Two men accused of participating in a criminal cartel in the galvanised steel tank industry were acquitted on Wednesday after a three-week trial at Southwark Crown Court – but recent changes to the criminal cartel offence mean future cases are more likely to produce convictions as the bar has been lowered for the prosecution to prove its case.
Both men were directors of companies supplying galvanised steel water tanks. They were accused of participation in a criminal cartel from 2004 to 2012, in which directors of key suppliers allegedly met to fix prices, divide customers and rig bids. They were charged with the offence in July 2014, after an investigation by the Office of Fair Trading (OFT), now the Competition and Markets Authority (CMA). Customers claimed that prices increased after 2004, but reduced after the entry of a new competitor in 2012.
A director of a third company pleaded guilty in June 2014; he awaits sentencing. The directors and employees of a fourth company received immunity from criminal prosecution under the CMA’s leniency policies.
The case turned on whether or not the defendants had acted dishonestly. The defence did not dispute the facts as presented by the CMA and called no witnesses, but argued that the men had been motivated by honest considerations, including maintaining standards and keeping their businesses afloat in an increasingly competitive market. The judge emphasised the need for the jury to be sure the men had acted dishonestly at the time of the offence by the standards of an ordinary, law-abiding individual. The jury reached a unanimous decision within less than three hours, effectively deciding that neither man had been dishonest.
The acquittals will disappoint the CMA, as the UK competition authorities have never successfully prosecuted a defendant who has pleaded not guilty. The only previous convictions were in 2008, when three directors pleaded guilty to participating in a criminal cartel in the manufacture and supply of marine hoses. The only other criminal cartel case brought to trial by the OFT was against four BA executives in 2010, who were accused of fixing prices for fuel surcharges on long haul flights. The case collapsed after new evidence came to light.
The CMA may, however, consider the verdicts as demonstrating the case for removing ‘dishonesty’ from the offence, as implemented from 1 April 2014, so individuals who fix prices, share markets or rig bids after that date can be convicted of the cartel offence without any need to prove that they were dishonest. The removal of this element has been particularly controversial, as without needing to prove defendants have acted dishonestly, the offence will be significantly easier to prove, potentially resulting in more convictions.
For conduct taking place after 1 April 2014, therefore, defendants who cannot dispute the basic facts presented by the CMA will have to rely on new (and rather technical) exclusions and defences to escape a guilty verdict. An individual will not be guilty of an offence where customers were given relevant information about the arrangements before entering an agreement; such information was published before the arrangements were implemented; or if the agreement was made pursuant to a legal requirement. An individual will have a good defence if he or she had no intention to conceal the nature of the arrangements from customers or the CMA, or took reasonable steps to disclose them to professional legal advisers to obtain advice about them before they were implemented. Proving a lack of intention may be challenging; it remains to be seen how these exclusions and defences will be applied in practice.
This will not be the last trial for the cartel offence, but it may well be the last acquittal on the basis of a lack of dishonesty.