Tougher antitrust penalties for company directors considered in U.K.

The Office of Fair Trading ("OFT") has announced (here) that it is considering widening its use of competition disqualification orders ("CDO").

Directors of all companies should take note of this proposed tougher stance.  At present (and as set out in the OFT's 2003 Guidance) company directors are in practice only likely to face disqualification for breach of competition law if they are found to have personal responsibility for their companies' contravention of the competition rules. 

The OFT wants to change this.  Note that no changes in the law are required for the OFT to pursue directors with increased rigor.  The court's powers already exist.  The OFT is simply looking at ways of enhancing company and board competition compliance and explaining how it intends to go about this.

CDOs were introduced by the Enterprise Act 2002, to incentivize compliance with antitrust law by providing sanctions for the individuals responsible.  On the application of the OFT or a sector regulator the court can disqualify a company director from acting as a director for up to 15 years if that director's company has breached competition law (for example by price fixing or other cartel offenses), and the court considers the director unfit to be involved in the management of a company as a result.  It is also possible for a director to give an undertaking to similar effect to prevent his having to appear in court and have an order made against him.

The OFT thinks that the way in which it has used its powers to seek CDOs so far has not had the desired deterrent effect.  It believes that research which it commissioned in 2007 indicates that greater use of CDOs is called for.

The OFT therefore proposes a new approach to maximize the deterrent effect of CDOs.  In particular, the OFT would be likely to seek a disqualification order where a director "ought to have known of" or "should have taken steps to prevent" a breach of antitrust law, even if he or she was not personally involved in the breach.  

The OFT is also considering extending its discretion to apply for disqualification orders to cases where a company has benefited from the lower levels of leniency.  At present the OFT will not apply for the disqualification of a current director of a company which has benefited from any form of leniency, on the basis that to do so might inhibit applications for leniency. The OFT still wants to encourage the early offering of information on cartels, so would not seek disqualification orders against first whistle-blowers or in other cases where a company has qualified for the highest levels of leniency.

The OFT could even in exceptional circumstances seek disqualification orders where no breach of competition law has been proven or where no financial penalty has been imposed.

The OFT asks for comments on its proposals by 20 November 2009.

If any were needed, this certainly provides an extra incentive for directors to get to grips with their companies' antitrust compliance activities.