First Director Disqualified By The Competition And Markets Authority

Date Added 13.12.16

…for infringing competition law

On 12th August 2016, the Competition and Markets Authority (“CMA”) held that two online poster and frame suppliers (Trod Ltd and GE Eye Ltd) had breached competition law by agreeing not to undercut each other’s prices for these goods when sold on Amazon’s UK website.

The Competition Act 1998 prohibits agreements or conduct that has a detrimental effect on competition in the UK. An agreement between competitors to fix prices has long been regarded as one of the most obvious examples that demonstrates anti-competitive behaviour and it is considered a serious breach of the Competition Act 1998. The CMA has the power to impose a fine of up to 10% of a business’ annual worldwide group turnover if they find that such business has breached the Competition Act 1998.

In this case, the CMA imposed a fine on Trod Limited of £163,371 for its role in the cartel. GB Eye Ltd did not receive a fine as a result of reporting the cartel to the CMA and co-operating with the investigation pursuant to the CMA’s leniency policy.

Following this decision, on 1st December 2016 the CMA used their power for the first time under the Company Directors Disqualification Act 1986 (“CDDA”) to secure disqualification of a director for breach of competition law.

Sections 9A to 9E of the CDDA, gives the CMA the power to apply to the court for a disqualification order to be made against a director for a maximum of 15 years where a director has breached competition law and where his conduct as a director makes him unsuitable to be concerned in the management of a company.

Section 9B of the CDDA in particular allows the CMA to accept a disqualification undertaking from a director instead of bringing proceedings and normally, in exchange, the director is afforded some discount in the period of disqualification which the CMA is prepared to accept.

In this case, the CMA found that the managing director of Trod Ltd had personally contributed to the breach of competition law and that such conduct made him unfit to be a company director for a specified period. The CMA secured a disqualification undertaking from the managing partner to not act as a director for any UK company for a period of 5 years.

The CMA’s stance on preventing anti-competitive behaviour is greater than before and the use of their powers to disqualify a director for the first time indicates this. The Executive Director for Enforcement at the CMA said:

“The responsibility to ensure that companies don’t engage in illegal anti-competitive practices is an important one, and company directors should not shirk that responsibility. 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.”

If you are concerned about the decision in this case and/or have any queries regarding anti-competitive behaviour, talk to Tollers on 01908 396 230 and ask for Liz Appleyard in our Commercial Team, who will happily assist you.

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