Cartel prosecutions by Serious Fraud Office need to meet criteria, agency tells CMA

Cartel offenders will have to meet fraud or public-harm criteria to merit prosecution by the Serious Fraud Office, the UK's white-collar crime agency said today in response to a Competition and Markets Authority proposal to transfer over cases involving "hardcore" offenses.

The CMA, which proposed a wide-ranging overhaul of its competition and consumer-law powers yesterday, said it doesn't have the level of specialist expertise required to pursue prosecutions for severe collusion, which it said would sit “more naturally” with an agency such as the SFO.

CMA Chairman Andrew Tyrie outlined the proposal in a letter to UK Business Secretary Greg Clark, saying that prosecution by the watchdog of individuals over serious infringements has been “difficult and costly” and occurred “relatively rarely.”

Prosecuting hardcore cartels is only a “small part “ of the CMA's antitrust enforcement regime, and the authority doesn’t maintain the “scale of specialist expertise normally possessed by agencies with powers of prosecution,” Tyrie said. The SFO, by contrast, “routinely brings criminal prosecutions” so the case for enlisting its help "merits reconsideration.”

A spokesman for the SFO told MLex today that the agency will “consider all referrals” that meet its “statement of principle.” Among those criteria, the SFO says, it will consider investigating cases involving serious or complex fraud, based on the offense’s actual or intended harm to the public or the UK’s financial reputation or economic prosperity.

Under current rules of cooperation from 2014, the SFO and the CMA may both start proceedings for criminal cartel offenses set down under 2002 laws "where serious or complex fraud is suspected."

The SFO has prosecuted a number of individuals at UK banks related to suspected rate-rigging of various benchmark interest rates, including Libor and Euribor, but these have been for fraud offenses rather than cartel-like misconduct.

Prosecuting individuals

Individual criminal responsibility exists in UK competition law and is limited to hardcore cartel activity. While the UK is one of the few countries outside the US where individuals have been imprisoned for cartel offenses, the CMA has had only isolated successes, even as revisions to cartel laws in 2014 strengthened its hand in bringing behavior such as price-fixing and bid-rigging to book.

In 2017, a London court handed a company director a two-year suspended sentence for being in a seven-year cartel of suppliers of precast concrete drainage products. The director was arrested in 2013 after a probe by the CMA’s predecessor, the Office of Fair Trading.

Two years earlier, a director was jailed for six months for being in a cartel in galvanized steel water tanks. The water-tank case was the first criminal cartel proceedings in the UK since a case against airline executives came apart in 2010. In 2008, three directors in a marine-hoses cartel were all jailed for between two-and-a-half and three years.

Alongside criminal prosecution, the CMA aims to get individual cartelists barred from being company directors or from carrying out other senior corporate roles. These “director disqualifications” can last for up to 15 years.

But the CMA has applied its powers rarely.

The Office of Fair Trading was first given powers to disqualify directors on competition grounds in 2003. But it was a full 13 years before those powers were first wielded, when the CMA in 2016 disqualified a managing director at an online poster supplier.

In 2018, the CMA secured a second round of disqualifications after barring British real-estate executives as directors over a price-fixing cartel in a seaside town in Somerset.

In his letter to Clark, Tyrie said there are “possibly more” disqualifications in the pipeline, but that the “process is wholly reliant on the courts.” Last year, the CMA moved to widen its disqualification powers and make disqualification procedures faster.

In addition to competition law infringements, the CMA’s measures against individuals over consumer-law breaches is limited to specific circumstances, such as over a breach of trading laws.