Legal professional privilege will apply under new criminal cartel 'whistleblowing' regime

The Office of Fair Trading (OFT) has published updated guidance for businesses on the approach it will take when companies engage with its leniency programme. (115-page / 1.22MB PDF) The leniency programme allows businesses and individuals to apply to the OFT for exemption from criminal prosecution and fines if they admit their involvement in cartel operations, provide evidence of criminal wrongdoing and cooperate with the OFT's investigations.

The OFT had twice consulted on plans which would have left open the opportunity for it to oblige companies signing leniency agreements to waive their rights to LPP in criminal cases, but the regulator said it had been persuaded to drop those plans.

"The OFT's clarification that it will not require LPP waivers as a condition of leniency follows very careful consideration of comments in response to both the original and supplementary consultations as well as engagement with prosecutors in the UK," the regulator said in a statement. "The OFT considers that this approach to LPP waivers is consistent with those of other UK prosecutors in relation to similar issues, such as the Crown Prosecution Service and Serious Fraud Office in relation to Deferred Prosecution Agreements as well as agreements under the Serious Organised Crime and Police Act 2005."

Competition law specialist Angelique Bret of Pinsent Masons, the law firm behind Out-Law.com, said that businesses would welcome the ability to retain LPP when engaging with the OFT through its leniency programme.

"The leniency applicant must be prepared to accept that it has been involved in cartel activity and provide a concrete basis for the OFT to suspect cartel activity, i.e. documentary evidence or key witnesses," Bret said. "The company also has a continuing obligation to cooperate with the OFT or risks losing its right to leniency, which can be an onerous burden; the OFT has you under its thumb."

"The OFT was proposing to introduce legal professional privilege (LPP) waivers in criminal cartel investigations which would require the leniency applicant to allow access to confidential legal advice which would otherwise have been protected from disclosure. This proposal was met with widespread objection as there was a fear that not only could this discourage leniency applicants but it could discourage companies from carrying out internal audits and taking legal advice in the first place on the basis that the advice might later on end up in the hands of the OFT; it is no surprise that this proposal has been dropped," she added.

Bret said that the new guidance was not substantively different to previous guidance on leniency that were in place, but said that the document would likely be more keenly referred to once the new Competition and Markets Authority (CMA) assumes responsibility for regulating competition in the UK next year. The CMA is expected to adopt a more rigorous approach to enforcement, she said.

However, Bret said businesses thinking of engaging with the leniency regime should note that doing so can trigger civil proceedings being brought against them.

"It is important to remember that the leniency programme may protect you from fines and from criminal prosecution but it will not protect you from third party damages claims further down the line and, critically, that documents provided to the OFT in the context of a leniency application may end up being used against you in court, It is also important to bear in mind that the number of third party damages actions is likely to increase with recent EU and UK proposals to make damages actions easier to victims of competition law infringements. In the UK, the proposals are even tougher with the introduction of an 'opt-out' system of collective claims which means that, if the proposals are adopted, a much broader range of representative organisations will be able to bring actions on behalf of consumers and businesses," Bret said.

Jackie Holland, who led work on the leniency guidance for the OFT, said: "The secret nature of cartels and their damaging effects justifies a policy which rewards businesses or individuals who come forward to tell us about cartel activity that would otherwise have remained hidden. It also helps us bring successful enforcement action against the other cartel members or individuals involved to bring the harmful activity to an end, as well as deterring businesses and individuals more widely from engaging in cartel activity in the future."