20 April 2011

Proposed changes to criminal cartel offence – a good thing?

Are proposed changes to the criminal cartel offence a good thing?  BIS published a consultation paper on 16 March 2011 containing its proposals for amending the criminal cartel offence introduced by the Enterprise Act 2003. The paper does not propose changing the status quo whereby only an individual, not a company, can commit the offence.   At the moment, to obtain a conviction, the OFT must prove not only knowing participation in cartel conduct but also dishonest participation. The paper outlines four options for what should replace this dishonesty element.

Why shouldn’t there be corporate criminal liability? It is natural that UK businesses want to limit the scope of criminal law as it applies to companies. But if corporate conduct is sufficiently nefarious, it should be criminalised. This is what underlies the Bribery Act: to drive home the message that corruption is unacceptable and should never be regarded as a “cost of doing business”. If certain types of cartel are seriously harmful and committed by individuals through companies where it is often difficult to identify who did what but easy to discern the overall conduct, why does the UK persist in wanting to exclude corporate liability?

Has dishonesty made the offence too difficult to prove? It is tempting to see this as the major reason why the OFT has had such a puny number of prosecutions and such a disappointing record. The truth is more prosaic: the OFT lacks resources and training. Although there was talk of sharing expertise with the SFO, history has shown that the OFT – with its regulatory outlook and almost total lack of relevant criminal law experience – has acted alone. Contrast this with the offence which is one of the most complex to prosecute and where the defendants are likely to be formidable opponents and the disastrous outcome in 2010 for the OFT of the prosecution of the BA executives looks like it was an accident waiting to happen.

Undoubtedly the dishonesty requirement has made this offence very difficult to prosecute. The UK is the only country which has made this mandatory, the others setting the bar at knowing participation in unlawful price-fixing. If a cartel offence is to be effective and thus act as a deterrent, dishonesty has to go.

Of the four replacement options put forward by BIS, only the second seems practicable: to limit the scope of the offence to certain types of activity or agreement. This option permits certainty as to what is caught and allows for beneficial agreements to be excluded. The first option of relying on state guidance as to what types of cartel should be criminal is surely constitutionally improper, although the same idea can be seen in the recent guidance issued for the Bribery Act. The third option, replacing dishonesty with secrecy, suffers from having to prove what is wicked about secrecy. The final option, granting carte blanche to cartels which are not secret, assumes a high level of consumer awareness and is probably unrealistic but that is the option favoured by the Government.

Corker Binning is a law firm specialising in cartels and company investigations, fraud and criminal work of all kinds.  For more information call us on 020 7353 6000 or go to www.corkerbinning.com.