The Office of Fair Trading’s upcoming decision on its investigation of 112 construction companies will not necessarily be the end of the matter for the companies concerned or for their directors. By Craig Shuttleworth and Ben Walton
Some of the possible further consequences will surprise many.
The OFT may fine cartelists up to 10 per cent of their worldwide turnover for contravention of Articles 81 and 82 EC treaty. However, the OFT and ECC operate leniency programmes in return for cooperation, with maximum benefits of immunity.
Companies found by the OFT to have been involved in cartels may also face civil actions for damages pursuant to the Competition Act 1998. Damages designed to reflect losses suffered as a result of the cartel behaviour (in this instance, allegedly cover pricing and bid rigging) can be very substantial.
There are also serious potential criminal sanctions, both for individuals and, more surprisingly, companies. Individuals can be convicted of the cartel offence under the Enterprise Act 2002 (maximum sentence 5 years). “No action letters” may be available for whistleblowers and reduction in sentences for full co-operation may be substantial.
In respect of companies, the recent decisions of the House of Lords in R-v-GG and Norris-v-USA indicate that a common law conspiracy to defraud can still occur within the cartel context where there is agreement in respect of “aggravating features”.
These include positive misrepresentations. The construction industry may be at particular risk because statements of non-collusion (for example, in the context of a public tender) by parties to a cover pricing or bid rigging agreement would constitute positive misrepresentations.
The penalties for conspiracy to defraud can exceed even the regulatory penalties imposed by the OFT, and there is no leniency programme. Parties convicted of a crime may then be subject to further sanctions under the Proceeds of Crime Act 2002.
A party which has obtained a discount or immunity by cooperation with the OFT or ECC may therefore remain susceptible to substantial further civil and criminal penalties. A failure by the OFT and SFO to confirm that they do not intend to prosecute cartels as conspiracies may therefore endanger the leniency programmes, which are probably the most effective tools for combating anti-competitive behaviour at the disposal of the OFT and ECC.
The OFT’s decision is expected in the third quarter of this year. Whether that decision marks the end of the matter for all of the companies and individuals involved may not be clear for some time thereafter.
Craig Shuttleworth is litigation partner and Ben Walton is an associate at Jones Day