CMA Obtains Director Disqualification for Breach of Competition Law

shutterstock_474636388

The Competition and Markets Authority (“CMA”) has today announced that it has secured the first disqualification of a director of a company which has infringed competition law. Under the Company Directors Disqualification Act 1986 (as amended by the Enterprise Act 2002), the CMA can apply to the court for a disqualification order to be made against a director in cases where a company has breached competition law and the director’s conduct makes him or her “unfit to be concerned in the management of a company[1]. This is the first time that the CMA has utilised this power.

In this case, poster supplier Trod breached competition law by agreeing with a competitor that they would not undercut each other’s prices for posters and frames sold online, with the agreement between the competitors being implemented using automated re-pricing software. The company received a fine of £163,371 for this behaviour.

A director of Trod was deemed to have contributed to the breach of competition law and was disqualified from acting as a director of a UK company for five years. The director gave a disqualification undertaking, which has the same legal effect as a disqualification order. The acceptance of a disqualification undertaking is another power possessed by the CMA, which will normally result in a discount to the period of disqualification.

In a statement made by Michael Grenfell, Executive Director for Enforcement at the CMA, the CMA issued a warning that it could pursue similar punishments in the future:

The business community should be clear that the CMA will continue to look at the conduct of directors of companies that have broken competition law, and, where appropriate, we are absolutely prepared to use this power again.”[2]

GB Eye Limited, the party with whom Trod had colluded, escaped similar retribution and obtained immunity as it reported the cartel to the CMA. The CMA’s leniency policy allows for immunity to be granted (or for a company to receive a significant reduction in any penalty) where it reports cartel activity and subsequently assists the CMA with the investigation.

It is worth noting that the CMA has had these powers since 2003 and this is the first time they have used them to disqualify a director. It remains to be seen if today’s development is the start of a new trend or an isolated event. Either way this ruling serves as a reminder of the personal repercussions which directors can face as a result of anti-competitive behaviour.

[1] See: s.9A (2) of Company Directors Disqualification Act 1986

[2] See: https://www.gov.uk/government/news/cma-secures-director-disqualification-for-competition-law-breach