(by Peter Whelan) A recent post on this blog argued that, in relation to the UK Cartel Offence, we should put the definitional element of dishonesty ‘to bed’ following the publication of BIS’s response to its consultation on the UK competition regime. I agree with the sentiments expressed concerning ‘dishonesty’ and believe that that particular definitional element should be removed from S 188 of the Enterprise Act 2002. What surprises me however is that the vast majority of those who commented on the BIS proposals concerning the Cartel Offence are not in agreement: on my count, 33 contributors (out of 49) provided express support for the continued employment of the mens rea of dishonesty in the UK Cartel Offence.
More often than not, such commentators wished to see the Cartel Offence tried in front of a jury before deciding whether its definitional element of dishonesty is as problematic as claimed. I respectfully disagree. Requiring a trial run is not necessary; reform should occur sooner rather than later. First, the definition of cartel activity in S 188 arguably violates legal certainty ― at least in those (admittedly rare) cases where the underlying cartel activity does not infringe national or EU competition law (i.e., Chapter 1 of the Competition Act 1998 or Article 101(1) TFEU). Second, the ‘chicken and egg’ problem is a reality with cartel activity: hardened attitudes to cartel activity do not currently exist among the public. A criminal offence which relies upon such hardened attitudes for success is bound to fail. Third, given that cartel activity is conducted for the direct benefit of companies rather than the individual cartelists, defendants always have the ability to advance dubious defences (e.g., they were cartelising to save jobs) when dishonesty must be proved.
Importantly, one can achieve the aims associated with the employment of the mens rea of ‘dishonesty’ (e.g., underlining the criminality of cartel activity) through other less problematic means. The proposal in the BIS Consultation Document which can achieve these aims most easily is Option 4: removing the ‘dishonesty’ element from the offence and defining the offence so that it excludes agreements made openly. Although this option was advocated by only three contributors (the OFT, the Centre for Competition Policy and myself), BIS has decided that this particular option is indeed the most appropriate choice concerning reform of the Cartel Offence. While not without its limitations, this decision should be welcomed.
The removal of ‘dishonesty’ introduces the possibility that the criminal offence does not necessarily cover immoral behaviour. This brings its own problems: citizens may view the law as unjust; attitudes towards the meaning of criminality may change; and the criminal law may lose some of its legitimacy. But one can overcome these problems of ‘overcriminalisation’ by linking the Cartel Offence to the commission of immoral behaviour, such as ‘deception’ (i.e., the communication of a message with the intent to cause someone to be misled).
One can plausibly argue that by placing her cartelised good on the market, and saying nothing about the existence of the cartel, the cartelist aims to cause the consumer to believe that collusion has not occurred. (Indeed, taking inspiration from an article written by Sir Jeremy Lever QC and John Pike, the High Court accepted such an argument in the Norris case:  EWHC 71 (Admin).) If so, in such situations the cartelist will have violated the moral norm against deception. But this will only be so if the cartelist does not reveal the existence of the cartel prior to the relevant sales transaction; hence the requirement to exclude those agreements made openly.
By linking cartel activity to ‘deception’, then, Option 4 underlines the criminality of cartel activity without engendering the problems associated with proof of dishonesty. The obligation upon the cartelist to make her cartel agreement public so as to avoid criminal sanctions also has two positive effects. First, it provides an effective immunity from criminal sanctions for those who conclude agreements that would benefit from an exemption under Article 101(3) TFEU (or the national equivalent). If cartelists genuinely believe that their cartel agreement would be so exempted, all they have to do to avoid criminal sanctions is to publish the agreement prior to its implementation. No economic evidence therefore needs to be presented to a jury for an Article 101(3)-type exemption to be operationalised.
Critics might say that cartelists will short circuit the criminal antitrust regime by routinely making public all of their cartel agreements, thereby nullifying the deterrent effect of the criminal cartel sanctions. This is unlikely as presumably the cartelist wishes to see the cartel actually work in practice. If so, they would be reluctant to bring the cartel to the attention of those who enforce the administrative cartel prohibitions. However, if cartelists do decide to make their (clearly unlawful) agreement public merely to avoid criminal sanctions, the second positive effect of Option 4 would register: the veil of secrecy surrounding the cartel would be pierced, thereby increasing the rate of detection (and consequently the deterrence) of unlawful cartels for the purposes of the enforcement of Chapter 1 of the Competition Act 1998 or Article 101 TFEU.