Competition authorities see rise in 'leniency' applications

The number of businesses and individuals whistleblowing on cartels in return for immunity from prosecution has increased 69 per cent in the last year, according to commercial law firm EMW.

The new Competition and Markets Authority (CMA) operates a leniency policy designed to encourage those who have engaged in any anti-competitive collusion, such as price-fixing, bid-rigging, output restrictions or market sharing, to report it.

The penalties for involvement in cartel activity can be severe, with businesses fined up to 10 per cent of worldwide turnover and individual directors jailed for up to five years and given unlimited fines, as well as being banned from acting as directors for up to 15 years.

Official figures from the Office of Fair Trading (OFT) and the Competition Commission show that there were 22 applications for leniency in 2013, up from just 13 in 2012 and 14 in 2011.

'Top priority'

James Geary, principal at EMW, said: "Competition authorities regard cartels as one of the worst infringements of competition law, cheating customers out of a fair deal and preventing other businesses from competing on a level playing field, so tackling it is a top priority.

"The problem is that cartels are very difficult to spot and even harder to prove. Encouraging those involved to come forward of their own volition and admit their activities in return for immunity if they can provide sufficient evidence against others is a tactic that seems to be working well."

High-profile examples, such as the £2.8m in fines handed out to Mercedes-Benz and five of its commercial vehicle dealers, could be encouraging more whistle blowers to come forward. The dealership that blew the whistle on market sharing, price manipulation and exchanging commercially sensitive information avoided a fine under the OFT's leniency policy.

"Those caught colluding in cartels face the prospect of losing their jobs and even their freedom, as well as massive company and personal fines, so the prospect of handing themselves in and claiming 'leniency' before someone else does is an attractive option," said Geary.

"The view of the competition authorities seems to be that giving whistle blowers what is in effect a get out of jail free card is a price worth paying if it flushes out the other perpetrators so that they can be brought to book and puts an end to their illegal anti-competitive practices."

Geary continued: "Without the incentive of immunity from prosecution for whistle blowers, the number of prosecutions would be far fewer. The authorities would have to work harder in spite of squeezed budgets, making it difficult to make the same level of prosecutions."

Acting dishonestly

April saw changes made to the Enterprise Act 2002 which were intended to make it easier for the CMA to prosecute individuals for cartel involvement. In particular, the new rules remove the need to prove that those involved were acting dishonestly.

Geary concluded: "Despite some heavy fines meted out in recent years, there's been a sense that the new Competition and Markets Authority will want to show it has arrived by levying even more punitive fines for anti-competitive behaviour."