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22 Apr 2012

Removing the dishonesty element from the criminal cartel offence – not such a bad idea after all?

On 15 March 2012 BIS published its plans for an overhaul of the UK’s competition laws and enforcement arrangements. One aspect of these plans concerns the reform of the criminal cartel offence, s188 of the Enterprise Act 2002. The key proposal is to remove the dishonesty criterion so that the offence would be committed by those who agreed to price-fix, bid-rig or limit supply with another participant (purportedly a competitor) without revealing this to the public. This proposal has been widely criticised by competition and criminal lawyers, who have denounced it for its apparent illiberality and injustice. Despite this opposition, I crawl out onto a narrow and perilous ledge of assent to what BIS wants to do.

The reality is that a cartel offence containing a need to prove an accused’s dishonesty was never going to succeed. Including that element, coupled with the stricture that the offence could only be committed by individuals, doomed the offence from the outset. The near-insuperable difficulty encountered when seeking to prove dishonesty is that the benefit of the alleged crime always flowed only to another person who could not be accused as being a co-conspirator, the company or firm. So an accused could always seek to show – no matter how deceptive he/she was – that they were not dishonest because they had no expectation of any significant personal gain. When we think about someone being dishonest with money, we invariably tend to employ a criterion of whether they thought they stood to gain.

In addition, as “dishonesty” is such a vague and fact-specific legal concept, it was always going to be difficult for a trial judge to manage the trial by being unable to rule that particular lines of defence (including the calling of expert evidence) were irrelevant and thus inadmissible. So for example, I admit the facts but I was not dishonest because I wanted to save co-workers from redundancy and my honest belief about that evil is buttressed by a report by Professor X. In most criminal cases, the defendant does not have the ingenuity and resources to dream up such possible defences but the interlocutory arguments in the BA case manifested such a phenomenon. Of course, they were never tested. Interestingly an argument not run by the lawyers in BA was a “consent of principal” one; i.e. could a middle-manager be dishonest if his principal authorised the cartelist action which he took? In the vast majority of cases, such employees would have been so authorised (not just believed they were). When we think about employees being dishonest, we tend to employ a criterion of whether there was a betrayal of trust or breach of duty.

The OFT’s disappointing record as a prosecutor of this offence is not, as the critics argue, the fault of its low quality and resource-starved investigators. Neither is it fair to contend that the change is simply about being seen to lock up some errant directors. Dishonesty has never been a necessary element of analogue offences steeped in the history of English criminal law. Since about 1910, a jury has only been required to be satisfied of whether an alleged bribe was accepted in corrupt circumstances for corruption to be proved. That is an amorphous legal concept but the courts established then that it did not require the agent or principal to have been dishonest; what was needed was secrecy and breach of duty.

So I have sympathy for BIS’ view that the dishonesty element in paradigm cartel cases makes it very difficult to secure convictions.

It is nonetheless essential that a cartel offence (especially one created by statute) contains a discrete mens rea element. It must not be one of virtual strict liability. So what would work instead of dishonesty? Alternatively, what would be likely to satisfy a jury that the conduct was immoral? I suggest that secrecy is not sufficient. This is where I turn into an opponent of BIS’ plan. Criminal offences should begin at a higher threshold than that. People need a better guide to potential criminality than whether or not they act in secret, bearing in mind that so much of legitimate commercial life has this trait. I think deception or an intention to deceive is what is needed. Deception need not always be a matter of inference. If it was, then the distinction between it and secrecy would collapse. Deception should be proven; for example, did the alleged cartelists resort to mask and disguise when communicating or did they purport to their customer that they were in competition whilst they colluded?

Corker Binning is a law firm specialising in fraud, regulatory litigation and general criminal work of all types. Visit our website for more information about our cartel and company investigations practice or call us now on 0207 353 6000.

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