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.


Court goes easy on CMA accused: 120 hours of community service for ‘cartel offence’

Courtesy of the Competition & Markets Authority in the United Kingdom

Nigel Snee was today sentenced to 6 months’ imprisonment, suspended for 12 months, and ordered to do 120 hours community service within 12 months.  While the law would have permitted issuance of a monetary fine, he was spared that as well, and likewise is allowed to continue serving as a company director in the future.

The sentencing hearing at Southwark Crown Court followed a criminal cartel investigation by the Competition and Markets Authority (CMA).

Mr Snee, the former Managing Director of Franklin Hodge Industries, had previously pleaded guilty to dishonestly agreeing with others to fix prices, divide up customers and rig bids between 2005 and 2012 in respect of the supply in the UK of galvanised steel tanks for water storage.

The tanks are used to store water for sprinkler systems in buildings.

Mr Snee was arrested in 2012 at the start of an investigation begun by theCMA’s predecessor, the Office of Fair Trading.

Mr Snee cooperated with the investigation and, after pleading guilty to the cartel offence in January 2014, was a witness for the CMA at the subsequent trial of two further individuals, who were acquitted in June. As is usual in such cases, the extent of Mr Snee’s cooperation was reported to the trial judge in order that it could be taken into account in his sentencing decision.

In explaining the approach to sentencing, His Honour Judge Goymer remarked that “the economic damage done by cartels is such that those involved must expect prison sentences”.

The judge indicated that his starting point in this case was that a prison sentence of 2 years was appropriate. Taking into account Mr Snee’s early guilty plea, his personal mitigation and the extent of his voluntary cooperation as a witness, the Judge reduced his sentence by the “higher end” discount of 75%, and concluded that it was appropriate in the circumstances of this case for the resulting 6 month sentence to be suspended.

Bullet point summary:

  1. On 24 June 2015, following a trial at Southwark Crown Court in the same case, two directors, Clive Dean of Kondea Water Supplies Limited and Nicholas Stringer of Galglass Limited, were acquitted of the same charges under section 188 of the Enterprise Act 2002.
  2. The case was brought under the law as it applied to conduct before April 2014, under which the cartel offence was only committed where the individuals concerned acted dishonestly. Following a change in the law, for conduct after 1 April 2014, it is no longer necessary for the CMA to prove that individuals acted dishonestly to commit the cartel offence.
  3. The CMA is also currently conducting a related civil investigation into whether businesses have infringed the Competition Act 1998. No assumption should be made at this stage as to whether the Competition Act has been infringed.
  4. The CMA operates a leniency programme for parties who want to admit their involvement in a cartel and also, in certain circumstances, offersfinancial rewards for cartel informants.

DOJ Antitrust Division announces criminal fines for FY 2014


The Department of Justice collected $1.861 billion in criminal fines and penalties resulting from Antitrust Division prosecutions in the fiscal year that ended on Sept. 30, 2014. Contributing in part to one of the largest yearly collections for the division, five of the companies paid in full penalties that exceeded $100 million, including a $425 million criminal fine levied against Bridgestone Corp., the fourth-largest fine the Antitrust Division has ever obtained.  The second-largest fine collected was a $195 million criminal fine levied against Hitachi Automotive Systems Ltd.  The three additional companies that paid fines and penalties exceeding $100 million were Mitsubishi Electric Corp. with $190 million, Toyo Tire & Rubber Co. Ltd. with $120 million and JTEKT Corp. with $103.2 million. The collection total also includes penalties of more than $561 million received as a result of the division’s LIBOR investigation, which has been conducted in cooperation with the Justice Department’s Criminal Division. In addition, in the last fiscal year the division obtained jail terms for 21 individual defendants, with an average sentence of 26 months, the third-highest average ever.

“The size of these penalties is an unfortunate reminder of the powerful temptation to cheat the American consumer and profit from collusion,” said Assistant Attorney General Bill Baer for the Antitrust Division.  “We remain committed to ensuring that corporations and individuals who collude face serious consequences for their crimes.”

Why are compliance programmes treated differently (competition vs. anti-bribery laws)?

In this post, Michael Volkov compares the “carrot” approach to FCPA compliance programmes to the lack thereof in antitrust enforcement, asking the pertinent question: “why do antitrust enforcers not reward compliance efforts like their anti-bribery counterparts do?”

Worth a read.

White Collar Crime Resource Guide: Statute of Limitations


Some issues in white collar criminal defense arise over and over. I’ll periodically post Resource Guides to cover those issues. Feel free to suggest other Resource Guide topics in the comments.

Click here for a printable version of this statute of limitations Resource Guide.

Default Statute of Limitations

Generally, there is a 5-year statute of limitations for federal criminal matters. 18 U.S.C. § 3282.

Longer Statutes of Limitations

Although five years is the default statute of limitations, many federal crimes have a longer period.

Capital offenses, as an extreme example, have a limitation period that never expires. If a federal crime is punishable by death, the government can bring an indictment on that crime at any time after the crime has been committed. 18 U.S.C. 3281.

Congress has specifically extended the statute of limitations for a number of white-collar crimes.

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EU Parliament votes in favour of private antitrust damages initiative

The European Parliament gave its green light to the Commission private-damages Directive today:

Brussels, 17 April 2014

Antitrust: Commission welcomes Parliament vote to facilitate damages claims by victims of antitrust violations

The European Parliament has approved a proposal for a Directive which will help citizens and companies claim damages if they are victims of infringements of the EU antitrust rules, such as cartels and abuses of dominant market positions. The Directive is based on a proposal by the Commission of June 2013 (see IP/13/525 and MEMO/13/531), and aims to remove a number of practical difficulties which victims frequently face when they try to obtain compensation for the harm they have suffered. In particular, it will give victims easier access to evidence they need to prove the damage and more time to make their claims. At the same time it ensures that the effectiveness of the tools used by competition authorities to enforce antitrust rules, in particular leniency and settlement programmes, is preserved. The proposal is now sent to the EU Council of Ministers for final approval. See also MEMO/14/310.

Commission VicePresident in charge of competition policy Joaquín Almunia said, “The vote by the European Parliament is great news for European citizens and businesses harmed by antitrust violations. The Directive will help to make the right to full compensation a reality in the EU, by removing the practical obstacles that victims face today. When the Directive is adopted and implemented, obtaining redress will become easier for them, especially after a competition authority has found and sanctioned an infringement.”

The EU Court of Justice has recognised the right for victims of antitrust infringements to be compensated for the harm suffered. However, due to national procedural obstacles and legal uncertainty, only few victims actually obtain compensation. Moreover, national rules are widely diverging across Europe and, as a result, the chances of victims to obtain compensation greatly depend on which Member State they happen to live in. The Directive aims to remove these obstacles. Main improvements include:

  • National courts can order companies to disclose evidence when victims claim compensation. The courts will ensure that such disclosure orders are proportionate and that confidential information is duly protected.
  • A final decision of a national competition authority finding an infringement will automatically constitute proof before courts of the same Member State in which the infringement occurred.
  • Victims will have at least 1 year to claim damages once an infringement decision by a competition authority has become final.
  • If an infringement has caused price increases and these have been “passed on” along the distribution chain, those who suffered the harm in the end will be the ones entitled to claim compensation.
  • Consensual settlements between victims and infringing companies will be made easier by clarifying their interplay with court actions. This will allow a faster and less costly resolution of disputes.

Private damages actions before courts and public enforcement of antitrust rules by competition authorities (whether the Commission or national authorities) are complementary tools. Through the Directive they will reinforce each other, on the one hand to achievefull compensation for victims (including lost profits and interest) and, on the other, to enhance the key role of competition authorities in investigating and sanctioning infringements, thus achieving deterrence. In particular, cooperation between companies and competition authorities under so-called “leniency” programmes plays a key role in the detection and sanctioning of infringements of competition rules. Without such cooperation, many infringements would never be discovered in the first place, and in many cases, it is therefore the successful enforcement of competition rules by a public authority that will enable victims to subsequently seek and obtain compensation. As a result, the Directive contains a number of safeguards to ensure that facilitating damages actions does not diminish the incentives for companies to cooperate with competition authorities (see MEMO/14/310).

Next Steps

Today’s plenary vote in first reading was the European Parliament’s final step in the procedure. Approval by the Council will complete the legislative procedure. Once the Directive has been officially adopted, Member States will have two years to implement the provisions in their legal systems.

The full text of the Directive is available here:


In June 2013, the Commission submitted its proposal to the European Parliament and the Council (see IP/13/525 and MEMO/13/531). After both co-legislators discussed the proposal and suggested amendments, informal meetings between the three institutions (so-called trilogues) were launched in February to achieve a compromise text. Representatives of Member States’ governments agreed to the final compromise text at the end of March.


On the wrong side of the tracks: German BKartA Cartel Office fines rail makers anew to tune of EUR 97m

The Bundeskartellamt (German Federal Cartel Office) has determined once again that German rail producers have been on the wrong side of the tracks & spent too much time in a bad neighbourhood, so to speak.

This time around, the eight players in the rail business were fined for a separate, but related, heavy-industry cartel that was targeted at short-haul local/communal German rail customers.

In the first round of the massive investigation — initiated by the leniency application of cartelist Voestalpine — the target had been the federal Deutsche Bahn.  In that case, the FCO imposed total fines of EUR 134.5 million against 4 participants in the illegal agreements.

What’s the total FCO cost of this train ticket?  Almost 1/4 billion Euros, if you include both cartels.  And that’s just the BKartA fines.  Let’s see where the private damages litigation will head, with Deutsche Bahn leading the pack in all likelihood.

Huh? German merger law changes go into effect “unnoticed” by Federal Cartel Office?

Either the Bundeskartellamt is missing something, or yours truly is — …

…but why is the 8. amendment to the German antitrust statute (allegedly in effect since 1 July 2013) not mentioned anywhere on the BKarta/FCO’s web site? A reference to the revised law is nowhere to be found.

For starters, let’s just take one example from the German legislature’s amendments (the “8. GWB-Novelle”): the change-over from the “creation or strengthening of a dominant position” test in German merger control to the common “significant impediment to effective competition” (SIEC) test used by the European Commission since 2004. Arguably, this change is not quite substantive in nature, and the former is still used as a prime example (“Regelbeispiel”) of the latter, but the change is — sorry to say — in the law, and the FCO doesn’t even mention it?! Not even in its “news” archive? Nor does it update its online reprint of the governing law?

If you look at the FCO’s web page dealing directly with its merger control regime, you will see no reference whatsoever to the new SIEC test. Equally (or more) troubling is that its related “Merkblatt” (roughly, guideline) on merger control is completely out of date, being asterisked with a cute “(wird derzeit überarbeitet)” (“is currently being revised”) note, which has been there for at least a year if not more.

Someone, please tell me that I am wrong and that the Bundeskartellamt actually has things under control. What am I missing here?

(Note: this post is valid as of 10 July…)

Updated European Commission “Dawn Raid” guidance notice

Not that anyone is planning to be subjected to an unannounced visit and search by a bunch of suited-up European Commission bureaucrats & DG COMP’s IT personnel wearing sneakers rummaging through your network drives…

But just in case that you want to be prepared: We can provide you with training for your employees — from the receptionist (who is a more important person in this role and in this context than many might think at first glance) to the company’s IT staff, all the way to your CEO. And, to boot, here is a timely link to the updated European “Dawn Raid” guidance paper. It is short and worth looking at. The EC’s PDF notice can be found here.


Patent Troll / NPE update to yesterday’s article

Little did I know that the United States House of Representatives had the same thoughts on their mind as I was writing my lil’ piece on counter-attacking IP troll lawsuits.

Here’s what the honorable members of the U.S. House Judiciary Committee had to say on this topic Thursday:

  • the U.S. needs legislation to limit NPE lawsuits
  • similar to the E.U. Universal Patent Court’s proposed system, we should create a “loser pays” regime with limits on discovery (did they read my blog?!)
  • the SHIELD Act (Saving High-Tech Innovators from Egregious Legal Disputes Act) goes a long way towards these goals
  • NPEs should be prohibited from parallel actions in both federal court and the ITC.
Cisco’s GC (Mark Chandler) stated that the company spent about $50 million per annum on outside lawyers in NPE suits, calling on Congress to “change the incentives.”

My closing remark: One panelist saliently labeled NPEs “business terrorists.”