Cartels

01.01.07

Cartels

Competition law is becoming increasingly high-profile, as enforcement authorities across Europe adopt strategies designed to break up cartels and penalise their members - in the UK, participating in a cartel is a criminal offence. Clients should be aware of the range of situations which can amount to cartels, and of the immunity available from co-operating with the authorities to break-up existing cartel arrangements.

Brodies' Charles Livingstone recently travelled to Helsinki for a conference attended by competition lawyers from across Europe. The aim of the conference was to share experiences of the various nations' competition law, and in particular to discuss cartel enforcement issues. One of the speakers was Dr Petri Kuoppamaki, global head of competition compliance at Finnish phone giant Nokia, who noted the tremendous damage which can be done to the reputation of a company found to be breaking the law to the direct detriment of its customers. This is not just an issue for companies like Nokia, which has a globally recognised and admired brand, but must also be a consideration for any organisation which prizes its relationships with its customers and its brand integrity. The best approach an organisation can take towards cartels is therefore to adopt policies which will keep them from getting into any.

It is also important to consider whether any cartel arrangements exist which should be terminated. Any number of agreements between competitors can amount to cartels, including agreements which fix the prices of goods or services, or prevent the cartel members from selling to particular customers or in particular areas. A cartel can arise even without a conscious decision to disadvantage customers - it is not unusual for industries to contain cartels just because "that's the way it's always been done". Alternatively, new management or owners of a company may find themselves part of a pre-existing cartel they had no hand in establishing. In such cases, they must assess what the best course of action is.

There has been a drive by national and EU competition authorities to adopt "leniency" policies, encouraging cartel members to come forward with information. This means giving total or partial immunity from punishment to the first member of a cartel to come forward. The best course of action for cartelists is therefore no longer to keep the cartel operating in secret, but to be the first to blow the whistle.

The UK's leniency scheme grants full immunity from the usual fines for cartel activity (up to 10% of global turnover) to any member which blows the whistle on the cartel and co-operates fully with the OFT. Perhaps more importantly, the OFT will also agree to forego criminal prosecution of the whistle-blowing organisation, its directors and employees. It is worth noting that the OFT has no power to grant freedom from prosecution in Scotland, as that authority belongs solely to the Lord Advocate (although a prosecution is unlikely if a cartel member has complied with the OFT's leniency policy).

Enquiries can be made to the OFT on an anonymous basis, so organisations which are (or suspect they might be) involved in a cartel can find out whether the OFT is investigating their industry and whether any leniency applications have already been made. Even if an investigation has begun, the first to come forward may still be granted full leniency. An organisation which is not the first to come forward, but which co-operates fully, may still achieve immunity from prosecution and a reduction in fines of up to 50%.

Brodies is happy to advise on all aspects of competition law, including cartels and cartel enforcement. We can advise how to spot and avoid cartel situations, assess whether a cartel already exists, and assist with OFT and/or European Commission investigations and leniency applications.

For further information, please contact Rodger Murray 0131 656 0276 / rodger.murray@brodies.com or Charles Livingstone 0131 656 0273 / charles.livingstone@brodies.com.