24 Jun 2014

(by Andreas Stephan) A former managing director charged with the UK’s cartel offence to the criminal offence of price fixing. Peter Nigel Snee pleaded guilty to fixing the price of galvanised steel tanks used for water storage and now awaits sentencing. His case provides an important first test for the sentencing of cartelists under the UK’s criminal offence. Although Snee is the fourth individual to be convicted of the offence, the first three (in the Marine Hoses case) actually requested custodial sentences because of the peculiar conditions of a plea bargain entered into with the US Department of Justice. The issue of whether Snee receives a custodial sentence is important to justifying the use of criminal sanctions in UK cartel enforcement.

The defendant’s guilty plea was actually made in February but could not be disclosed until now because of a , apparently put in place while the OFT (now the Competition and Markets Authority or CMA) considered whether to charge others in connection with the same cartel arrangement. The infringement apparently took place between 2004 and 2012.

This is only the third case to be brought to trial. In 2008, were sentenced to between two and a half and three years at Southwark Crown Court. As discussed in my , these individuals were arrested in the US and repatriated to the UK as part of a plea bargain agreement. Under the terms of this agreement, the individuals had to plead guilty to the UK cartel offence and could not serve resulting sentences lower than those agreed to in the US. Failure to comply with this last condition would have resulted in their serving a ‘top-up’ sentence back in the US following their release. In the event, the sentences imposed in the UK were a little higher than those agreed in the US and the defendants succeeded in having them lowered closer to the levels agreed with the US, on appeal (Whittle, Allison & Brammar [2008] EWCA Crim 2560 28). The sentences in Marine Hoses were therefore strongly overshadowed by this unprecedented plea agreement, with the Court of Appeal expressing “doubts as to the propriety” of the arrangement. The only other cartel prosecution, of four British Airways executives, collapsed because of significant new email evidence being disclosed by the cooperating firm’s lawyers during the early stages of the trial.

In contrast to Marine Hoses, sentencing in the Snee case will have free discretion in terms of mitigating factors and whether or not to impose a custodial sentence. The experience outside of the US has been that cartelists receive hefty fines and sentences that are either suspended or to be carried out in the community. This includes jurisdictions such as Canada and Ireland where criminal sanctions against cartels have been available for some time. The difficulty with justifying incarceration lies in the fact a typical cartelist does not pose a danger to the public (at least not a physical danger), is very unlikely to have a criminal record and may otherwise be a well respected member of the community.

The question of whether a custodial sentence will be imposed hinges on how serious the judge considers price fixing to be, in spite of these mitigating factors. It also depends on the judge’s appreciation of why a custodial sentence is so central to achieving effective deterrence. If the UK goes down the road of non-custodial sentences, then criminalisation risks becoming a very expensive means for achieving a level of punishment that could more easily be realised through cheaper civil mechanisms. These include Competition Disqualification Orders (already available in the UK but never used) and civil fines against individuals. The criminal process is costly – the failed British Airways trial . Yet if custodial sentences become the norm, the resulting deterrent effect could prevent anti-competitive behaviour that harms consumers to the extent of many hundreds of millions of pounds in terms of artificial price rises and lost efficiency within the economy. There is a large body of academics and practitioners who subscribe to this view, including many in-house compliance lawyers who have publically stated that jail time focuses the minds of compliance trainees like no other sanction.