FP McCann Ltd, Stanton Bonna Concrete Ltd ("SBC") and CPM Group Ltd ("CPM") have collectively been fined more than £36 million by the Competition and Markets Authority ("CMA") for participating in an illegal cartel in relation to the supply of concrete drainage products.
| what you need to know - key takeaways |
- Companies can be fined up to 10% of their group turnover for engaging in conduct which breaches competition rules.
- It is also a criminal offence in the UK to engage in the most serious and damaging forms of anti-competitive agreements, known as "hard core cartels". These include agreements relating to price-fixing, the sharing of markets or customers, limiting production or supply, or bid-rigging. Significant sanctions, including a prison sentence of up to five years, exist for individuals found guilty of the offence.
- Director disqualification has become a central tool in the CMA toolkit. Directors should be aware that they have a personal responsibility for ensuring that their companies comply with competition law, and that they may become subject to this sanction even if they have not themselves been directly involved with competition law breaches.
- A Competition Disqualification Order ("CDO") will be made by the court (on the application of the CMA) where there has been a breach of competition law and the court considers that a person's conduct as a director makes him or her unfit to be concerned in the management of a company.
- The CMA also has the power to obtain a Competition Disqualification Undertaking ("CDU") from a director instead of applying for a CDO.
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The cartel and fines
The three firms were found to have fixed and co-ordinated prices of concrete drainage products, shared the market among themselves by allocating customers, and exchanged commercially sensitive information at regular meetings attended by senior executives of all three firms. In particular, the meetings were used as evidence by the CMA when making its final decision, after it secretly recorded a number of them during the life of the cartel.
At the time of the alleged cartel, which spanned seven years, the three firms were the largest players in the market, holding a combined share of more than 50%. From 2010 onwards, they collectively held more than 90% of the market. The concrete drainage pipes they manufacture are used in large infrastructure projects and are usually supplied to engineering and construction firms, as well as utility providers and local and national government bodies.
Regarding the level of the fine, the CMA said that issuing large fines in this and other sectors are key to cracking down on cartels and deterring others from participating in this sort of behaviour in the future.
SBC and CPM previously admitted their involvement in the cartel, so received reductions to their fines as part of the CMA's leniency and settlement guidelines. In contrast, FP McCann has not accepted responsibility and has said it will be "robustly" appealing the decision.
The criminal investigation and director disqualifications
The CMA also conducted a related criminal cartel investigation into whether individuals had committed an offence under section 188 of the Enterprise Act 2002 (the "criminal cartel offence"). The criminal investigation concluded in June 2017 and in September 2017, the CMA announced that Barry Cooper, the CEO of SBC, had been sentenced to two years' imprisonment suspended for two years, a 6pm-6am curfew for six months and disqualification as a director for seven years, for participating in a price fixing and market sharing cartel in the supply of precast concrete drainage products.
In addition, on 26 April 2019 the CMA announced the disqualification of two former directors of CPM resulting from CPM's involvement in the cartel. The CMA secured legally binding CDUs from the former directors, for periods of seven and a half years and six and a half years. The CMA is entitled to accept such CDUs in place of going to court to seek CDOs, with both measures having the same legal effect.
With thanks to Kate Mullan of Ashurst for her contribution.
