UK criminal cartel enforcement – Alex Swan and Richard Sallybanks write for Fraud Intelligence

UK criminal cartel enforcement – Alex Swan and Richard Sallybanks write for Fraud Intelligence

BCL’s Alex Swan and Richard Sallybanks‘ article ‘Another false dawn for UK criminal cartel enforcement?‘ has been published by Fraud Intelligence, looking at whether we can expect an upturn in the level of criminal investigation of cartel activity in light of the Memorandum of Understanding recently concluded between the SFO and the CMA.

Here’s an extract from the article:

On 21 October 2020, the Serious Fraud Office (“the SFO”) and the Competition and Markets Authority (“the CMA”) signed a Memorandum of Understanding (“MoU”) which sets out the basis upon which the two authorities will cooperate and coordinate in investigations and/or prosecutions of individuals for the criminal cartel offence under section 188 of the Enterprise Act 2002 (“EA02”).

This comes against the background of the former chairman of the CMA, Lord Tyrie, stating in an open letter to the Secretary of State for Business, Energy and Industrial Strategy as long ago as March 2019 that the CMA should focus more directly on protecting the interests of the consumer by, inter alia, “ [requiring] the CMA to relinquish or share some of its existing powers and functions – for example, in the field of regulatory appeals and of criminal cartel enforcement – so that it can focus more effectively on its core responsibilities.”  Indeed, Lord Tyrie’s proposals recognised that “Because hard-core cartel prosecutions are only a small part of its overall enforcement work, the CMA does not maintain the scale of specialist expertise normally possessed by agencies with powers of prosecutions.  Primary responsibility for cartel prosecutions may sit more naturally with an agency that routinely brings criminal prosecutions, such as the Serious Fraud Office…”

In light of this frank acknowledgment by Lord Tyrie, borne out by the less than impressive track record of the CMA (and its predecessor, the Office of Fair Trading (“the OFT”)) in the area of criminal cartel enforcement, it therefore is not overly surprising, particularly in the current era of greater cooperation between enforcement agencies (both domestically and internationally), that agencies such as the SFO and the CMA have decided to enter into this MoU (noting that, in fact, the MoU updates a previous MoU entered into between the two agencies in 2014). So, does this MOU reflect any great change and herald the prospect of greater enforcement of the criminal cartel offence? Or is it another false dawn?

The Criminal Cartel Offence

Section 188 of the EA02, which came into force in June 2003, created the criminal cartel offence (“the s188 offence”) which can only be committed by individuals, not by companies or other commercial organisations which remain subject to the CMA’s civil enforcement regime under the Competition Act 1998 (“CA98”).  In general terms, and in its original incarnation, the offence was committed when a person dishonestly agreed to enter into arrangements involving at least two undertakings which would, if implemented, directly or indirectly fix prices, limit or prevent the supply of a product or service, limit or prevent the production of a product, divide products or services between customers, divide customers between the undertakings, or amount to bid-rigging arrangements.  On 1 April 2014 section 188 was amended by the Enterprise and Regulatory Reform Act 2013, which removed the requirement to prove the dishonesty element of the offence.

Terms of the MoU

The MoU principally records the following:

  • That the cooperation between the SFO and the CMA is to ensure the “effective and efficient investigation or prosecution” of the s188 offence;
  • That the s188 offence may be investigated by the CMA, the SFO, or jointly by both agencies;
  • That the CMA will undertake any necessary initial enquiries upon receipt of information that a s188 offence may have been committed;
  • That if the SFO receives intelligence suggesting that a s188 offence may have been committed, then it will in the first instance refer that information to the CMA;
  • If after initial enquiries, and any informal discussions with the SFO, the CMA identifies a criminal cartel case as being likely to fall within the SFO’s acceptance criteria, then it may refer the case to the SFO;
  • In all events, s188 offence investigations may be led by either the SFO or the CMA, and the authority leading the investigation may request the assistance of the other authority by providing staff and support;
  • It will be presumed that where the SFO is leading an investigation, it will utilise its powers under the Criminal Justice Act 1987 (“the CJA87”) rather than powers under the EA02 where they would achieve essentially the same objective. However, in a joint investigation consideration will need to be given whether to utilise powers under the CJA87, the EA02 or both;
  • The costs of the investigation will be borne by the authority leading the investigation;
  • That the CMA may progress a civil investigation using its powers under the CA98 in parallel to an overlapping criminal investigation led by the SFO. In such instances, suitable procedures will be put in place to ensure that there is appropriate communication between the two authorities and that the civil investigation does not prejudice the criminal investigation;
  • That the CMA retains the power, under the CA98, to grant immunity from criminal prosecution by way of “no-action” letters – any no-action letter is binding upon the SFO. Whilst decisions as to whether to issue no-action letters remain with the CMA, if such a decision could have an impact upon an SFO-led s188 offence investigation or prosecution, then the CMA shall consult the SFO.

This article was published by Fraud Intelligence on 18th Nov 2020. You can read the full article by logging onto their website.

BCL Solicitor, Alex Swan is an experienced Senior Associate who has worked on a variety of complex and high-profile criminal matters.  He specialises in corporate and financial crime and has extensive experience of advising clients at all stages of investigations and prosecutions.  He is adept at dealing with complex cross-border matters, including where there are often simultaneous investigations taking place in other jurisdictions.  Alex regularly deals with matters being investigated and prosecuted by the SFO, the CPS, HMRC, the NCA, and the FCA, as well as by foreign authorities such as the DOJ, SEC, PNF, CBI and ED.

Richard Sallybanks specialises in complex business crime and regulatory defence work. Richard has been involved in numerous SFO, FCA, HMRC & CMA investigations and prosecutions, together with associated restraint and confiscation proceedings. His recent SFO experience includes the Alstom, Barclays Qatar, and Tesco investigations (acting for senior individuals under suspicion), as well as acting for Robert Tchenguiz in the SFO’s Kaupthing Bank investigation (including the successful Judicial Review challenge to SFO search warrants). Richard has acted in a number of FCA criminal and regulatory investigations for brokers, traders and senior executives, including in relation to allegations of insider dealing and market abuse. He is experienced in cartel investigations, both domestic investigations conducted by the CMA and cross-border anti-trust investigations (including those conducted by the US DoJ). Richard is also experienced in the international mutual legal assistance regime, and in leading and co-ordinating teams of lawyers in multi-jurisdictional investigations.