Director disqualified for breach of Competition Law

This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.

The Competition and Markets Authority ("CMA") has for the first time disqualified a director of a company which infringed competition law.The CMA has issued a stark warning to businesses that it is "absolutely prepared to use this power again" if companies break the law.

The director concerned, Daniel Aston, was the Managing Director of an online poster and frame supplier, Trod Limited ("Trod"). Earlier this year, the CMA found that Trod had unlawfully entered into an agreement with a competing online seller, GB eye Limited ("GB eye"), not to undercut each other's prices for posters and frames sold on Amazon's UK website. The CMA imposed a fine of £163,371 on Trod, and in addition has now taken the step of disqualifying its Managing Director. GB eye reported the agreement to the CMA and received immunity from fines.

The CMA has powers under the Company Directors Disqualification Act to apply to the court for an order to disqualify a director of a company which commits a breach of UK or EU competition law, where the person's conduct makes him or her unfit to be concerned in the management of the company. In this case, Mr Aston had contributed to the breach by personally implementing the unlawful agreement on behalf of Trod.

Mr Aston has been disqualified for five years, but the maximum penalty is 15 years, during which time the individual cannot act as director or be involved in the management of any company. In this case, the CMA secured a disqualification undertaking as an alternative to applying for a court order.

A person may be disqualified not only where he or she was actively involved in contributing to the breach, but also where he or she ought to have known that the company was in breach and took no steps to prevent it. The burden therefore falls on the company's management to put in place effective procedures to guard against anti-competitive behaviour.

Since GB eye was awarded immunity and its directors co-operated throughout the investigation, the CMA did not invoke its disqualification powers against them.

The CMA has published Guidelines (Director Disqualification Orders in Competition Cases, June 2010) which make the point that while competition regulators do "not expect that directors should have specific expertise in competition law, they do expect that all company directors should appreciate the importance of competition law compliance".

The case is a timely reminder that company directors can face personal consequences if their companies commit any breaches of competition law. It is therefore highly advisable that they foster a culture of compliance within the business, not least by ensuring that it has an appropriate compliance programme for all its employees.