What are the Criminal and Other Sanctions for Violating United Kingdom Competition Law?

by | Jul 19, 2023 | Antitrust

What are the Criminal and Other Sanctions for Violating United Kingdom Competition Law?

The Competition Act of 1998 lays down the main sanctions the British national competition authorities impose on those who commit a competition law breach in the United Kingdom. The authorities impose these sanctions on those who violate either Chapter I and Chapter II of the Competition Act. Chapter I and Chapter II are broadly analogous to the antitrust law the Federal Trade Commission and Dept. of Justice enforces in the United States, and which the European Commission also enforces.

The Competition Act allows the competition authorities to impose a civil fine and arrange for the disqualification of a director. Just like in the European Union and United States, UK competition policy requires courts to impose harsher penalties on those who commit a more serious competition law breach, such as engaging in cartel activity. Indeed, while the UK government will impose harsh sanctions on those who commit a cartel offence, it would probably impose no sanctions on those who inadvertently enter into anti competitive agreements, but then correct their anti competitive practice.

The British national competition authorities will certainly impose sanctions on companies who knowingly violate antitrust law. The most common sanctions the authorities will impose are financial sanctions. The authorities can impose a fine of 10% of the wrongdoers’ global turnover. This is comparable to the financial sanctions the European Commission imposes pursuant to EU law. And just as the European Commission has imposed sever monetary sanctions on those who violate competition law, so too have the British competition law enforcement agencies.

Director disqualification is another common sanction. The Company Directors Disqualification Act of 1986 allows the authorities to forbid a director who either knowingly allowed his or her company to engage in competition law infringements, or, even if he or she did not know, showed have known. This director disqualification can be for up to 15 years. Even if the period is shorter, disqualification will probably destroy a business career, and this is becoming an increasingly common tool to enforce competition compliance.

In addition, the Enterprise Act of 2002 calls for the authorities to impose criminal sanctions on those who engage in serious anti competitive behaviour, such as serious cartel conduct. The UK Office of Fair Trading, which together with the Competition Commission used to enforce competition law, had on only three occasions successfully imposed criminal sanctions on officers and directors of companies who had violated UK competition law. All three had engaged in improper cartel conduct, yet two of the three received only suspended sentences, thus avoiding the custodial sentences which would have sent them to prison.

The Office of Fair Trading blamed this small number of successful criminal enforcement actions on the difficulty of proving criminal intent under the Enterprise Act. The UK government therefore lowered the required standard of proof, hoping to make it easier to use criminal sanctions to enforce competition compliance. And while the Competition and Markets Authority, which now enforces competition law, has not yet had a successful criminal enforcement action under the new standard, given its general aggressive enforcement of competition law, it may very will try again in the near future. It, together with the Serious Fraud Office, would certainly start a criminal investigation if it suspected cartel activity.

A merger control investigation can also lead to criminal sanctions. One who gives false information to the investigators could very well end up in prison.

In addition to criminal sanctions, the authorities can also impose monetary penalties. They will, for example, require those who engaged in anti competitive behaviour to return their ill-gotten gains.

Finally, an individual or company who engages in cartel activity, or other serious anti competitive behaviour, may be able to avoid both civil and criminal law penalties if that person or company reports the improper conduct. Leniency is an important part of UK competition policy. But to obtain leniency one must act quickly. The first person to report the violation receives the best treatment. Given how aggressively the authorities enforce competition law, it certainly behooves anyone who may need it to apply for leniency quickly.