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Personal liability and competition around the world

In September 2020, the UK’s competition enforcer, the Competition and Markets Authority (CMA), launched a new guidance document in conjunction with the Institute of Risk Management designed to help managers and directors understand and address risk. Launching the guide, Andrea Coscelli, the CMA chief noted, “Individuals are far less likely to break the law if they know they may be held directly responsible for it. And the public rightly expects there to be personal responsibility for very serious wrongdoing in firms.” Competition law and anti-competitive practices This initiative to encourage senior leadership of Competition law is designed to protect businesses b. Anti-competitive agreements (excluding cartels) companies came only a couple of months after the and consumers from anti-competitive behaviour in are less obviously injurious to competition, CMA had successfully secured its first contested order to deliver open, dynamic markets and enhanced but nonetheless may result in a reduction of competition disqualification order (CDO). There, the productivity, innovation, and value for customers. competition in certain situations. Examples High imposed a seven-year ban on the director Although the precise approach of competition include joint selling or purchasing agreements, of an agent in Burnham-on-Sea who had been differs by , they typically target three types retail price agreements between suppliers and found to have engaged in price fixing with five other of conduct: (a) cartels; (b) other anticompetitive retailers, and long exclusivity periods. local estate agents. agreements; and (c) abuse of dominant position. c. Abuse of dominant position is a type of conduct The CMA is not alone in its focus on ensuring individual a. Cartels are the most serious anticompetitive whereby a business enjoys a dominant position in responsibility and accountability for breaches of agreements. They occur when two or more a market, and certain types of behaviour in which competition law. As shown in the infographic below, businesses agree – directly or indirectly – not to it engages may harm competitors or consumers. laws imposing personal liability for various types compete with each other. Such practices may of competition law breaches have become more include price fixing; bid rigging; limiting production; prevalent, with many countries now assigning some market or customer sharing; or exchange or form of personal civil or criminal sanction for breaching disclosure of commercially sensitive information. competition law. These developments highlight the significance of effective competition law compliance for the benefit of individuals. The growing threat of personal responsibility Only four prosecutions have ever been made against In practice, these sanctions have remained rare – partly individuals involved in cartel cases; these relate to the because the French Competition Authority has stated While the United States and Canada can trace the roots Marine Hose cartel (2008), the Air Passenger Fuel that in cases where parties benefit from the leniency of their criminal antitrust laws back to the nineteenth Surcharge cartel (2011), the Supply of Galvanised Steel programme, individuals shall not be prosecuted or fined. century, individual liability for breaches of competition law Tanks cartel (2015), and the Supply of Precast Concrete Since 1986 and until 2016 there have been an average has only proliferated globally in the twenty-first century. Drainage Products cartel (2017). It is worth mentioning of only about two criminal convictions per year, resulting The United States that in the Marine Hose cartel case, the defendants mostly in fines and suspended prison sentences. More In the United States, individuals may be sentenced to pleaded guilty in the UK to avoid a likely custodial recently, there has been increased cooperation between up to 10 years in prison and/or fines $1 million for any sentence in the United States, so a did not hear the competition and criminal authorities. From 2013 until anticompetitive practices. In fiscal year 2018 alone, 59 case, since disqualification orders are a decision solely for 2017, the average conviction rate increased to 3.8 individuals were sentenced in the United States, 21 of the to make. convictions per year, the average fine was about €8,000 whom were sentenced to incarceration time. and there were five suspended prison sentences. Civil sanctions are available in the form of competition The UK disqualification orders (CDOs). A CDO may disqualify a Historically, these convictions usually related to cases In the UK, the criminal cartel offence was introduced director from acting as a director for up to 15 years where of bid-rigging in public markets, where the individuals in 2003 by the Enterprise Act 2002 and subsequently there has been a competition law breach by the company involved often committed additional offences such bolstered in 2014 by removing the requirement for the which the individual was a director of and the director as forgery, corruption or misuse of company assets. offence to have been conducted ‘dishonestly’. Criminal has been deemed unfit to act as a director. Of note for Nevertheless, there are at least five persons reported to sanctions in the UK are available only in respect of cartel directors, this includes not only situations where the have actually served up to one year in prison – the first activity, and individuals may be sentenced to up to five director participated in the competition law infringement one in 1995 (possibly the first European incarceration for years in prison and/or fined an unlimited amount. but also where the director (1) had reasonable grounds competition law breaches). to suspect the competition law breach and did nothing to stop it; or (2) did not know, but ought to have known German law, in line with most European , that the conduct amounted to a breach. In other words, does not criminalise any anticompetitive practices, it is not sufficient for UK company directors to ignore although section 298 of the German Criminal Code competition law, as the CMA may pursue a CDO where a criminalises bid rigging, and persons can be sentenced to director failed to act when they should have. up to five years in prison or fined. Until 2018, only three directors had been disqualified; the However, personal administrative fines exist under section first one was in 2016. However, the CMA has recently 81(4) of the Act against Restraints of Competition and increased its efforts, as it now considers CDOs in all section 17(2) of the Act on Regulatory Offences, which anticompetitive cases, and, consequently, in May 2020, impose fines of up to €1 million for intentional competition the CMA secured its 20th disqualification of a company violations or €500,000 for negligent competition violations director, with more cases pending. by a person. Such fines are imposed more aggressively France than average. In 2018 a total of 20 individuals were fined Rather reversely, France decriminalised anti-competitive approximately €2 million (about €100,000 per person) practices in 1986, yet the decriminalisation was not from prosecutions by the German Federal Cartel Office, absolute. Currently, persons may be penalised under while 2014 was the apex year when 81 persons were Article L.420-6 of the French Commercial Code, which fined a record total of approximately €10 million. stipulates that if a natural person fraudulently intervenes in an anticompetitive practice in a personal and decisive manner, the person risks imprisonment for up to four years and/or a fine of up to €75,000. The threat of personal liability globally * Click on flag for more information Red Borders: Jurisdictions where personal liability attaches to competition law AND include a criminal regime* Yellow Borders: Jurisdictions where personal liability attaches to competition law without a criminal regime*

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Netherlands Norway Russia Saudi Arabia South Africa Spain Turkey UAE

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