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CMA secures first director disqualification for competition law breach

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Summary: A company director who illegally agreed prices with a competitor has been disqualified from acting as a director for five years. This is the first time the CMA has used the disqualification powers granted to it in 2003, reinforcing the message that individuals, not just companies, can face serious sanctions for competition law breaches and that directors are expected to take responsibility for competition law compliance by companies they manage.

The CMA’s powers

Under the Company Directors Disqualification Act 1986, the CMA has the power to apply to the court for a disqualification order to be made against a director for a maximum of 15 years where:

  • a company of which he is a director has breached competition law, and
  • his conduct as a director makes him unfit to be concerned in the management of a company.  

Alternatively, the CMA can accept a disqualification undertaking from a director, and avoid the need for proceedings. Where a disqualification undertaking is offered, this will normally result in some discount in the period of disqualification which the CMA is prepared to accept.

“Director” in this context includes both a shadow and a de facto director.

Both a disqualification order and a disqualification undertaking disqualify the individual from holding company directorships; directly or indirectly being concerned or taking part in the promotion, formation or management of a company; or acting as an insolvency practitioner.  Both orders and undertakings are legally binding, and individuals can be criminally prosecuted for their breach.

The infringement

The CMA launched an investigation into price fixing in relation to posters and frames in 2015, carrying out a dawn raid of the business premises of Trod Limited, an British retailer of toys and sports products trading as Buy 4 Less, and the domestic premises of one of its directors.  The raids were also carried out on behalf of the US Department of Justice, which was carrying out a separate investigation into the sale of posters and wallpaper.

In July 2016, Trod admitted agreeing with one of its rival online sellers, GB Eye, not to undercut each other’s prices for posters and frames sold on Amazon’s UK website from March 2011 to July 2015.

In August 2016, the CMA imposed a £163,371 fine on Trod. GB Eye was granted full immunity from fines for blowing the whistle on the cartel.

On 30 November 2016, the CMA accepted a disqualification undertaking from Daniel Aston, the former managing director of Trod. The CMA determined that Mr Aston’s anticompetitive conduct presented a particularly strong case for disqualification, falling within the middle range of 5-10 years for duration, because he was personally involved in the cartel. Mr Aston was able to benefit from a discount in the duration of his disqualification, however, as he agreed to provide a disqualification undertaking to the CMA.

Commentary

The CMA’s enforcement action against Mr Aston should act as a reminder to company directors (including shadow and de facto directors) that competition law breaches can have serious consequences not just for their businesses, but for their own careers and livelihoods. 

It is also worth noting in this context that it not sufficient for a director to avoid becoming personally involved in competition law breaches.  Although in this case Mr Aston was personally involved in the infringement, a director can be disqualified where he/she has no knowledge of the breach by his/her company but ought to have known about it.  This places a responsibility upon directors to ensure that there is a “culture of compliance”  within the companies with which they are involved, through, for example, the establishment of an appropriate compliance programme, training and early detection systems (such as whistleblower processes).

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