Out-Law News | 02 Dec 2016 | 4:52 pm | 3 min. read
The undertaking (3-page / 1.15MB PDF) was secured by the Competition and Markets Authority (CMA). It is the first time the CMA has obtained a disqualification undertaking from a company director under the Company Directors Disqualification Act.
Daniel Aston was managing director of online poster and picture frame seller Birmingham-based business Trod. In August, the CMA fined Trod, trading as Buy 4 Less, Buy For Less and Buy-For-Less-Online, £163,371 for breaching UK competition laws that prohibit agreements, practices and conduct that have as their object or effect the prevention, restriction or distortion of competition and which may affect trade within the UK.
The CMA's investigation found that Trod had agreed with another UK business, GB Posters, that they would "not undercut each other’s prices for posters and frames sold on Amazon’s UK website" for a period of more than four years.
The CMA said Aston "personally contributed to the breach of competition law" and that it therefore considered his conduct to make him "unfit to be a company director for a specified period".
Competition law expert Angelique Bret of Pinsent Masons, the law firm behind Out-Law.com, said the case is "an important development, particularly given low numbers of successful criminal cartel prosecutions which require a different level of evidence".
"This case shows that where there is a serious competition law infringement, such as price fixing or bid rigging, but, because the facts and/or the evidence don’t support a robust criminal case, the CMA decides to take a civil case against the company, there is a real risk going forwards of the CMA using director disqualification orders to punish individuals," Bret said.
The CMA is able to impose disqualification on directors where their conduct directly contributed to the breach or had reasonable grounds to suspect a breach but took no steps to prevent it; and may do so even if the director was not involved in the breach but 'ought to have known' of it, Bret said.
"This makes it all the more important for the managers of even very small companies to ensure that they are aware of the competition law rules and take compliance seriously. The CMA has issued a number of pleas to law firms, particularly outside London and those servicing smaller businesses, to continue to raise awareness of the competition law rules and the potential consequences," Bret said.
By agreeing to sign a disqualification undertaking, Aston avoided his case being settled in court.
The CMA has the power to ask the courts for a disqualification order banning individuals from holding company directorships where that the company those individuals worked for has breached competition law. The CMA can accept disqualification undertakings instead of pursuing the court order.
The regulator said that it "agreed to reduce the period of disqualification it was prepared to accept to five years" in Aston's case by agreeing an undertaking instead of pursuing the case in court.
Competition law expert Robert Eriksson of Pinsent Masons said: "What is particularly important to also bear in mind is that director disqualification orders can be issued not just for cartelist conduct but also for arguably less serious infringing conduct that a director took part in, or for conduct he or she knew about but turned a ‘blind eye’ to, such as abuses of dominance or anti-competitive agreements between non-competing suppliers and distributors."
"The decision also shows it’d be wrong to think the CMA only would go after directors of larger companies in bigger investigations, as it may indeed be easier for the CMA to demonstrate that a director ought to have known about the conduct in question when the company is smaller," he said.
Michael Grenfell, executive director for enforcement at the CMA, said: "Breaking competition law can harm consumers, businesses and overall economic performance. In this case, people shopping online were entitled to believe retailers were competing on price, whereas, unknown to them, the companies had colluded not to undercut each other’s prices."
"The responsibility to ensure that companies don’t engage in illegal anti-competitive practices is an important one, and company directors should not shirk that responsibility. The business community should be clear that the CMA will continue to look at the conduct of directors of companies that have broken competition law, and, where appropriate, we are absolutely prepared to use this power again," Grenfell said.