CMA secures director disqualification for competition law breach
The CMA has 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 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.
The disqualification undertaking is available on the CMA’s web pages.
Notes for editors
- 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.
- Section 9B of the Act allows the CMA to accept a disqualification undertaking from a director instead of bringing proceedings. Where a disqualification undertaking is offered, this will normally result in some discount in the period of disqualification which the CMA is prepared to accept. In this case, taking into account the disqualification period the CMA considered to be appropriate in the light of Mr Aston’s conduct and the fact that Mr Aston was willing to give an undertaking before court proceedings were commenced, the CMA agreed to reduce the period of disqualification it was prepared to accept to 5 years.
- 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.
- The other company involved in the competition law breach, GB eye Ltd (trading as ‘GB Posters’), applied for and obtained immunity having reported the cartel to the CMA. Under the CMA’s leniency policy a business that has been involved in a cartel may be granted immunity from penalties or a significant reduction in penalty in return for reporting cartel activity and assisting the CMA with its investigation. Under the policy the CMA will also not apply for a disqualification order against any director of a company whose company benefited from leniency in respect of the activities to which the grant of leniency relates, provided that he or she co-operates with the leniency process. The only exception to this is where a former director has been removed or otherwise ceases to act as a director because of a breach of competition law and/or opposing the relevant leniency application.
- Individuals involved in cartel activity may also in certain defined circumstances be granted immunity from criminal prosecution for the cartel offence under the Enterprise Act 2002. The CMA also operates a rewards policy under which it may pay a financial reward of up to £100,000 in return for information which helps it to identify and take action against cartels. For more information on the CMA’s leniency and informant reward policies, go to leniency and rewards.
- Anyone who has information about a cartel is encouraged to call the CMA cartels hotline on 0800 085 1664 or 020 3738 6888, or email cartelshotline@cma.gsi.gov.uk.
- For more information on how to achieve compliance with competition law, go to the CMA’s compliance web page. The CMA has also produced a series of animated videos explaining the main principles of competition law and how they affect small businesses.
- For more information on the CMA see our homepage or follow us on Facebook, Twitter @CMAgovuk, Flickr and LinkedIn. Sign up to our email alerts to receive updates on Competition Act 1998 and civil cartels cases.
- Enquiries should be directed to Rory Taylor (rory.taylor@cma.gsi.gov.uk, 020 3738 6798).