From community service to director disqualification: UK CMA gets tough

CMA secures director disqualification for competition law breach

Unlike our September 2015 report on a rather lenient sentence of 120 hours of community service, the CMA has now secured the first disqualification of a director of a company found to have infringed competition law.

Daniel Aston, managing director of the online poster supplier Trod Ltd, has given a disqualification undertaking not to act as a director of any UK company for 5 years.

The Competition and Markets Authority (CMA) may, under the Company Directors Disqualification Act, seek the disqualification of an individual from holding company directorships where that individual has been director of a company which has breached competition law.

This is the first time the power has been used for competition law breaches since it came on the statute book.

The disqualification follows the CMA’s decision of 12 August 2016 that Trod breached competition law by agreeing with one of its competing online sellers that they would not undercut each other’s prices for posters and frames sold on Amazon’s UK website. The CMA found that the agreement was implemented using automated re-pricing software. The CMA fined Trod £163,371.

As Mr Aston was the managing director of Trod at the relevant time, and because he personally contributed to the breach of competition law, the CMA considers that his conduct makes him unfit to be a company director for a specified period.

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.

Under the disqualification undertaking, Mr Aston undertakes that for a period of 5 years, he will not ‘without the leave of the court be a director of a company or act as a receiver of a company’s property; or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company; or act as an insolvency practitioner.’ On 6 October 2016, the CMA served Mr Aston with a notice pursuant to section 9C of the Act setting out the grounds and evidence on which it proposed to rely in a claim for a disqualification order. Mr Aston has made oral and written representations on the proposed claim. On 21 November 2016, the CMA determined to bring proceedings in the event that no disqualification undertaking were given.

Under the Company Directors Disqualification Act, the CMA has the power to apply to the court for an order disqualifying a director from holding company directorships or performing certain roles in relation to a company for a specified period if a company of which he or she is a director has breached competition law. The Act also allows the CMA to accept a disqualification undertaking from a director instead of bringing proceedings. A disqualification undertaking has the same legal effect as a disqualification order.  Sections 9A to 9E of the Company Directors Disqualification Act 1986 as amended by the Enterprise Act 2002, which came into effect on 20 June 2003, gives the CMA the power to apply to the court for a disqualification order to be made against a director for a maximum of 15 years where a company of which he is a director has breached competition law and where his conduct as a director makes him unfit to be concerned in the management of a company.

The disqualification undertaking is available on the CMA’s web page.

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