In the UK, cartels that act to price fix to restrict competition are considered both a civil issue and a criminal offence. If you or your company are involved with price-fixing, also known as anti-competitive activity, and are found guilty, you could face a number of penalties. These include:
- Any business caught up in a price-fixing crime could be fined up to 10% of its worldwide turnover
- The businesses involved are open to being sued for damages from customers
- Individuals can be fined
- Those involved can be sent to prison for up to five years
- Company directors may be disqualified from being a company director for up to 15 years.
In the criminal courts a sentence is passed down by a judge or magistrates. When they are determining the sentence, many factors come into play, such as:
- Culpability - this looks at your involvement in the crime
- The level of harm or intended harm to the victim
- The impact of the offence on the victim
- The amount of money that has been made or potentially could have been made from the crime
- Whether or not there have been any aggravating factors (e.g. attempts to conceal or dispose of evidence)
- Any previous convictions
- Evidence of remorse
- Whether or not any other charges are also brought against you (e.g. money laundering)
- Mental health
When it comes to the law, price-fixing tends to fall under the 1989 Competition Act and EU Competition Law, the latter will only come into effect if the price-fixing affects trade between EU countries.
The first prison sentence handed down in the UK for price-fixing was in 2008. Three former executives of a company that sold marine hoses were imprisoned for their part in a global cartel that fixed the prices of the hoses. The activity of the cartel was alleged to have led to customers paying at least 15% more than what was believed to be the competitive price at the time. The cartel operated through a coordinator; the members of the cartel would send customer queries to the coordinator and then they would allocate them to one cartel member. The other cartel members would then make fake bids and quotes, so the allocated member would win the bid.
This was considered a sophisticated cartel that was spread across a number of jurisdictions. The three individuals were initially given sentences of 30-36 months in prison, which were then reduced on appeal to 20-30 months. The EU also imposed fines on cartel members totalling 131 million Euros. The members' US operations where also fined a total of $12.3 million.
Amnesty and leniency
Several institutions investigate cartels and price-fixing; these include:
- The Competition and Markets Authority (CMA)
- The Serious Fraud Office (SFO)
- The police. Typically, this will be the City of London Police, who are the principal police force for investigating economic crimes, such as price-fixing
- The Financial Conduct Authority (FCA)
If a company that is a member of a price-fixing cartel comes to one of the above organisations and whistle blows, then it is sometimes possible for individuals and companies to get amnesty or leniency. For example, the company who exposed the marine hose cartel was a member, but was exempt from fines.
If you are facing anti-competition, price-fixing or cartel allegations contact the Legal 500 recommended solicitors at Stephensons today on 01616 966 229.