Can the Competition and Markets Authority fulfil the ambitions of its new enforcement chief?

Michael Grenfell’s first speech as head of enforcement at the Competition and Markets Authority (CMA) contained all the things you would expect any self-respecting enforcer to say: the CMA is determined to be vigorous in combating illegal anti-competitive practices; it has high-profile cases in the pipeline; and of course it is committed to going after individuals.

Individual accountability is high on the global enforcement agenda. From the Financial Conduct Authority’s senior managers regime, which comes into force in March, to the so-called ‘Yates memo’ recently issued by the US Department of Justice, pursuing individuals for corporate wrongdoing appears to be the order of the day. It is perhaps not surprising then that the CMA, an organisation with hopes of becoming a ‘mainstream criminal enforcement agency’, has jumped on the bandwagon.

But if mainstream criminal enforcement is the goal, the CMA has got off to a bad start. In June this year two executives were acquitted of price-fixing in the galvanised steel tanks trial, the CMA’s first contested prosecution since it took over the competition functions of the Office of Fair Trading in April 2014. A third executive had pleaded guilty.

In his speech Grenfell made much of the organisation’s procedural handling of the case, emphasising that the procedural failings in the 2010 price-fixing trial of four BA executives, which collapsed spectacularly after it emerged that a large volume of material had not been disclosed to the defence, were a thing of the past. Perhaps the CMA does deserve credit for having got its ‘ducks in a row’, particularly given what it inherited, but it does not change the fact that the jury – unpersuaded after a three-week trial that the defendants had acted dishonestly – took only two and a half hours to acquit them.  

The change in the law almost certainly will make a difference, because the offence is now substantially easier to prove (although the new offence is not without its difficulties and of course has never been tested in the courts). It is inherently difficult to convince a jury of dishonesty in cartel cases, since unlike fraud or theft cases there are very rarely clear signs of greed or even personal gain. As the galvanised steel tanks case highlights, it is easy to imagine a situation where the alleged acts are not in doubt but where the defendant argues an honest motive such as saving employees from redundancy.  Juries are clearly sensitive to this, and it will be interesting to see how they respond when faced with the prospect of sending individuals to prison for conduct that was not dishonest.  

Following the galvanised steel tanks case, the CMA will no doubt be taking a critical look at the cases on its books where the conduct pre-dates the change in the law. It will have to decide whether it has the stomach for another fight over dishonesty, or whether it prefers to wait until its job is made easier by the change.

It is an unenviable position to be in. The last thing the CMA needs is another high-profile defeat, and yet to discontinue its existing prosecutions would be an admission that it does not think it can get over the line on dishonesty – a criterion that many would consider a central element of criminal wrongdoing.

Elly Proudlock is counsel at WilmerHale