THE first prosecutions of cartels under new criminal powers for competition regulators should not be expected for at least two years, according to John Fingleton, head of the Office of Fair Trading.

The Enterprise Act, which came into force in 2003, gave the OFT the power to prosecute businesses that agree not to compete on issues such as pricing, whom they should supply or contracts.

Companies involved in such operations can already be fined up to 10 per cent of their turnover but under new powers directors can be jailed for up to five years if found guilty of involvement in a cartel.

Mr Fingleton said that the OFT was gearing up to use its new powers but had not pursued criminal prosecutions until now partly because it was unable to prosecute offences committed before June 2003.

He said: “We took the view that we should prosecute cases where we had good evidence post 2003. Large multi-party criminal trials will take a long time so I think you are talking about a period of up to five years from now before you see any cases in court.”

He said that the OFT was beginning criminal investigations now but it was likely to be at least two to three years before these were brought to court.

In the Irish Republic, where Mr Fingleton was previously head of the Competition Authority, powers to pursue criminal prosecutions of cartels came into force in 1996 but the first conviction is not expected until next month.

However, Mr Fingleton said that criminal prosecutions of cartels had an important role to play and he was keen to pursue them.

“Criminal sanctions have a critical role to play in the prevention of cartels because if the individual director of a company or head of pricing sees somebody going to prison for price-fixing they will take that much more seriously than the company paying a fine.

“All the evidence is that all the work done on education and compliance or what is called the soft stuff has a very low return unless it is backed up by some of the hard stuff. One good criminal case will double or treble the return you get for trying to educate people,” he said.

OFT officials have the power to bug homes and hotel rooms, track vehicles and follow suspects if they suspect anti-competitive practices. They can offer leniency for whistleblowers who reveal cheating in the industry. This has already persuaded more than ten companies to give evidence against fellow cartel members.

In November 2004 the OFT began an investigation into construction and renovation contracts in the Midlands between 2000 and 2005 after evidence from a whistleblower.

The investigation, which identified £500 million worth of bid rigging across 1,000 contracts in the East Midlands alone, is continuing. The OFT has not ruled out using its criminal powers under the Enterprise Act but many of the offences cannot lead to prosecution using the new criminal powers because they occurred before 2003.

The OFT is targeting construction as a priority area of investigation and it has vowed to crack down on anti-competitive practices on projects paid for with taxpayers’ money.

However, last month the Serious Fraud Office abandoned an investigation into allegations of contractual irregularities during the award of construction work at the Queen’s Medical Centre in Nottingham based on information handed to them by the Office of Fair Trading, citing a lack of evidence.

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