19 November 2015

CMA speech on implications of steel tanks case on criminal cartels and leniency

On 13 November 2015, the Competition and Markets Authority (CMA) published a speech given by Stephen Blake, Senior Director in the Cartels and Criminal Group. The speech focused on the UK’s criminal cartel offence and the implications that the galvanised steel tanks case has on this offence as well as the leniency programme.

Mr Blake was clear to emphasise that a fully effective criminal cartel regime would only come about through incremental growth, and that the steel tanks case should be considered a landmark in the evolution of the offence.

In the steel tanks case, the CMA investigated and charged three individuals under section 188 of the Enterprise Act 2002, for cartel conduct relating to the supply of galvanised steel tanks for water storage. Two defendants were acquitted and one pleaded guilty and was sentenced to six months' imprisonment, suspended for 12 months, and ordered to do 120 hours of community service (see here for further discussion).

Blake suggested that the case has three main implications on the development of the UK criminal cartel offence. Firstly, pre-April 2014, dishonesty was a requirement of the offence, and it was the fact that this element could not be proved in the steel tanks case that led to the two acquittals. Dishonesty has subsequently been removed as a requirement for cartel conduct to amount to a criminal offence and Mr Blake commented that the challenge of establishing this factor was clearly greater than the CMA / OFT had realised. It has been widely suggested that the removal of the dishonesty requirement will facilitate successful prosecutions in the future.

Secondly, the CMA’s “very thorough and comprehensive review” was commended by the trial judge, who also rejected arguments from the defence regarding abuse of process by the enforcer. Mr Blake suggested that these are signs that the CMA has made progress in its criminal investigation procedures and prosecutions capability, particularly in light of the collapse on procedural grounds of the air passenger fuel surcharges case in 2010.

Finally, Mr Blake noted that the judge in the case explained that prison sentences ought to be “expected” in relation to serious criminal cartel conduct. In addition, the judge took into account the early and continuous cooperation of Nigel Snee, giving a 75% reduction to the sentence and further suspending the sentence for 12 months. Mr Blake commented that this will provide those involved in cartel conduct with an incentive to cooperate fully in order to benefit from a more lenient sentence. Nevertheless, Mr Blake emphasised that relying solely on leniency will reduce this incentive if undertakings / individuals do not perceive there being a possibility of the CMA discovering the anticompetitive conduct through own initiative investigations. Mr Blake therefore makes it clear that the CMA needs to continue to improve its intelligence and investigation capacity.

Overall, Mr Blake considered there to be four ingredients of a successful criminal cartel regime: (i) a well-designed offence; (ii) a specialist enforcement authority committed to enforcement and with the necessary powers and resources; (iii) a willingness of juries to convict; and (iv) a willingness of judges to impose significant penalties. He suggests that three of these criteria are met by the UK offence, though as yet, the evidence in relation to juries' willingness to convict is not clear.

In his conclusion, Mr Blake explained that the pillars of a successful UK criminal cartel offence are in place and that these have evolved by learning from previous set-backs. He noted that there will be more lessons in the future, suggesting that, in his view, the offence is not yet fully effective. However, his final comments were that improving the offence further and maintaining momentum in this regard continues to be important, particularly due to the serious economic damage caused by cartels. It is clear that the CMA intends to continue vigorously prosecuting individuals who have had significant involvement in serious cartel cases.

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