• Businesses working with OFT to reduce penalty for cartel behaviour

The number of cartel whistle-blowers granted leniency by the Office of Fair Trading (OFT) almost doubled last year from 13 in 2009 to 25 in 2010, according to data revealed to City law firm Reynolds Porter Chamberlain LLP (RPC).* (see graph)

RPC explains that the leniency programme offers businesses involved in cartel behaviour the opportunity to secure 100% immunity from fines and prosecution in exchange for providing evidence of the cartel to the OFT. 

Subsequent leniency applicants can still receive significant reductions of up to 50% in any eventual penalty imposed by the OFT for anti-competitive behaviour. 

Stephen Smith, Partner at RPC, comments: “Cartel behaviour is notoriously difficult to detect.  The leniency programme is an important policy tool in the OFT’s enforcement toolkit, enabling the OFT to obtain substantial evidence from businesses prepared to blow the whistle in exchange for a reduced penalty.”

“Plea bargaining style deals are controversial, particularly where the evidence provided may be used subsequently in individual criminal prosecutions, but the tactic certainly seems to be working.”

Recent high profile cartel cases where the OFT relied on evidence from whistle-blowers include:

• Royal Bank of Scotland and Barclays fined for cartel behaviour relating to the pricing of loan products for professional services firms.  Barclays received 100% discount on its fine for whistle-blowing. 
• Unlawful activity around retail prices for tobacco products by tobacco manufacturers and retailers.  Several high street name retailers Asda, Sainsbury’s and Somerfield qualified for discounts under the leniency programme.
• Bid-rigging by construction companies in which a number of participants qualified for fine reductions due to cooperation with the leniency programme.
• Price-fixing by recruitment companies servicing the construction sector, two of which received 100% discount on their fine.
• Price-fixing by British Airways and Virgin Atlantic.  Virgin Atlantic received 100% discount on its fine.  The OFT’s prosecution of four BA executives collapsed, partly as a result of over-reliance on evidence gathered by Virgin Atlantic.

RPC explains that companies will only be accepted on to the leniency programme if the business has a genuine intention to confess involvement in cartel activity and the ability to provide the OFT with the evidence it requires to investigate other members of the cartel.

Last year the OFT accepted 100% of the 25 leniency applications it received, up from 87% of the 15 applications it received in 2009.

Says Stephen Smith: “The OFT has spent a lot of time explaining exactly what businesses need to provide to fulfil the requirements of the leniency programme.  It is clear that business has welcomed this guidance and that those availing themselves of the leniency programme are providing the OFT with all the information it needs to investigate other cartel members.”

RPC points out that the Government is consulting on a radical overhaul of the UK competition regime, which could see the OFT and the Competition Commission merged into one organisation.

Stephen Smith adds: “The UK competition regime is generally well regarded by business and the legal community alike. There is therefore some concern, particularly in respect of a number of the government’s proposals, that what is perceived as a very effective system could be torn up.”

_{* Data release to RPC following a Freedom of Information Act request}

ENDS

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