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An illegal drain on competition: pre-cast drainage industry executive lacks concrete defence and now faces possible imprisonment!

31 March 2016

In a further reminder about the enhanced prosecutorial powers of the Competition and Markets Authority (“CMA”) under the reformed UK competition landscape, a fresh case has been brought before the Crown Court for suspected price fixing and market-sharing cartel activity in violation of section 188 of the Enterprise Act 2002 (“section 188”) (“EA02”), this time by an executive in the precast concrete drainage products industry.  The individual in question has pleaded guilty to one count of the cartel offence and will now await sentencing. 

The charges presented – and potentially severe punishments!

The CMA has been investigating suspected price-fixing and market-sharing practices in the concrete drainage pipe industry.  Amidst the various evidence of communications uncovered to date, the CMA indicated in a press release on 7 March 2016 that Mr Barry Kenneth Cooper had become implicated at the centre of a suspected tripartite arrangement between three leading companies in the sector.  It appears the CMA had grounds to reasonably suspect that Mr Cooper had been communicating with competitors around pricing and supply / customer allocation.

It may be that, in reality, many of the decisions which Mr Cooper took may have appeared to him and his cohorts to be relatively straightforward commercial decisions at the time at which they were made (e.g. strategically allocating customer business).  Nonetheless, Mr Cooper’s admission of guilt indicates that he now recognises he ought to have known that the practices he was pursuing would amount to criminal cartel activity. 

Mr Cooper’s guilty plea comes despite the additional barrier of the jury having to be satisfied on the evidence that he had acted dishonestly by the relevant criminal standard (the case of R v Ghosh is the common law authority on subjective dishonesty, which states that the jury must be satisfied beyond reasonable doubt that the accused knew at the relevant time that what he was doing was dishonest by the standards of reasonably honest men).  This is because acts for which he was charged took place between 2006 and 2013, prior to a reformed version of the section 188 coming into force on 1 April 2014.

However, business people across all sectors should be aware that for alleged cartel activity taking place after April 2014 the accused will be charged under an amended form of the section 188 offence (revised pursuant to the Enterprise and Regulatory Reform Act 2013).  With no “Ghosh”-standard dishonesty having now to be proved before a jury, a defendant can thus be found liable under the amended section 188 offence even if he might not have realised the full gravity of what he was doing at the time. 

Furthermore, if that defendant also failed to cease his malpractice and ‘come clean’ with customers and the regulator when he encountered wrongdoing, he would therefore be unable to rely at trial on any of the new defences provided for under section 188A EA02 - notably, by demonstrating that they had no intention at the material times to conceal the relevant arrangements from customers or from the CMA.

Having now pleaded guilty to the reformed cartel offence, Mr Cooper faces up to five years’ imprisonment and/or fines of any amount which the judge sees fit in all the circumstances.

Innocent until proven guilty… but (again) the accused pleads guilty

The CMA had reiterated that Mr Cooper was merely charged with a suspected offence by the prosecuting CMA and that no commission of an offence could be presumed until detailed evidence had been examined at trial.  Indeed, the CMA’s case page had previously stated that restrictions on further reporting about the case still applied under the Crime and Disorder Act 1998. 

Mr Cooper was due to appear before Southwark Crown Court to hear his charges at a Plea and Trial Preparation Hearing on 4 April 2016.  However (presumably, upon taking independent legal advice as to his likely position at trial), the Pre-Trial Preparatory Hearing was brought forward to 21 March at Southwark Crown Court, at which he entered his guilty plea.

Further updates are now awaited via the CMA’s case page as to the timetable for Mr Cooper to reappear for sentencing.

Comment: CMA criminal enforcement gathering momentum!

This latest case of an executive being charged with - and subsequently pleading guilty to - suspected market-sharing and/or price-fixing cartel practices serves as a reminder of the CMA’s prosecutorial powers; meanwhile, the reduced ‘bar to conviction’ created by the removal of the requirement to prove subjective dishonesty on the part of the accused, will give the CMA’s criminal enforcement arm further fresh impetus, as was envisaged when the reforms to the regime were first tabled.  This in turn means that business people in a wide range of sectors must take even greater care than ever before to avoid engaging in anti-competitive practices – in theory, even a single conversation or e-mail out of line, if it sanctions price-fixing, market-sharing or bid-rigging activities, could ultimately lead to up to five years in prison and unlimited individual fines!

Three executives were charged last year in connection with market-sharing in the market for steel water storage tanks, one of whom (Peter Nigel Snee) pleaded guilty and was subsequently summoned for sentencing on 24 September 2015, receiving a suspended six-month prison term and being ordered to undertake 120 hours of community service.  The other two executives charged were acquitted at trial, albeit (as reported in Compliance Inform) this nevertheless served as an early reminder at the time of the CMA’s increased motivation to bring those behind cartel behaviour before the criminal courts, which will only increase now that, for suspected offences alleged to have been committed after 1 April 2014, longstanding evidential barriers presented by the original section 188 offence have been lowered.  The companies involved in the water storage cartel have now, incidentally, settled the CMA’s civil case against them by accepting fines totalling more than £2.6 million (with one company, CST Industries, receiving full immunity from any penalty in exchange for cooperating and providing evidence under the CMA’s leniency policy).

This article was written by Rory Ashmore. For more information please contact Rory on +44 (0)20 7427 1031 or at rory.ashmore@crsblaw.com