Expect increase in director disqualifications for competition law breaches, says Lougher

Out-Law News | 11 Apr 2018 | 3:04 pm | 1 min. read

Senior executives of companies that breach UK competition law are at increasing risk of being disqualified from serving as directors at UK businesses, an expert in competition law has said.

Guy Lougher of Pinsent Masons, the law firm behind Out-Law.com, said that the UK's Competition and Markets Authority (CMA) is intent on pursuing director disqualifications as the norm in cases where businesses breach competition rules.

Lougher was commenting after the CMA announced that it had "secured legally binding undertakings" from two directors of an estate agency business that "have the effect of disqualifying them as directors and preventing them from being involved in the management of any UK company". If the undertakings had not been voluntarily given, the CMA could have sought a disqualification order, which would have equivalent effect, against the individuals.

The CMA took action after an earlier investigation found that five Somerset estate agents had been "secretly agreeing between themselves the fees they charged".

David Baker and Julian Frost were directors of Abbott and Frost Estate Agents Ltd in Burnham-on-Sea at the time. The company was part of a group of local estate agents that " agreed to fix their minimum commission rates at 1.5%, so denying local home owners the chance of getting a better deal when selling their property", the CMA said.

The CMA said Baker has been disqualified from serving as a UK director for three and a half years, while Frost has been disqualified for three years.

It is only the second time that the CMA has secured director disqualifications in respect of a company's breach of competition laws. The first case was in December 2016. However, Lougher said the CMA can be expected to be more active in using its director disqualification powers, under the Company Directors Disqualification Act 1986, in future.

Lougher said: "The CMA has for several years had the power to seek director disqualification orders, lasting for up to 15 years, against individuals who were directors of a company found to have infringed EU or UK competition law. But to date this power has been little used."

"The CMA has recently indicated an intention to consider whether to seek a director disqualification order as a matter of course in each case where it finds that a company has infringed EU or UK competition law. The CMA’s seeking of disqualification in this case, even though it involved a local anti-competitive arrangement, is consistent with its policy," he said.

"The CMA’s thinking is that because disqualification punishes individuals, and not just the infringing company, it has significant deterrent effect and enhances competition law compliance. We can expect to see many more competition disqualification orders being sought in the future," Lougher said.