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OFT seeks new powers to disqualify directors

20 August 2009

The OFT is planning to extend its powers to secure the disqualification of directors to situations where a director should have taken steps to prevent or should have known about a breach of competition law.

At the moment the OFT can disqualify directors for up to 15 years if their firm breaches competition law and the court considers them unfit to be involved in the management of a company.

“We know that the prospect of being disqualified as a director is one of the most powerful deterrents to anti-competitive behaviour,” Ali Nikpay, senior director of policy at the OFT, said.

“Our proposals aim to increase the incentives on company directors to take responsibility for competition law compliance and tackle behaviour that harms competition.”

Alan Davis, competition law partner at Pinsent Masons, said it was reasonable for the OFT to expect that directors should have some knowledge of competition law,

but it was “raising the bar” as to what it expected them to do in terms of proactive monitoring.

“It also signals an intention by the OFT to start exercising its powers to disqualify directors and that includes where directors have turned a blind eye to suspicious activity within the company,” he said.

“An example given by the OFT is that a director signing off an expense claim, where the director might suspect the employee was using those funds to meet with competitors for anti-competitive purposes, should take active steps to enquire into that activity and stop it.

“That is quite an onerous obligation on directors.”

In a separate development, the OFT has decided to refer local bus services in Britain, excluding London, to the Competition Commission, following a five-month investigation.

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Trade