Director has been disqualified for five years for infringement of Competition law
First published by Admin on December 23, 2016 in the following categories: Latest and tagged with cma
This case shows the range of powers of the Competition and Markets Authority (CMA). Recently, the CMA managed to secure the disqualification of a director who breached competition law.
Daniel Aston, a former director of Trod Limited, infringed the Competition Act from March 2011 to July 2015 by making an anti-competitive agreement with GB Eye Limited. The agreement detailed that both companies wouldn’t offer to sell licensed sport and entertainment posters and frames for a lower cost than the other.
This is a clear breach of fair competition rules.
Trod was an international wholesaler and retailer of consumer products, including licensed sport and entertainment posters and frames (the specific goods subject to the competition breach). The breach is said to have occurred around March 2011 where both companies used an automated re-pricing software to give effect to the agreement.
The effect of the agreement between Trod and GB Eye was to stop or reduce competition between both of the companies.
Infringement of Competition law
Mr Aston infringed section 2(1) (dubbed the ‘Chapter I prohibition’) of the CA by making an agreement as such. The CA provides that companies and organisations should be prohibited from making agreements that may prevent, restrict, or distort competition. In effect, this is so trading in the U.K. can be an ‘open’ one, and smaller businesses can actually compete with the bigger organisations.
In addition, this is to ensure that there is a ‘real choice’ for consumers.
CMA’s powers
The CMA has a range of powers they can impose on individuals or companies who infringe the provisions set out in the CA., and the most common punishments imposed are monetary penalties. As a result of this infringement, the CMA imposed a £163,371 penalty on Trod for its participation in the anti-competitive agreement.
The CMA also secured the disqualification of Mr Aston. In accordance with section 9B of the Company Directors Disqualification Act, Mr Aston will not be able to take up a directorship for the next five years unless a court allows him to do so. This is reportedly the first time that a director has been disqualified from their post for breaching the competition law. If the former director does so, he may be prosecuted for a criminal offence, and may be personally responsible for the debts of the company.
CMA’s response
In the wake of the infringement, the CMA launched a campaign and released subsequent guidance for online competitors to ensure compliance with U.K. competition law. The guidance notes that online retailers mustn’t make agreements to refrain from undercutting each other, and must refrain from discussing their pricing structure.
Both of these actions can amount to an infringement of the CA and may have very serious penalties. The CMA can fine companies up to 10 per cent of the annual turnover, and individuals like Mr Aston can face personal fines, director disqualification, or a prison sentence.
Sources:
https://assets.publishing.service.gov.uk/media/583ff903e5274a1303000040/daniel-aston-director-disqualification-undertaking.pdf (Opens as PDF)
https://www.gov.uk/government/news/cma-issues-final-decision-in-online-cartel-case
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/565424/60ss-price-fixing-guidance-for-online-sellers.pdf (Opens as PDF)