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Monday, 26 July 2010

Disqualification orders in competition cases

As part of my catching up process, I've been reading the OFT's revised guidance on disqualification orders for directors in competition cases (available at: http://www.oft.gov.uk/news-and-updates/press/2010/68-10). Some of the significant changes are that the OFT are now saying that they may, in exceptional cases, bring proceedings for a disqualification order, even if there has been no prior decision that there was a breach of competition law. In other words, the question of the breach of competition law will be argued in front of the, non-specialist, court. Secondly, proceedings for a disqualification order may be brought even if no financial penalty has been imposed. Thirdly, the OFT may also apply for such an order against a director who has ceased being a director because of a breach of competition law. Finally, the OFT says in its press release that it will be just as concerned to take action against those directors who ought to have known of the breach of competition law, not simply those who were responsible for the breach or had reasonable grounds to suspect that there was a breach.

It is welcome to see the OFT toughening its stance on a number of issues but, given that they have not yet used this power, a certain amount of scepticism is in order. The proposal to bring disqualification proceedings, even when there is no prior decision of a breach in competition law does seem odd. The OFT gives as examples cases where the undertaking is insolvent or in the course of being wound up, where there is an appeal simply on the quantum of a fine and where no action is taken because the undertaking is subject to a limited immunity from fines. As the OFT emphasises that action will only be taken in exceptional circumstances, this presumably means cases where the OFT feels that the director's behaviour has been very bad, but short of meeting the test for criminal liability (because you don't want to have to prove the case in two courts). This makes sense of the insolvency example, although not the immunity one, because presumably the OFT would want to order the undertaking to cease its behaviour, even if it could not impose a fine, and then follow up with disqualification proceedings. Although logical, it would seem to be a waste of resources to pursue an individual, when it was not worth making a decision on the undertaking's behaviour.

What seems to be going on here is an exercise in symbolic toughness, in order to try and improve the deterrent effect of the provisions. This is, indeed, state to be one of the reasons for bringing disqualification proceedings even if no financial penalty is imposed. The problem is that tough messages have to be backed up by tough action at some point. So far, the OFT has not had much luck outside the relative comfort zone of Competition Act proceedings.

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