Mark Furse on Criminal Competition Law in the UK and the US

August 2, 2012

academic law, Author Articles

criminal activityIn 2002, the UK introduced a criminal competition law into the UK legal system for the first time since the 18th century. Ten years on Mark Furse offers a personal reflection on that law. He considers successful prosecutions in the US and the extent to which the law in practice has succeeded or failed in the UK. Based on his book The Criminal Law Of Competition In The Uk And In The Us: Failure and Success.

I first studied competition law in 1984, while reading for my undergraduate degree in Economics and Law at the University of Newcastle upon Tyne. It was then an obscure subject, and before the first class I really had no idea what to expect (not having done the required reading), but I was blessed in having an exceptional teacher in Professor Tim Frazer (now a partner at the leading firm Arnold and Porter, and still a friend). Although Tim made the subject interesting it was, at that time in the UK, not mainstream. There was one textbook suitable for use by students but there were few exciting ‘stories’ to hang the subject onto. Things would have been very different in the United States, where antitrust law has been in existence since 1890, and where high-profile cases have received media coverage, as well as serious scrutiny by academic researchers, policy-makers and practitioners, since at least the mid-1950s. Things have changed somewhat in the UK since 1984, with developments largely driven by the European Union (an undoubted benefit of membership of the EU), but also driven internally by a recognition of the harms that flow from anti-competitive conduct.

It is almost certain that you have been the victim of a cartel: if you bought replica English-team football kit in the early 1990s you probably paid too much; as you might also have done if you took a transatlantic flight at the time when at least two major operators, Virgin and British Airways, colluded to impose a commonly-agreed fuel surcharge; many buildings built for UK local authorities – schools, hospitals etc – have been too expensive as a result of builders’ bid-rigging, and we will have lost out on the provision of other services as a consequence. The fuel-surcharge case, which is discussed extensively in my new book, gave rise to a prosecution in the UK, which was subsequently abandoned, subjecting the prosecuting authority (the UK’s Office of Fair Trading) to considerable criticism. In the US, the authorities were able to secure convictions, and in the UK and the US, British Airways was required to pay very substantial penalties. Cases like this, and other high profile cases, have ensured that competition law has grown in importance, and in profile, substantially since I first studied the subject (only one day before writing this, BBC radio was reporting that the OFT has made provisional findings to the effect that a major internet travel agent and a major hotel chain have engaged in price fixing). There is a risk that I might at some point no longer have to explain what it is precisely that I do. There are increasing references to the subject in the general media: there has been a film called Antitrust (released in 2001, with Tim Robbins playing a character who would appear to be extremely loosely based on Bill Gates; this is described by one post on IMDB.com as ‘the worst movie ever’; it’s not that bad); a much better Steven Soderbergh film, The Informant! which is based more closely on real-life events, described in part in my new book; and references to competition law and antitrust are increasing in their frequency. Two days before writing this I finished The Jennifer Morgue, a science-fiction book by the excellent Charles Stross. I laughed out loud at the following passage (spoken by a representative of an archetypal billionaire business-man/villain): ‘We’re currently tracking six stalkers and three blackmailers, and that’s before you count the third-world governments. We’ve got enough schizophrenics to fill one-point-four psychiatric hospitals, plus an average of two-point-six marriage proposals and eleven-point-one death threats per week, and a federal antitrust investigation which is worse than all of them combined.’

My new book takes as its starting point the assumption that the threat of enforcement of antitrust by the US Department of Justice is one that business people take seriously, and that these investigations may give rise to seriously adverse consequences (most recently a term in prison of four years for an American businessman). Business people are, as has been recognised, ‘exquisitely sensitive to status deprivation’. In the UK however, notwithstanding the introduction of a new criminal offence in 2002, there has been very little effective enforcement of this law. The pattern outside the US has tended to be that competition law is directed to the company that commits the infringement (on the basis in part that it is for the benefit of the company’s profits that such breaches take place), rather than to the individual members of the company – perhaps typically its directors, but possibly also senior and even middle management, who commission or engage in the illegal acts. Evidence suggests that the public in the UK do not regard this conduct as egregious enough to merit individual sanctioning taking the form of imprisonment. However, there is a virtuous (or perhaps vicious?) circle at play here: the more criminal cases there are in a particular area, the more likely it is that the public begin to absorb and reflect the message sent by the prosecutions – that the acts being condemned are harmful, and that condemnation is deserved where guilt is established. There are of course many differences between US antitrust law and UK competition law, some of which are probably have deep cultural roots. But the UK authorities made a deliberate attempt to incorporate into UK law a model based on, explicitly, the perceived success of US law and practice in this area. The only convictions secured in the ten years since this were the result of a plea-agreement entered into in the US, and followed an investigation conducted in part by the NCIS (yes, it really does exist). British defendants pled guilty in the US courts, on the basis that they would return to the UK, would plead guilty here, and that any time served in the UK would be deducted from agreed US sentences. The case for the UK authorities was therefore pretty straightforward.

There are a number of interesting questions that arise: should company officers and employees be individually at risk of sanction in relation to competition law breaches? If they are, how best should the law be enforced? How are judges to be persuaded to impose sentences which have a deterrent effect? How might juries respond to commercially complex scenarios where the people in the dock are presented as ‘fine upstanding members of society’? Unfortunately, in the UK so far, most of these questions remain open.

MF, August 2, 2012.

Mark Furse Mark Furse is Professor of Competition Law and Policy at the University of Glasgow, and is the author of The Criminal Law of Competition in the UK and the US: Failure and Success, as well as a number of other books, including six editions of Competition Law in the EU and UK, and Antitrust in China, Korea and Vietnam.

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3 Comments on “Mark Furse on Criminal Competition Law in the UK and the US”

  1. Dae-Sik Hong Says:

    Pleased to know that you are also active in blog area. There must be many implications to Korea. Nowadays how to reinforce criminal enforcement is hot political issue here.

    Reply

    • Mark Furse Says:

      Dear Dae-Sik – you may know that I have followed Korean competition law for quite some time now, and am always interested in developments in your country, which is an important reference point for the region. Should there be any firm developments in the Korean position I would be very interested in looking at these.
      Mark

      Reply

  2. Dae-Sik Hong Says:

    Dear Mark – Thanks for your kind reply. I am now asked for advice from an Korean MP who is interested in formulating Korean competition law amendment for making criminal enforcement more effective. Your research will be of great help for us in Korea. I will surely keep you updated on this issue.

    Reply

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