The first competition disqualification order to come to trial has resulted in a company director, Michael Martin, being disqualified for seven years. In its judgment of 7 July 2020, the UK High Court found that Mr Martin had contributed to Gary Berryman Estate Agents' breach of competition law by failing to prevent its anti-competitive behaviour once he had learnt of it.
| what you need to know - key takeaways |
- The latest director disqualification sends a clear message to company directors that the Competition and Markets Authority (the "CMA") will seek to hold them accountable for breaches of competition law, even if not directly involved.
- In order to avoid personal liability for company breaches of competition law, directors should take steps to prevent or end the company's wrongdoing as soon as they learn of it.
- Directors who do not take steps to prevent or end companies' participation in breaches of competition law will be seen as having contributed to the breach and therefore risk disqualification.
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An investigation by the CMA found in 2017 that six estate agents in Somerset had agreed to fix a minimum commission rate for residential estate agency services in an illegal cartel, which lasted for just over a year beginning in February 2014. The CMA found that the cartel agreement between the six estate agents (who had an estimated market share of 95%) caused local homeowners to miss out on receiving the best possible deal when selling their property.
Following the CMA's findings, three other directors whose companies participated in the cartel provided formal undertakings not to act as a director of a company for between three and five years. Michael Martin abstained from giving formal undertakings, which resulted in the CMA issuing court proceedings against him in February 2019. The trial took place via video conference in June 2020.
The court had regard to the fact that Mr Martin was not concerned with day-to-day sales and did not attend any of the meetings at which the illegal cartel agreement was made, but considered that as a director, on becoming aware of the agreement, he had responsibility to prevent or end his company's involvement in it. By failing to do so, the court determined that he had contributed to the breach of competition law and that this conduct made him unfit to be a director of a company. It therefore disqualified him from acting as a director or being concerned in the management of a company for seven years.
The seven year period reflected the seriousness of the findings of misconduct in the context of the sale of homes when estate agents have to be trusted by vendors. Notably, it was far longer than the 2.5 year period the CMA had proposed if Mr Martin had offered a disqualification undertaking before court proceedings were launched.
The disqualification of Mr Martin is the CMA's 18th director disqualification since the first of its kind in 2016. This case sends a clear message that the CMA will seek to hold company directors accountable for any anti-competitive behaviour, and that, even if a director is not directly involved in a breach, they can still be held accountable for it.
