Competition law risks for directors
Directors have a personal interest in their companies complying with competition law. The Competition and Markets Authority (CMA) has been using its powers to seek disqualification of directors from acting as such where they are considered to be “unfit”.
Unfitness can arise not only where the director contributes to the breach of competition law but also, without contributing, does nothing about ensuring compliance. This applies even where the director has no actual knowledge but ought to know about the competition misconduct.
Two features in particular stand out from recent history, firstly that directors of SMEs have been disqualified and, secondly, that the periods of disqualification have extended to over seven years.
As an alternative to a disqualification order, a director can agree with the CMA to undertake not to act as a director for a given number of years.
- Some recent examples illustrate the sanction to which directors are personally exposed:-
- agreement between two companies to fix online prices of posters and frames – 5 years undertaking
- residential estate agents within Somerset in a cartel to fix their minimum commission rates at 1.5% - disqualifications up to 5 years
- pre-cast concrete drainage products cartel - undertakings for 7.5 years and 6.5 years
- office fit-out companies colluding on the price at which each would bid for contracts – disqualifications up to 5 years.
These cases emphasise the necessity of directors understanding the principles of competition law, recognising the risks and knowing when to make dig deeper and/or seek legal advice. Questions for management include:
- What are our competition law risks?
- When did we last assess them?
- Do we have a record of this assessment?
- How do we manage these risks in practice?
- Is competition law a specific feature of our risk assessment/control framework?
- Do we give specific training on competition law to our staff and tell them what to do if a competition law issue arises ?
- Do the employees understand the competition law risks associated with their role, and what is likely to fall on the wrong side of the line?
For more information on this topic, please contact Sebastian Calnan, or you can give us a call on 0345 070 6000.