2007 was a record-smashing year for competition regulators. In February, the cartel busters at the European Commission imposed the highest ever fine of €992 million on elevator manufacturers for bid rigging. In August, the OFT broke its former record by levying a £121.5 million fine on British Airways for colluding on the price of long-haul passenger surcharges. These fines, which can reach a legal maximum of 10 per cent of annual turnover, are the regulators’ primary weapons to punish violations of the two major prohibitions laid down by antitrust laws in the UK and Europe.

The first prohibition targets anti-competitive agreements between companies and covers a broad spectrum of arrangements from exclusive purchasing, supply or distribution agreements (which in some circumstances are unlawful), to “hard core” infringements such as price fixing and market sharing (which are always unlawful and are generally typified by secret cartels). The European Commission, which takes the lead on antitrust cases where trade between EU member states is affected, has been on a crusade against cartels both by imposing severe penalties and encouraging whistle-blowers to report their fellow cartelists in return for leniency and reduced fines. The Office of Fair Trading mirrors this approach at domestic level through its enforcement of the Competition Act 1998 and has a similar leniency regime to encourage whistle-blowing.

he second primary antitrust prohibition is designed to counter the abusive use of market power by companies, including monopolies, through, for example, predatory (below cost) pricing, tying of goods and refusals to supply. The long-running Microsoft case falls into this category and, as shown by the €497 million fine imposed on Microsoft, and upheld on 17 September of this year by a European court, penalties can be just as severe for abuses of a dominant market position.

Unlike many other European countries, domestic law in the UK also targets individuals responsible for competition violations. Under the “cartel offence”, laid down by the Enterprise Act 2002, company employees may face up to five years in prison and/or an unlimited fine if they dishonestly agree to engage in prohibited cartel activities. Also, directors run the risk of being disqualified for up to 15 years. Both the OFT and the European Commission have (and regularly exercise) the power to raid the offices of companies they suspect of being involved in breaches of competition law. Add to that the real possibility of company executives being extradited to another country for prosecution under local competition laws, and the conclusion has to be that gambling with competition rules in the UK and the EU is riskier than ever before.

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In light of the serious consequences of antitrust violations, it is important that a competition compliance culture be instilled from the company board downwards. To minimise falling foul of the competition regime companies should establish meaningful and comprehensive training concerning these issues throughout their organisations. Clearly, basic risk management must include a well-prepared and implemented compliance programme but the real challenge for senior executives will be to foster a compliance culture throughout their organisations. In many instances, the reputation of businesses and individuals (including potentially their liberty and their ability to act as directors) may hinge on adherence to that culture.

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