Tuesday, 10 April 2012

Scrapping 'Dishonesty' from the Cartel Offence

Section 188 Enterprise Act 2002 provided that:
An individual is guilty of an offence if he dishonestly agrees with one or more other persons to make or implement, or to cause to be made or implemented, [cartel] arrangements [between at least two companies].
I wrote last time about the different situations in the US and UK. I mentioned that the UK wasn’t a great criminal enforcer of competition law infringements, and that this ‘cartel offence’ wasn’t doing a great job.
Well, maybe that’s about to change. The Government has decided that it wants to scrap the ‘dishonesty’ element of the offence. This might be good news in that:
  •   We might see more prosecutions.
  •   Those prosecutions are more likely to be successful.
  •  As such, the offence will have more ‘bite’ and thus be a better deterrent.

This is because the dishonesty test is one that comes from case law (R v Ghosh[1]), and it is arguably a bit tricky to apply to ‘complex’ commercial agreements. Ghosh needs the defendant (D) to fall below the normal standard of honesty (objective test) and to know he was being dishonest by that standard (subjective test). A jury member knows what he thinks of theft, he might not know how dishonest he considers cartelling. And this will affect both whether he believes cartelling is dishonest by reasonable standards, and also whether he thinks D would know that.
On the other hand, we could be worried, in a couple of different ways:
  • Serious offences should always have a ‘mens rea’ element – D needs to have a sufficiently guilty mind. This isn’t a parking ticket, this is five years in jail – D needs to be wilfully bad.
  • The reason we weren’t prosecuting often or successfully enough was because the body responsible (the OFT, soon to be merged with the CC) lacked expertise and experience.

These skirt the fundamental issue. It is the more woolly issue of to what extent we should criminalise anti-competitive conduct. Getting rid of dishonesty widens the offence, both in law and in fact. Some conduct that previously wasn’t criminal now would be. Some conduct that was criminal but too difficult to prove will be easier to prove. I don’t know where the limits should be. But I am a little worried that the global trend to tougher enforcement means that we’re making tougher and tougher laws without fully exploring how well the original law could ‘work’ at limiting anti-competitive conduct whilst still being careful that we don't over-penalise those who engage in that conduct.
 Further, in this particular case, we’ve bypassed the need to explain to the public, or persuade a jury, that price fixing is dishonest. As a result, the cartel offence makes scant effort at earning its place in the public conception of what is ‘wrong’. Another time, I’ll write a comment on public attitudes to anti-competitive practices. It will be tightly related to this piece.

[1] [1982] EWCA Crim 2

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