When should talking to competitors land you in prison? The Competition & Markets Authority (CMA) failed to secure convictions in its first contested criminal cartel case, according to a cartels expert from the University of East Anglia (UEA).
Prof Andreas Stephan, of UEA’s School of Law, acted as a consultant advisor to the defence team of one of the two co-accused. Both were acquitted in June 2015. They were accused of conspiring to fix prices, rig bids and divide customers between them for the UK supply of galvanised steel tanks used in fire sprinkler systems.
A third defendant had pleaded guilty and agreed to act as a prosecution witness.
This case, decided at Southwark Crown Court in London, was the CMA’s first attempt at a cartel trial since a 2010 trial against four British Airways executives collapsed in what a defence lawyer told the Financial Times was “incompetence on a monumental scale.” The authority was then known as the Office of Fair Trading.
Prof Stephan, a cartels expert, said the prosecution in the present case never succeeded in convincing the jury that the conduct in question was criminally dishonest.
Prof Stephan said: “The CMA focused on proving that meetings between competitors took place and that they resulted in increased margins. However, they failed to demonstrate that the alleged conduct was dishonest or objectionable enough to attract criminal liability.“
“Any upward pressure on prices occurred during a period when steel costs soared and new manufacturing standards were introduced, making it difficult to pin down the extent to which prices might have increased as a result of the arrangement.
“There also wasn’t an awful lot of secrecy surrounding the meetings between competitors –some of which were at the behest of an industry body – and the primary motivation appeared to be averting crisis, not greed.
“The CMA’s case was significantly weakened by the largely flat testimony of its witnesses. Some said they did not consider the practices to be really dishonest and there was even a suggestion that the cartel may have saved lives by ending a period of very aggressive competition, when there was a danger that quality standards would be compromised.
“The case confirmed predictions that dishonesty would be unpredictable and difficult to prove in cartel cases, vindicating the Government’s decision to reform the offence in 2014.”
The Enterprise and Regulatory Reform Act 2013 amended the cartel offence by removing the requirement of dishonesty and replacing it with defences where the conduct was entered into (or intended to be entered into) openly. The present case was tried under the old offence and may have had a different outcome under the reformed law.
Professor Andreas Stephan
Professor of Competition Law
UEA Law School
Andreas Stephan is a Professor of Competition Law. He has a background in both Law and Economics and has widely published articles on all aspects of cartel enforcement. His research on public attitudes to price fixing in the UK and the design of the criminal cartel offence have been cited in the UK government’s 2011 review of its competition policy regime and in an 2009 Australian Senate Standing Committee Report on the criminalisation of cartel behaviour.