How scared should you be by the news that the OFT is using undercover techniques to spy on cartels? That depends on what you've been up to …

One role of the office of fair trading is to "make markets work well for consumers". The most important mission in that field is to track down businesses that have made an agreement that prevents, restricts or distorts competition. It procures evidence using all means permissible by law and licence, including the tools of the spooky community (read the 3 February news story by logging on to

As any competition lawyer will know, many types of agreement may fall within the prohibitions. Chapter I of the Competition Act and article 81 of the EC Treaty provide identical lists of examples of banned practices. Such as:

  • Fixing purchase or selling prices or other trading conditions
  • Agreeing to limit or control production, markets, technical development or investment
  • Sharing markets or supply sources
  • Applying different trading conditions to equivalent transactions, thereby placing some parties at a competitive disadvantage.
Solicitors who, in advising clients, come across documentary evidence that might suggest the existence of a cartel must issue a warning of the investigatory powers of the OFT and the penalties imposed. Not only may businesses be fined up to 10% of their annual global worldwide, the law also provides strict penalties against individuals involved in cartels. So individual corporate responsibility arises.

Section 188 of the Enterprise Act 2002 introduced a criminal offence for individuals who dishonestly engage in cartel arrangements. This only applies to agreements between undertakings at the same level in the supply chain.

Further, directors of companies that have infringed prohibitions in chapter I or article 81 may also be subject to competition disqualification orders under the Company Directors Disqualification Act. The OFT will view seriously the involvement of directors or senior management in any infringement, and such involvement will increase the likelihood of an application for a CDO being made against them.

The other side of these penalties is the OFT's leniency programme, which encourages denunciation. Under is, a business may receive total or partial immunity if it comes forward with information. Total immunity is available to the first member of the cartel to come forward with relevant information, if they:

  • Provides the OFT with all the relevant information, documents and evidence available to it
  • Maintains continuous and complete co-operation throughout the investigation
  • Has not taken steps to coerce another undertaking to take part in the cartel activity
  • Has ceased its involvement in the cartel from the time it came forward with information.
This system, however, only works in England and Wales. In Scotland, the lord advocate will simply "take into account" an individual's co-operation with the OFT when deciding whether to bring a prosecution.

An important consideration is that the OFT will endeavour to keep the identity of a business confidential throughout the course of its inquiry

Reductions in penalties of up to 50% are also available where the business:

  • Is not the first to come forward with information but does so before the OFT has issued a statement of objectives
  • Would have qualified for total immunity had it not been a coercer.
An important consideration, given that a business with evidence of a cartel may be concerned about its identity being disclosed, is that the OFT will endeavour, in most cases, to keep the identity of such businesses confidential throughout the course of the investigation.

Businesses are under intense pressure to avoid engaging in anti-competitive cartel conduct.

The risk of being caught by the OFT is higher and the price to pay, if convicted, is a threat with potentially fatal consequences. The result is that the OFT's efforts will create a virtuous circle, in that it will encourage more business folk and individuals to denounce prohibited agreements for the good of us all.

Cartels in the construction industry hurt subcontractors, contractors and employers alike. The OFT therefore also encourages individuals to put their perceived sense of morality and loyalty aside and to denounce anti-competitive practices. One can perhaps see back stabbing supplanting the culpable back scratching of the cartel.