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OFT proposes greater duties for directors over competition law

Contractors have been warned they may soon face “aggressive” new regulations after the Office of Fair Trading announced plans to widen the use of its director disqualification powers.

Under the new proposal, the watchdog would be able to ban not only company directors directly involved in competition law offences, but those who should have taken steps to prevent a breach, or ought to have known of a breach but did not.

The move follows an investigation into cover pricing in the construction industry, which saw 112 companies accused of anti-competitive behaviour, and became one of the largest investigations the OFT has ever undertaken.

While the OFT can already disqualify directors involved in breaches, the extension would significantly widen the scope of OFT enforcement action, and could expose increased numbers of directors to disqualification.

Eversheds head of competition Ros Kellaway said: “The OFT seem to have moved from zero to 100mph on this subject. [These are] a very aggressive new set of proposals which make it far more likely that disqualification will become a real possibility.

“The new guidelines are said to reflect the need to deter individuals and not just to punish shareholders through fines. This seems to ignore the fact that depriving a company of its experienced directors will unquestionably punish shareholders; in the case of smaller companies possibly even more than any fine.”

But OFT senior director of policy Ali Nikpay said the prospect of disqualification was “one of the most powerful deterrents” to anti-competitive behaviour.

He said: “Our proposals aim to increase the incentives on company directors to take responsibility for competition law compliance and tackle behaviour that harms competition.”

Pinsent Masons competition partner Alan Davis agreed the OFT was expecting a lot more from directors.

“It’s not unreasonable for the OFT to say that it is a company director’s responsibility to have some basic competition law knowledge,” he said.

“But the OFT is really raising the bar as to what it expects directors to do in terms of pro-active monitoring and enforcing a culture of competition law compliance in a company.”

The OFT has published a consultation on the proposed changes. All responses must be returned by 20 November.

The National Federation of Builders and the UK Contractors Group last month launched a code of conduct demanding UK construction companies met “the highest standards of competition law compliance”.

UKCG director Stephen Ratcliffe said: “This [consultation] reinforces the message about the importance of the construction industry competition law code of Conduct of Conduct which UKCG helped to launch last month.  Hopefully, this will be a useful tool for directors managing this risk.”