Breaching Competition Law is bad - especially if you are a director.
Earlier this week the CMA secured the disqualification of a director of a pharmaceutical company in connection with his involvement in illegal anti-competitive practices.
The probe by the Competition and Markets Authority (CMA) into the supply of Nortriptyline, a drug relied on by thousands of patients every day to relieve symptoms of depression, has (to date) resulted in:
- fines of over £3million issued against companies involved;
- 2 of the companies having to reimburse the NHS to the tune of £1million; and
- as of this week, the disqualification of a 4th director*
*Although 1 of the disqualified directors appealed against his disqualification and was allowed to remain in his position as director of Alissa Healthcare Research subject to very strict conditions, and had to vacate director positions from other businesses.
The companies involved in the original CMA’s Nortriptyline investigation included ‘competitors’ of one another who, instead of competing, cooperated in an unlawful manner by sharing commercially sensitive information and devising a market strategy to avoid competition. This conduct meant the NHS and ultimately the UK taxpayer is likely to have paid over the odds for this important drug.
Director and/or senior management involvement in any competition law breach can be an aggravating factor in a CMA investigation and result in higher fines. The greater the involvement of directors in an infringement, the more likely this will result in the CMA seeking disqualification of those directors (especially in agreements between competitors as per the Nortriptyline investigation).
In the Nortriptyline investigation, almost all anti-competitive conduct was carried out by directors of Alissa Healthcare Research, King Pharmaceuticals, Praze Consultants and Lexon (UK).
Under the Company Directors Disqualification Act and the Company Directors Disqualification (Northern Ireland) Order 2002, the CMA has the power to apply to the court to disqualify a director from holding company directorships or performing certain roles in relation to a company, for a specified period, if a company of which he or she is a director has breached competition law.
The Act and the Order also allow the CMA to accept a disqualification undertaking from a director as an alternative to bringing proceedings and obtaining an order in Court; such an undertaking has the same legal effect as a disqualification order. Director disqualifications under the Nortriptyline investigation were secured by such undertakings.
The CMA has in recent years ‘ramped up’ its pursuit of disqualification actions against directors involved in breaches of competition law.
To protect themselves (and their directors), companies should consider their conduct and exposure relating to competition law to understand competition law risks and help them to take decisive action. This action should include the immediate cessation of any breaches and the consideration (and if appropriate, the submission) of a leniency application. Directors are granted immunity from disqualification under successful leniency applications.
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If you should have any questions about this article and/or queries about competition law, please contact Christopher Scerri.