Type: Client Alerts
On 1 December 2016, the Competition and Markets Authority (CMA) announced that it had secured its first disqualification of a director of a company found to have infringed competition law.
Daniel Aston, managing director of the online poster supplier Trod, gave a disqualification undertaking not to act as a director of any UK company for five years.
This disqualification follows the CMA’s final decision of 12 August 2016 that Trod and GB Posters infringed competition law by agreeing that they would not undercut each other’s prices for posters and frames sold on Amazon’s UK website. The case against Trod started when the CMA launched an investigation on 1 December 2015. As part of its investigation, the CMA conducted searches at the headquarters of Trod, as well as the domestic premises of one of its officers. In July 2016, Trod admitted agreeing the infringement and agreed to accept a fine of £163,371 for taking part in the cartel. This was after deducting a 20 per cent discount to reflect the resource savings to the CMA as a result of Trod’s admission and cooperation with the CMA’s investigation.
Since 2003, the CMA has had the power to apply to the court for a disqualification order against directors for a maximum of 15 years, where a company of which they are a director has breached competition law and where conduct as a director makes the person unfit to be concerned in the management of a company.
The law also allows the CMA to accept a disqualification undertaking from a director instead of bringing proceedings. Where a disqualification undertaking is offered, this will normally result in some discount in the period of disqualification which the CMA is prepared to accept.
Given that Mr Aston was the managing director of Trod at the relevant time, and because he personally contributed to the breach of competition law, the CMA considered that such conduct made him unfit to be a company director for a specified period.
Leniency Policy and Director Disqualification
GB Posters applied for and obtained immunity, having reported the cartel to the CMA. Under the CMA’s leniency policy a business that has been involved in a cartel may be granted immunity from penalties or a significant reduction in penalty in return for reporting cartel activity and assisting the CMA with its investigation. Further, in respect of the activities to which the grant of leniency relates, the CMA will not apply for a disqualification order against any director whose company benefits from such leniency, provided that he or she cooperates with the leniency process. The only exception to this is where a former director has been removed or otherwise ceases to act as a director because of his or her breach of competition law and/or opposition to the relevant application for leniency.
This is the first time the CMA has secured the disqualification of a director and marks an important milestone in the successful enforcement of competition law against individuals personally involved. In the words of the Executive Director for Enforcement at the CMA, Michael Grenfell, “The business community should be clear that the CMA will continue to look at the conduct of directors of companies that have broken competition law, and, where appropriate, we are absolutely prepared to use this power again”.
Client Alert 2016-315