Directors urged to brush up on competition law to avoid penalties

Directors are being urged by the Competition and Markets Authority (CMA) to make sure their company practices comply with the law.

Failure to do so could result in penalties and disqualification.

The CMA has provided the following check list:

Why should directors help companies avoid breaking competition law?

Company directors have a special responsibility to be well-informed about their company practices and ensure they comply with the law
If caught breaking competition law, directors can be disqualified from acting as a director of a company or carrying out other specified roles in relation to a company for up to 15 years
Knowing about illegal practices without taking steps to stop them could be grounds for disqualifying a director
If a company breaks competition law and the director did not know about it but wasn’t diligent and should have known, this may also be a ground for disqualification

What action do company directors need to take?

You must ensure you are sufficiently abreast of your company’s affairs to spot and stop any illegal practices as soon as possible
If you suspect illegal business practices you should investigate
If you become aware of anti-competitive practices you should take immediate steps to stop them and seek independent legal advice
Lead by example – familiarise yourself with competition law risks and cascade advice to staff

Test your company’s compliance with competition law, here are some questions to ask:

What are our present competition law compliance risks?
What are the high, medium and low risks?
What measures are we taking to mitigate these risks?
When are we next reviewing the effectiveness of these measures?

Encourage and facilitate reporting

Designate an independent, trustworthy person in your company for staff to report concerns to (for example a company secretary)
Seek independent legal advice if you have a competition law concern

What is a cartel and how does being involved affect you?

In simple terms, a cartel is an agreement between businesses not to compete with each other. The agreement is usually secret and often informal.

Cartels are a particularly serious breach of competition law. Individuals involved in cartels can go to jail for up to five years. Businesses that breach competition law can be fined up to 10% of turnover.

If you’ve been involved in an illegal cartel yourself: you may benefit from lenient treatment by being the first to come forward to the CMA.

Please contact Sarah Liddiard if you would like more information about the issues raised in this article or any aspect of competition law.