Tackling cartels

Adam Smith is often quoted for his comment on cartels: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

Less well-known is the sentence which followed: “It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice.”

This month the government announced a package of competition law reforms, including an amendment of s 188 of the Enterprise Act 2002 (the cartel offence), by removing the element of dishonesty. The change meets the current zeitgeist of cracking down on business crime and it is virtually certain to be enacted. The only question remaining is what it will mean in practice. Does this reform criminalise cartels in a way that is consistent with the ideals of liberty and justice?

The Office of Fair Trading (OFT) already has extensive powers and also enjoys the fruit of a scheme where the first business to blow the whistle on a cartel gains substantial leniency. This makes it a more fearsome investigator than the Serious Fraud Office.

However, the rate of prosecutions for cartels has remained low. The UK has seen only two prosecutions for hard core cartel offences since 2002. This has embarrassed a government committed to strong market competition which faces pressure from the OECD to tackle cartels.

The OFT is under-resourced and has a real problem with low pay. But the problem is also cultural. Forming a cartel was not a criminal offence in Britain until 2002. As the House of Lords pointed out in Norris v United States [2008] 2 All ER 1103, price fixing was merely robust business practice until well into the 20th century…”

To continue reading go to: www.halsburyslawexchange.co.uk