New Cartel Offence

Adam Smith is often quoted for his comment on cartels

” People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”.

Less well known is the sentence which followed

“It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice”

In March the government announced a package of competition law reforms, including a bonfire of the OFT and the Competition Commission, from which will arise phoenix-like a new Competition and Markets Authority.

Among the changes is an amendment of s188 Enterprise Act 2002 (the cartel offence) by removing the element of dishonesty.   It answers claims that without some skin in the game no executive really cares whether a cartel is formed or not.  Only two prosecutions have been mounted for hard core cartel offences since 2002.  This has embarrassed the UK government which is committed to strong market competition and faces huge pressure from the OECD to tackle cartels.  So here is a new simplified cartel offence of strict liability which an individual may commit (yes they can) without even realising they are doing anything wrong.

We do not have a professional business class in the UK in the way they do in the US or Germany. Many businesses in the UK, particularly family firms and startups, prove slow to respond to regulation. Individuals running these companies who fail to keep up with the arc of law reform are a much softer target than the large corporation. Prosecuting agencies under pressure will always massage their productivity figures by taking the low hanging fruit, and we must be careful that any reform does not result in a string of sorry individuals facing prosecution while major companies manage to cheat the public.

You can read my fuller blog on this at Halsbury’s Law Exchange http://www.halsburyslawexchange.co.uk/cartels-and-law-reform-a-conspiracy-against-the-public/

Some academic commentators with an interest in stronger anti-competitve law have dismissed fears of miscarriages of justice.  But this only bespeaks lack of experience of how law enforcement happens.   Long experience says that selection for prosecution in matters like this involves chance as much as just desserts.  So often it is a racial or ethnic minority defendant upon whom the grip of chance closes, or sometimes simply the potential defendant in possession of valuable assets which make a confiscation order an appealing prospect.  This is why a formulation offered to the UK government by the American Bar Association is so welcome: “that the defendant agreed to cause the relevant corporate entities to engage in the conduct specified in s188 Enterprise Act 2002 and knew or ought to have known of the terms of the conduct engaged in”.

English critics could do with listening to the ABA – they have been dealing with strict liability anti-trust law for 122 years.

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