcy, the issue of dishonesty may be central to any prosecution. As one speaker pointed out, dishonesty is unproblematic in other areas of English criminal law (in particular theft) because juries are hardly ever directed to consider it. Dishonesty in theft is apparent; in price fixing it may not be. A in 2007, showed that only 6 in every 10 Britons felt price fixing was dishonest, and only 1 in 10 felt imprisonment was an appropriate sanction. The issue raised enough concern in Australia for dishonesty to be dropped from the design of its criminal offence altogether.

A number of participants were critical of the OFT’s case selection. The defendants in Marine Hoses were actually arrested in the US; their guilty pleas to the UK offence, induced by a plea bargain with the US Department of Justice. This is something that attracted criticism from the Court of Appeal (R v Whittle, Allison, Brammer [2008] EWCA Crim 2560). Airline Fuel Surcharges is also problematic because it is alleged to have involved only a handful of telephone calls between British Airways and Virgin Atlantic executives. Moreover, the employees of one of the two companies party to the infringement (Virgin) have received complete immunity. Contrast this with the Construction Bid Rigging case, which according to the (1,945 pages, Tolstoy’s War and Peace is only 1,456!), involved practices between a minority of firms more akin to a hardcore cartel. Yet the OFT is not pursuing criminal prosecutions in that case.

Signs of the OFT losing their enthusiasm for criminal prosecutions were highlighted, not least because of the heavily resource-intensive and protracted nature of criminal prosecutions such as Marine Hoses and Airline Fuel Surcharges. also suggests that Director Disqualification Orders are now top of their enforcement priorities, instead of criminal sanctions.

The workshop did not question the per se prohibition of cartels, or the adoption of individual sanctions in enforcement of the prohibition. There was a consensus that imposing hefty corporate fines years after cartels are formed, can only have a limited deterrent effect. Sanctions are needed to ensure the individuals who organise cartels bear the risk of breaking the law. However, it appears that the UK’s experience has left many feeling less enthusiastic about criminalisation. The debate now moves onto how alternative sanctions (such as Director Disqualification Orders) may be imposed on individuals so as to deter would-be cartelists.