Directors of companies with operations in the United Kingdom should review their competition law compliance programmes and training to avoid running the risk of a director disqualification order.
On 29 June 2010, the UK Office of Fair Trading (OFT) published revised guidance on director disqualification orders in competition law cases, as part of its ongoing compliance work in partnership with businesses. The OFT has made it clear that it intends to use these sanctions to deter anti-competitive activity and to increase the incentive for directors to take responsibility for competition law compliance within their companies.
In a statement, the OFT said: “[the] guidance should be taken as a clear message that we will actively seek disqualification of directors found to have engaged in anti-competitive behaviour or who ought to have known it was going on.”
The guidance, which follows consultation with the legal and business community, sets out how and when the OFT and the sectoral regulators such as the Office of Communications (Ofcom) will take action to seek the disqualification of directors where they uncover evidence that a director was responsible for, or ought to have known of, competition law breaches at a company.
Procedurally, it is for the courts to make a competition disqualification order under the Company Directors Disqualification Act on the application of the OFT or the relevant sectoral regulator. Under the Act a director can be disqualified from acting as a director for up to 15 years if their company is involved in a breach of competition law and the court considers that, as a result, they are unfit to be concerned in the management of a company.
The revised guidance provides clarification on a number of details of the policy including the fact that:
- The OFT is just as concerned with directors who ought to have known of competition law breaches at a company as those who were personally involved in an infringement. Cases will be chosen based on the evidence available and seriousness of the conduct.
- The OFT will continue to offer immunity from disqualification orders for any director who cooperates with the OFT's investigation and whose company benefited from leniency in respect of the same activities.
- There may be exceptional cases where the OFT believes it is appropriate to apply for a disqualification order where there is no prior decision or judgment on the infringement. As with all cases, however, the OFT would still have to satisfy the court that there had been an infringement of competition law.
It should be noted that the OFT's specific power to seek a disqualification order for infringements of competition law has never been used. In 2008, three company directors were convicted under the UK criminal cartel offence for their involvement in the marine hose cartel. They were also disqualified from acting as directors, although in this case the sanction was imposed pursuant to the general powers of disqualification available to the courts in relation to directors who have committed a criminal offence.
These latest developments further illustrate the importance for companies operating in the United Kingdom to maintain adequate competition law compliance programmes and training both to avoid the risk of potential criminal prosecution and fines, and to ensure that their directors are not at risk of a disqualification order.