Norris (Appellant) v Judgments - Government of the United States of America and others (Respondent) (Criminal Appeal from Her Majesty’s High Court of Justice)

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21.  The Divisional Court’s treatment of these authorities cannot, with respect, be supported.

  (1)  The defendant in Jones v North attacked the agreement as being contrary to public policy, and failed because the parties were held to be free to make the agreement they did. That was what, in the heyday of Victorian capitalism, public policy was held to require. The decision has never been overruled. The criminal law, to be fair, must be certain, and the requirement of certainty is not met by asserting that at some undefined later time a different view would have been taken.

  (2)  The Divisional Court did not address the principles for which Mogul has long stood as classic authority. It cannot be dismissed on the ground that there was on the facts no dishonesty. Mr Norris does not advance the contention that price fixing agreements can never be conspiracies to defraud even if accompanied by aggravating features such as dishonest misrepresentations, a proposition expressly and repeatedly contradicted by Mogul. He contends that agreements to fix prices, whether disclosed or not, have not been treated as in themselves dishonest. That contention is supported by Jones v North and Mogul or the decisions in those cases would necessarily have been different.

  (3)  The Divisional Court did not address the central point in Adelaide Steamship, which was the court’s recognition, foreshadowed in Mogul, followed in North Western Salt and later reflected (as will be seen) in statute, that a restrictive trade agreement lacking aggravating features of the kind noted above may operate to the benefit of the public. This is why, as Lord Hoffmann recently put it in OBG Ltd v Allan [2007] UKHL 21, [2008] 1 AC 1, para 56, the “common law has traditionally been reluctant to become involved in devising rules of fair competition,” the judges regarding themselves as ill-fitted for the task.

  (4)  Rawlings cannot be distinguished on the basis suggested. None of the four judges, including the two who found for the defendant, suggested that the agreement could be criminal (Scrutton LJ was clearly of opinion that it was not: p 643). Had it been, the agreement would have been criminal when made, and the price at which the goods were actually knocked down would have been irrelevant.

  (5)  R v Berenger, R v Lewis and Scott v Brown, Doering, McNab & Co are authority for the proposition that a conspiracy to deceive the public by express or implied misrepresentations is and has for many years been criminally indictable. But the correctness of that proposition is not in doubt, and has certainly not been challenged by Mr Norris. They are no authority for the proposition that a price-fixing agreement without aggravating features was indictable in this country at common law.

22.  The Divisional Court did not have the opportunity to consider Laker. The respondent submits that Laker is not authority for the proposition that dishonest price-fixing is lawful at common law. That is partly true. It does not establish that a price-fixing agreement with aggravating features, or an agreement with the predominant purpose of injuring another rather than defending one’s own business interests, is lawful at common law. The authority which Lord Diplock cited is inconsistent with such a proposition. Laker is, however, clear authority that an anti-competitive price-fixing agreement of the kind alleged in the complaint against British Airways and British Caledonian would have given Laker no cause of action which it could have pursued in the English court. That complaint alleged price-fixing and much besides.

23.  At no time up to the present has anyone, whether an individual or a company, been successfully prosecuted for being party or giving effect to a price-fixing agreement without aggravating features. The respondent did not suggest that they had. At the date of the respondent’s indictment against Mr Norris, no such prosecution had been brought.

(2) Statutory and other relevant non-judicial material

24.  In the past 60 years, the law relating to price-fixing has been radically, if somewhat gradually, changed through the medium of legislation. The Restrictive Practices (Inquiry and Control) Act 1948 created the Monopolies Commission, which was required, upon a reference by the Secretary of State, to report on whether certain cartel arrangements operated contrary to the public interest. The 1948 Act also empowered the Secretary of State to make orders giving effect to any recommendations contained in a report, which included declaring such an agreement or its carrying out unlawful. By section 11, no criminal proceedings could be brought against a person who committed, aided, abetted, counselled, conspired, incited or attempted a contravention of such an order.

25.  Five years later, in 1953, the Government commissioned a report from the Monopolies Commission on the issue of restrictive trade practices. The result was the Cairns Committee Report (Cmd. 9504), entitled “Collective Discrimination: A Report on Exclusive Dealing, Collective Boycotts, Aggregated Rebates and Other Discriminatory Trade Practices", published in June 1955. The view of the majority of the Committee, summarised at paras 242 to 247, was that, with relatively few exceptions, cartels (including price-fixing agreements) generally operated against the public interest, and that it should be made a criminal offence to operate at any rate most such arrangements. However, at paras 255 to 259, the minority said that, particularly as some cartels could operate in the public interest, criminalisation was inappropriate, and they proposed a scheme of compulsory registration, coupled with unenforceability of cartels which were not in the public interest.

26.  The Government accepted the view of the minority, as was explained by the Lord Chancellor, Viscount Kilmuir, in a speech in this House on 27 July 1955. He said that the policy of the legislation then laid before Parliament would “obviate the need for creating new criminal offences". He also emphasised that the Government rejected the majority view of the Cairns Committee, on the basis that it was “better to deal with” undesirable cartels “as a civil matter, by injunction, rather than as a criminal offence".

27.  This view was reflected in the ensuing Restrictive Trade Practices Act 1956. The principal reforms effected by Part I of that Act for present purposes were as follows. Section 9(1) introduced compulsory registration, recorded on a publicly accessible register, for cartel agreements to which the Act applied. By section 6(1)(a), such agreements included price fixing agreements if they operated in the United Kingdom. Section 14 gave the Registrar power to seek information in connection with such agreements. By section 20, the Registrar could refer any such agreement to the court to determine if it was in the public interest. Section 21 introduced a presumption that such an agreement was not in the public interest unless it satisfied one of eight requirements. The only criminal sanction was in section 16(1), which rendered it an offence not to comply with a notice from the Registrar seeking information.

28.  Part II of the 1956 Act included section 24, which rendered it “unlawful” to enter into or to carry out any agreement involving what the statutory headnote described as the “collective enforcement of conditions as to resale prices". However, subsection (6) provided that no criminal proceedings should lie against any person who committed, aided, abetted, counselled or procured any contravention of the section, or who conspired, attempted or incited others so to do.

29.  In their book, first published in 1956, The Law of Restrictive Trade Practices and Monopolies (2nd ed (1966), p 148), Lord Wilberforce, Alan Campbell and Neil Elles pointed out that, unlike the Sherman Act, or the equivalent French and German legislation, the 1956 Act “does not deal with the categories of practices which it desires to prevent by making them criminal offences but only by providing a civil remedy exercisable by the Crown". On the following page, they made the point more colourfully, stating that “the ‘odour of criminality’ is kept away from the world of restrictive practices in trade".

30.  The Resale Prices Act 1964 took the law a little further. It prohibited any contract which required a buyer to charge a minimum price, or to impose a corresponding provision on a purchaser from him. Section 4 of the 1964 Act authorised the bringing of civil proceedings in relation to any breach. However, by subsection (1), any criminal proceedings were excluded in similar terms to those in section 24(6) of the 1956 Act.

31.  In 1968, Parliament passed the Restrictive Trade Practices Act of that year, which had two principal functions. The first was to prevent cartel regulation from conflicting with the Government’s programme then under way for industrial re-organisation. The second was concerned with honouring certain Treaty obligations. So far as the first function is concerned, section 1 effectively exempted from registration under the 1956 Act any agreement of substantial importance to the national economy, whose main object was to promote efficiency or improve productive capacity, which could not be achieved except by such an agreement. As to the second function, section 12 enabled the Secretary of State to annul any agreement which conflicted with obligations under the European Free Trade Area Agreement, to which the UK was then a party.

32.  In 1973, the United Kingdom ceased its membership of EFTA and joined the European Community. Accordingly, the UK became subject to what are now articles 81 and 82 of the EC Treaty. The practical effect, in summary terms, of those provisions was to create a new tort of breach of statutory duty in respect of cartel agreements which affected intra-Community trade. They also exposed the parties to such agreements to civil penalties at the hands of the Commission, subject to review by the European Court of Justice. However, they did not give rise to any criminal liability.

33.  The next step taken by Parliament was to pass the Restrictive Trade Practices Act 1976, which is particularly important in the present context as it contained the principally relevant legislation in force at the time of the activities complained of in Count 1. It was, in the main, a consolidating statute. Its general structure was the same as the 1956 Act, albeit that it sometimes used different terminology. Like the 1956 Act, which it repealed and replaced, the 1976 Act, by section 1, required registration of a number of types of agreement including those set out in section 6. The same section entitled the Director General of Fair Trading to register such agreements, and to take proceedings in court to test their validity. Section 2 provided that, where the court concluded that an agreement was against the public interest, it might be declared void and an injunction made to prevent its performance.

34.  By section 6(1), it was provided that the 1976 Act applied to “agreements” between suppliers of goods “under which [specified] restrictions are accepted". They included restrictions in respect of “the prices to be charged, quoted or paid for goods supplied [or] offered". Section 10 stated that an agreement to which the Act applied was presumed to be contrary to the public interest, unless it satisfied certain requirements, which were similar, but not identical, to those in section 21 of the 1956 Act. Section 29 preserved the first of the two functions of the 1968 Act.

35.  Section 35 of the 1976 Act was similar in effect to section 24 of the 1956 Act, although it was somewhat differently expressed. Subsection (1) provided that, if an agreement was not registered appropriately, (a) it would be “void” in respect of all “restrictions” it contained, and (b) it would be “unlawful” for any person “to give effect to", or to “enforce or purport to enforce", any such restrictions. Subsection (2) stated:

“No criminal proceedings lie against any person on account of a contravention of subsection (1)(b) above; but the obligation to comply with that paragraph is a duty owed to any person who may be affected by a contravention of it and any breach of that duty is actionable accordingly…".

36.  The Director General was given power under section 36 to request a person to state whether he was party to a cartel agreement, to specify the terms of any such agreement, and to provide such further information and documentation as he might request. As with the 1956 Act, the only criminal offence created by the 1976 Act was in section 38, which rendered it an offence not to comply with a request under section 36. Section 37(1) enabled the Director General to apply for a formal examination of any such person before the court, and subsection (2)(b) required such person to answer all questions properly put to him in such proceedings.

37.  In 1998, Parliament enacted the Competition Act, which took effect in 2000 and remains in force. It repealed the 1976 Act, and introduced a general prohibition on anti-competitive activities derived from the EC Treaty and in particular articles 81 and 82. It prohibits cartel activity, which is defined in terms fairly similar to those in the 1976 Act, and it allows fewer exceptions, most of which were those permitted by the European Commission. The Office of Fair Trading (“OFT”) is given wide powers of investigation in section 25 to 29. Sections 32 to 41 are concerned with “Enforcement", and they include the imposition of substantial fines where forbidden cartel activity has occurred. Although there is no question of such anti-competitive activities being thereby criminalised, the 1998 Act contains no equivalent to section 35(2) of the 1976 Act. Sections 42 to 44 do create criminal offences, but they all are based on failure to comply with most of the investigation procedures in sections 25 to 29.

38.  Statutory criminalisation of cartels was first introduced by the Enterprise Act 2002. This statute was heralded by a paper jointly published by the Treasury and the Department of Trade and Industry in June 2001, which was entitled “Productivity in the UK: Enterprise and Productivity Challenge". The paper stated in para 3.23 that “the Government intends to consult upon a proposal that there should be a new criminal offence for individuals who engage in cartels….” The following month, a White Paper (Cm 5233) was issued by the DTI, entitled “A World Class Competition Regime". In her foreword to that Paper, the Secretary of State, after referring to the desirability of increasing “business certainty", stated that she proposed to “introduce strong deterrents to anti-competitive behaviour by introducing a new criminal offence for those engaged in cartels.”

39.  The DTI then publicly consulted on issues relating to the new proposed competition regime. As part of the consultation process, a paper was commissioned by the OFT on the criminalisation of cartel offences from Sir Anthony Hammond QC (the former Treasury Solicitor) and Professor Roy Penrose (the former Director General of the National Crime Squad). That paper (OFT 365) was published in November 2001.

40.  While the paper recommended that the law be changed in this and other respects, it stated in para 6.1 that “[i]t should be noted that engaging in a cartel currently only constitutes a civil law infringement in the United Kingdom and only undertakings are subject to penalties". In para 6.2 the paper went on to say that “individuals are not currently subject to any personal sanctions for participating in a cartel and it may only be the fear of a custodial sentence for a criminal offence which may serve as a sufficient deterrent against them engaging in any activity.” The paper recommended that undertakings “should continue to be subject to the existing civil law sanctions … and should not additionally be subjected to criminal sanctions, which should be reserved for individuals": para 1.19. Sir Anthony and Professor Penrose are recorded as having received views from a number of sources, including Government departments, the police and the director and assistant director of the Serious Fraud Office.

41.  After considering the paper and other representations from interested parties, the Department issued its “Response to Consultation” in December 2001, under the title “Productivity and Enterprise", which stated at para 52 that the Government “sees no reason to delay the introduction of the new criminal offence to supplement the civil provisions in the Competition Act.”

42.  When the Bill came before Parliament, ministers in both Houses stated that there was no question of criminal prosecutions in relation to conduct before the 2002 Act came into force. On 23 April 2002, when asked whether Sir Anthony Tennant, who had been alleged by the US authorities to be involved in price-fixing, could be extradited, the responsible Minister said: “There is no possibility of that at this moment because the matter is not defined as criminality at this point. There is no regime that covers it. Were this Bill enacted, my understanding is that Sir Anthony Tennant probably could have been extradited". Much the same point was made on behalf of the Government in this House by Lord McIntosh of Haringey on 22 July 2002.

43.  The 2002 Act was duly passed into law. Its long title describes it, inter alia, as an Act “to create an offence for those entering into certain anti-competitive agreements". Section 188 is headed “Cartel offence", and subsection (1) provides that

“An individual is guilty of an offence if he dishonestly agrees with one or more other persons to make or implement, or to cause to be made or implemented, arrangements of the following kind relating to at least two undertakings (A and B)".

Those arrangements include, by section 188(2)(a), ones which “would directly or indirectly fix a price for the supply by A in the United Kingdom (otherwise than to B) of a product or service". Section 190 states that, on indictment, a party guilty of an offence under section 188 should be liable to a maximum term of imprisonment of five years.

44.  The 2002 Act introduced a new section 30A into the 1998 Act. This section provided that any response by a person to a request made pursuant to the investigatory powers contained in sections 26 to 28 “may not be used in evidence against him on a prosecution for an offence under section 188 [of the 2002 Act]” subject to certain exceptions.

45.  The Divisional Court considered that neither these statutory provisions enacted over the past 60 years nor the observations from Ministers and others called into question the conclusion that price-fixing could, without more, constitute an offence at common law. Auld LJ pointed out that the introduction of a new statutory criminal offence did not, as a matter of logic or precedent, negative the existence of a pre-existing common law offence with a wider range. As for section 35(2) of the 1976 Act, and its statutory predecessors, he considered that they were merely included to emphasise that those statutes did not themselves create any new offence. He dismissed the ministerial and other statements, as they either did not satisfy the well known tests set out in Pepper v Hart [1993] AC 593, or were irrelevant, as they merely sought to identify the purpose of the projected legislation in question.

46.  The Divisional Court’s conclusion, that this legislative and other material does not assist the contention that price-fixing was not a criminal offence at common law, does not, with respect, bear analysis:

1.  It is clear that, from 1948 until 2002, Parliament, like the courts, did not regard cartels, and, in particular for present purposes, price-fixing agreements, as necessarily being contrary to the public interest: that is clear from sections 20 and 21 of the 1956 Act, section 1 of the 1968 Act, section 10 of the 1976 Act;

2.  It is equally clear that, during that period, Parliament was consistently of the view that undesirable cartels should be dealt with by regulation rather than through criminal sanctions: that is apparent from sections 6, 9, 20 and 24 of the 1956 Act, sections 1,2, 10, 21 and 36 of the 1976 Act, and sections 32 to 41 of the 1998 Act; indeed, the very fact that cartels had to be registered and publicly disclosed under the 1956 and 1976 Acts suggests that it is very unlikely that Parliament could have envisaged that such agreements could, of themselves, be criminal;

3.  In section 35(2) of the 1976 Act, as in section 11 of the 1948 Act, section 24(6) of the 1956 Act and section 4(1) of the 1964 Act, Parliament made it clear that, while carrying out an unlawful cartel agreement contrary to the provisions of that Act could give rise to civil remedies, it could not give rise to criminal sanctions; although section 35(2) appears to have a relatively limited reach and would not necessarily rule out the possibility of a common law offence of carrying out a cartel agreement, it strongly suggests that Parliament did not believe that such an offence existed;

4.  The 1976 Act appears to have represented an attempt to introduce a comprehensive and detailed regulatory non-criminal code to deal with cartel agreements and to strengthen the pre-existing law on the topic; it seems unlikely, in those circumstances, that Parliament could have believed that there was, or intended that there should be, an extra-statutory system, particularly involving criminal sanctions, running alongside that statutory code;

5.  The 2002 Act itself seems inconsistent with the notion that Parliament believed that there was a common law offence of price-fixing; first there is the extract from the long title, with its reference to the “creat[ion]” of an offence; secondly, there is the limitation of the criminal sanction in section 188 to individuals, which would be a little curious if there was a generally applicable common law offence; thirdly, it is clear from section 189(1) that section 188 refers only to horizontal arrangements, not to vertical ones, which therefore appear to be exempt from criminal sanction, even now; fourthly, the maximum term of imprisonment in section 190 of five years for the new statutory crime of operating a cartel seems somewhat hard to reconcile with the contention that it was already a common law offence, which would carry a maximum term of ten years under section 12(3) of the Criminal Justice Act 1987;

6.  Parliament’s assessment that the creation and operation of cartels was not within the reach of the criminal law was reflected in the majority and minority views in the Cairns Committee in 1955, in the leading textbook on the topic (Wilberforce, Campbell and Elles), and in the views of the OFT in 2002; in no legal text book or article before 2005 does it seem to have been suggested that price-fixing or other cartel behaviour could constitute an offence at common law;

7.  The same picture emerges from ministerial statements during this period, including Viscount Kilmuir’s speech in 1955, and statements in and out of Parliament even as recently as 2001 and 2002; indeed, the ministerial statements appeared to suggested that cartels were outside the ambit of the criminal law generally; in the present context, namely the actual and perceived state of the common law, such ministerial statements are not excluded from consideration by the rule in Pepper v Hart.

47.  The Divisional Court did not have the benefit of a further argument based on the absence of any provision in the 1976 Act or the 1998 Act in relation to self-incrimination in respect of the alleged common law offence of operating a cartel. The obligations in the 1976 Act relating disclosure of information and documents imposed by section 36 (with the consequence of criminal sanctions in the event of non-compliance), and relating to answering questions in section 37 (with the presumed consequence of contempt of court proceedings in the event of non-compliance), appear to have no protective provision so far as subsequent criminal proceedings are concerned. One would have expected them to be subject to some protective provision in relation to self-incrimination, if Parliament had believed that there was a common law offence of price-fixing and cartel activity generally. Without such a provision, the investigative powers in those sections could have effectively been stifled, as the right against self-incrimination would almost inevitably have been invoked as a reason not to provide information. The same point may be made in relation to the current investigative provisions of the 1998 Act: section 30A only operates in respect of the statutory offence created by section 188 of the 2002 Act.

48.  Two further points must be addressed. The first concerns the ambit of section 35(2) of the 1976 Act, which at first sight adds nothing because section 35(1) does not purport to create a crime. It appears to have been included for the purpose of ensuring that no criminal charges based on unlawful means conspiracy could be brought against people agreeing to engage in cartel activity contrary to section 35(1)(b). Until section 5 of the Criminal Law Act 1977 abolished the common law offence of criminal conspiracy, it could, in the absence of a provision such as section 35(2) of the 1976 Act, have been an offence to agree to enforce or carry out an arrangement which contravened section 35(1). While this would explain the predecessors of section 35(2), it was argued that, as the 1977 Act was going through Parliament at roughly the same time as the 1976 Act, it would not explain section 35(2). That does not seem right: the 1976 Act passed into law just over a year before the 1977 Act. The exclusion of any equivalent section from the 1998 Act, passed more than 20 years after the 1977 Act, reinforces the conclusion.

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