Pictured above: Ed Wright, Partner at Nottingham law
firm Berryman.
The Government's current consultation on Competition
Disqualification Orders (CDOs), which now form part of the UK's
competition laws courtesy of the Enterprise Act, is likely to
result in a change in how the Office of Fair Trading (OFT)
approaches individual cases of breach of those laws by companies in
terms of director culpability, and mean directors will no longer be
able to rely on a lack of awareness as a defence to any breach by
their companies of those laws.
Ed Wright, a partner at Nottingham law firm Berryman explains:
"The OFT has not to date used its Enterprise Act power to seek any
CDO for any breach of competition law and, as such, it is thought
that the current CDO Guidance issued by the OFT fails to maximise
the deterrent effect of CDOs.
"The OFT issued a consultation paper on the 18th August 2009, on
proposed changes to its CDO Guidance, broadening the circumstances
in which a CDO may be sought. Under the proposed changes a
CDO would be likely to be applied for where the OFT or other
relevant regulator considers a director to be unfit to be concerned
in the management of a company, regardless of whether that
director's conduct contributed directly to the breach of
competition law in question.
"A CDO may, in certain circumstances, be applied for where a
breach of competition law has not been finally proven in a decision
or judgment, for example where the court has established the breach
but the finding is subject to an appeal that does not contest the
breach. It may also be applied for where no financial penalty has
been imposed where for instance the company in question has since
been liquidated. In certain circumstances, a CDO be imposed on a
director of a company that has benefited from leniency in financial
penalties, either under the OFT's Guidance as to the Appropriate
Amount of a Penalty or a reduction in a fine imposed by the
European Commission under its Notice on immunity from fines and
reduction of fines in cartel cases, contrary to current
practice.
"The current consultation will run until 20 November 2009, at
which time the OFT will publish its revised CDO Guidance and a
summary of the responses received. What appears clear however, is
that the OFT and other relevant regulators wish to implement a
change of approach and are likely to start deciding on the merits
of whether to apply for CDOs on a case-by-case basis, as opposed to
merely focusing on those cases in which directors are directly
involved in breaches of competition law as they have done up until
now.
"In view of this likely change of approach, it is increasingly
more essential for directors to proactively seek to uncover any
potentially anticompetitive conduct on the part of their company
and, to the extent that any such conduct is uncovered, to take
immediate corrective action. Should the OFT's proposals for
altering the current CDO Guidance be adopted, a director will not
in terms of mitigating against becoming subject to a CDO, be able
to rely on a lack of awareness that any particular conduct
constitutes a breach of competition law if that director ought to
have known that such conduct breached competition law."