Enterprise and Regulatory Reform Bill

Memorandum submitted by Joint Working Party of the Bars and Law Societies of the United Kingdom on Competition Law (JWP) (ERR 35)

We are writing to the Committee on behalf of the Joint Working Party of the Bars and Law Societies of the United Kingdom on Competition Law ("the JWP"), which submitted Comments on BIS’s consultation in June 2011. The JWP is a long-established body comprising senior specialist competition practitioners from both sides of the UK legal profession.

The JWP wrote to the President of the Board of Trade, Dr Cable, on 27 April 2012 expressing our serious concerns as to the proposed amendment to the "cartel offence", to withdraw the requirement of dishonesty without replacing it with any other positive mens rea requirement.

As we understand it, both the OFT and the department advocate the removal of the dishonesty requirement on the basis that it has in practice rendered the offence impossible to prosecute. The JWP is not party to the evidence that is relied on to support these assertions but it has considerable reservations as to whether the case for amendment has been made out. Only two cases have been brought in 10 years. Of those cases, only one involved a full trial and neither failed on the basis of the dishonesty requirement.

However, our main concern is with the position that would prevail if the current amendments are made. In our view, the proposal, if adopted in its current form, would criminalise the participation of individuals in agreements to engage in a wide range of otherwise lawful commercial conduct, including agreements that do not infringe the Chapter I prohibition of the Competition Act 1998 or Article 101 TFEU. We do not consider that it is a sufficient answer to rely on a defence of disclosure to the public and prosecutorial discretion to keep the offence within reasonable bounds. It seems to us that a serious criminal offence of this kind should include an appropriate subjective element, assessed by reference to the state of mind of the individual(s) participating in the conduct concerned.

When the cartel offence was first introduced back in 2002, dishonesty was identified as the most appropriate test for this element. We do not currently see that the need to change that assessment has been made out. However, if dishonesty is to be removed as a substantive requirement of the offence, it appears to us that it needs to be replaced by one of the following alternatives:

- intention or recklessness as to the adverse impact of the agreed conduct on competition within the United Kingdom – this would appear to us to be the most obvious alternative, introducing a subjective element that reflected the intended target of the offence, i.e. deliberate or reckless participation in hard core infringements of the competition rules; or

- wilful concealment or deliberate intention to deceive – this would reflect the fact that the serious cartel activity that is the intended focus of the offence is invariably accompanied by deliberate secrecy; it also appears to the JWP that it would be less difficult for a prosecution to demonstrate the factual basis for such an allegation than to pass the double Ghosh test for dishonesty.

We consider that both of these alternatives are potentially workable and would represent a far better alternative than the current proposal just to remove the dishonesty requirement. As we indicate in more detail in our note, there seem to us to be at least four serious defects in the current proposal:

- The new offence would be a highly undesirable anomaly in the English criminal law, creating the possibility of an offence constituted by a conspiracy to perform a lawful act.

- It would undermine rather than complement changes to the civil enforcement regime over the past ten years.

- It would lead to a significant additional regulatory burden for UK businesses and their advisers, without producing sufficient countervailing benefits.

- It would significantly devalue the offence if it could be committed by persons agreeing to act in a way that was lawful and/or trivial, with no mens rea requirement.

July 2012

Prepared 13th July 2012