The UK competition regulator, the Competition and Markets Authority (CMA), has announced a 30% increase in "tip-offs" relating to cartels in 2017 following its "Cracking down on Cartels" social media and website campaign, which we blogged about last year. Allied with an increased enforcement budget, the CMA has now launched a new "Be safe, not sorry" campaign to encourage more people to get in touch with information about cartels.
There are severe penalties for being involved in a cartel, which are agreements where two or more competing businesses agree to coordinate their behaviour rather than compete with each other. Cartels might involve, for example, agreeing to fix prices, share customers or markets, or collude on "bid-rigging" arrangements. The impact on both customers and competitors can be very significant. Prices may be kept artificially high, consumer choice can be reduced and product quality and innovation can suffer. Over the past two years, the CMA has issued some £151million in fines following successful investigations into anti-competitive practices, many of which we have covered on this blog - see for example here and here.
The new cartels campaign will target a range of sectors that are at greater risk of anti-competitive behaviour, including construction, manufacturing and business support services (which the CMA describes as having "either a history of reported cartel activity or characteristics that make them vulnerable to cartels").
The CMA's new campaign is about encouraging people with information about cartel activity to report it to the CMA, and particularly about highlighting its leniency program for those who have been involved in cartels and other anti-competitive behaviour. The first participant to confess their involvement to the CMA can, in certain circumstances, get immunity from all fines, criminal penalties and director disqualification.
However, notwithstanding the CMA encouraging cartel participants to contact them direct, we would strongly recommend that a business take specialist competition law advice before doing so. There are several reasons for this:
- While our advice would almost always be to seek leniency, it is vital to understand exactly what breach of competition law you are confessing to. This may mean conducting an internal investigation to establish exactly what has happened, in order to ensure your leniency application covers everything for which you might be liable. Otherwise there is a risk of omitting conduct that comes out in the CMA's investigation but which, because it was not covered by the grant of leniency, could still result in fines or prosecution.
- You will also want to be sure that you are approaching the right regulator - a cartel involving trade with other EU countries may also have to be reported to the EU Commission and possibly other national regulators.
- Instructing a law firm allows first contact to be made with the CMA without you being named. We can therefore establish whether leniency is actually available, or if someone else in the relevant sector has already applied. If it turns out full immunity is no longer available you will be able to consider whether you still want to reveal your identity to the CMA, in the hope of getting a lower fine for cooperating with its investigation.
"Cash for information"
Witnesses who are not involved in a cartel, but have suspicions of or information on cartel activity, are also asked by the CMA to "Do the Right Thing" by reporting it. Whistleblowers can receive a reward of up to £100,000 (though this is discretionary). The CMA's announcement stresses that all information is treated confidentially, and that whistleblowers can discuss any concerns in relation to the CMA keeping their identity secret.
It should be stressed that rewards are only available to whistleblowers with 'clean hands', meaning they have not themselves been involved in the cartel activity. Anyone involved in a cartel should use the leniency process instead.
The Scottish dimension
As we noted in our previous blog, in Scotland only the Lord Advocate, as head of the Crown Office and Procurator Fiscal Service, can grant immunity from criminal prosecution. The CMA therefore does not have the authority to grant a cartel participant formal immunity against criminal prosecution in Scotland for a cartel offence. However, a CMA recommendation that criminal immunity should be granted will be given serious weight by the Lord Advocate in deciding whether to pursue a prosecution in Scotland. Anyone involved in cartel activity with a Scottish element should consider taking specific Scots law advice on this issue before applying to the CMA for leniency.
The race to the regulator
Timing is everything. Delay in blowing the whistle on a cartel could allow another participant, or a third party with relevant information, to steal a march and get to the CMA first. It is therefore vital to seek legal advice as soon as you think you may have a problem.