68/10   29 June 2010

The OFT has today published its revised guidance on director disqualification orders in competition law cases, signaling its intent to use these sanctions to deter anti-competitive activity.

Download Director disqualification orders in competition cases - an OFT guidance document (pdf 898kb) and the summary of responses to the OFT's consultation (pdf 277kb).

The guidance sets out how and when the OFT and certain sectoral regulators will take action to disqualify directors where they uncover evidence a director was responsible for, or ought to have known of, competition law breaches at a company. It follows widespread consultation with the legal and business community.

Under the Company Directors Disqualification Act a director can be disqualified from acting as a director for up to 15 years if their company is involved in a breach of competition law and the court considers they are unfit to be concerned in the management of a company as a result.

The final revised guidance provides clarification on a number of details of the policy including that:

• The OFT will be just as concerned with directors who ought to have known of competition law breaches at a company as those who were personally involved in an infringement. Cases will be chosen based on the evidence available and seriousness of the conduct.
• The OFT will continue to offer immunity from disqualification orders for any director who cooperates with the OFT's investigation and whose company benefited from leniency in respect of the same activities. 
• There may be exceptional cases where the OFT believes it is appropriate to apply for a disqualification order where there is no prior decision or judgment on the infringement. However, as with all cases, the OFT would still have to satisfy the court that there had been an infringement of competition law.

Following feedback received during the consultation, the OFT intends to develop straightforward guidelines for directors on their responsibilities under competition law as part of its ongoing compliance work in partnership with business.

Cavendish Elithorn, OFT's Senior Director of Policy, said:

'The prospect of being disqualified as a director is one of the most powerful deterrents to anti-competitive behaviour across boardrooms and companies of all sizes. Today's guidance should be taken as a clear message that we will actively seek disqualification of directors found to have engaged in anti-competitive behaviour or who ought have known it was going on.

'Any director who suspects their company has been involved in cartel activities should take urgent steps to ensure their company approaches the OFT or European Commission for leniency at the earliest opportunity.'

NOTES

1. Under the Company Directors Disqualification Act 1986 (as amended by the Enterprise Act 2002) the OFT and certain sectoral regulators have the power to apply for disqualification orders in cases involving an infringement of the Chapter I or Chapter II prohibition of the Competition Act 1998, or Article 101 or 102 of the Treaty on the Functioning of the European Union.

2. The Court must disqualify a director following an application if it is satisfied that the director's company was involved in a breach of competition law and the director's conduct in connection with that breach makes him unfit to be concerned in the management of a company.

3. Disqualification orders apply only to company directors. A director for these purposes includes any person occupying the position of director, regardless of his or her title. The powers also extend to partners in limited liability partnerships.

4. The guidance sets out a five step process for deciding whether to apply for a disqualification order. In all relevant cases the OFT or regulator will:

• consider whether there has been a breach of competition law
• consider the nature of the breach and whether a financial penalty has been imposed
• consider whether the company in question benefited from leniency
• consider the extent of the director's responsibility for the breach of competition law, and
• have regard to any aggravating and mitigating factors.

5. During the period for which a person is disqualified, it is a criminal offence for them to be a director of a company, act as a receiver of a company's property, be concerned in any way, directly or indirectly, in the promotion, formation or management of a company, or act as an insolvency practitioner.

6. The OFT may accept a Competition Disqualification Undertaking from a person instead of applying for a disqualification order. The breach of a Competition Disqualification Undertaking has the same consequences as the breach of a disqualification order.