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.

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.