(by Andreas Stephan) As part of the far reaching competition reforms announced by the UK Government this week, the Cartel Offence will no longer require the prosecution to show that cartelists acted dishonestly in order to secure a conviction (pp 66-77). Some commentators have suggested this move could result in miscarriages of justice. It is in fact the most positive reform to come out of the Government’s review.
Let us first put the issue of dishonesty to bed. There is no statutory definition for dishonesty. The question put to juries was set out in a Court of Appeal decision from the early 1980s (R v Ghosh). According to this, what was done was dishonest by the standards of reasonable honest people, and the defendant knew what he did was dishonest by those standards. The definition is ambiguous and is likely to be understood differently between juries. This has provided a potentially convenient refuge for any cartelist able to show a little imagination when preparing his defence.
As a number of practitioners and academics have pointed out, dishonesty works well in the law of theft because juries are very rarely directed to consider it in a given case. The dishonesty inherent in the alleged theft is considered so obvious that the judge usually takes it as given. Even in fraud cases, dishonesty can generally be inferred from a false representation. Price fixing is inherently objectionable, but dishonesty is not immediately obvious because the act is more subtle than theft or fraud. Price fixing does not require a positive misrepresentation; all that is required is secrecy and a desire to act like a monopolist. The House of Lords ruling in Norris, for example, suggested that dishonesty could not be inferred from the act of secret price fixing alone.
The problems associated with dishonesty must bear most of the blame for the OFT failing to bring more cases to trial. Their inexperience as a criminal prosecutor was undoubtedly a factor (as demonstrated by the BA case), but they were also very aware of how high the dishonesty standard set the bar. Attempts to bring more cases to trial may simply have resulted in further embarrassment for the authority.
Now on to the suggestion that the change may result in miscarriages of justice. This is a rather bizarre point to raise given we have not seen a single successful prosecution to date. Marine Hoses, in which three individuals pleaded guilty to the cartel offence, was instigated by a US plea bargain. The new cartel offence will not be a speeding ticket style strict liability offence. Prosecutors will have to show that individuals intended to engage in cartel practices and those arrangements made openly will not be subject to criminal prosecution. This is a stricter standard than that applied under the US Sherman Act (which requires intention or knowledge of the probable consequences, according to the US Supreme Court decision in US v United States Gypsum Co 1978).
Those concerned about miscarriages of justice apparently fear that British businessmen could unwittingly stumble into a cartel. Every businessman should know that conspiring with competitors to artificially raise prices charged to their customers is plain wrong. The fact practices such as price fixing, market sharing and bid-rigging are often actively hidden from individuals’ own employers, suggests those responsible know it is wrong.
Britain badly needs effective criminal cartel enforcement. In its absence, businessmen can enter into cartel agreements safe in the knowledge that their employer (and the shareholders) will bear the only direct consequence of their illegal actions. Criminal prosecutions will boost deterrence and make the leniency programme more effective, protecting the UK economy from significant harm.