Imagine a convivial meeting of sales representatives from various companies.

In keeping with Adam Smith's dictum, their conversation leads to an agreement to fix prices and allocate customers.However, they all know that what they are doing is wrong; their employers have told them repeatedly not to enter such agreements under threat of losing their jobs.

Nonetheless they carry on, believing they are acting in the companies' best interests.

Are their employers liable for their actions?The House of Lords, in its judgment in Director-General of Fair Trading v Pioneer Concrete (UK Ltd) (unreported, 24 November 1994), says yes, where the companies concerned are subject to an order of, or an undertaking given to, the restrictive practices court.The extent of any prohibition and the quality of any compliance programme, it held, are irrelevant to liability for contempt (although they are relevant considerations for mitigation).This conclusion was reached principally for public policy reasons, namely to deter the implementation of agreements which in Parliament's view harm the pub lic interest.This judgment thus corrects the entertaining detour of the last few years conducted by the Court of Appeal.

In 1991 in Re Supply of Ready Mixed Concrete [1992] 1 QB 213 (the Smith case), Lord Donaldson of Lymington MR held that the company was not liable for three reasons: its employee was subject to an express prohibition; it had adopted reasonable compliance systems to monitor his activities; and the employee did not have ostensible authority to enter into the arrangement.Russell LJ in 1993 in Re Supply of Ready Mixed Concrete (No.2) [1994] ICR 57 (the Pioneer case) went even further.

In his view, provided there was an express prohibition, and the employee had no ostensible authority, the company would not be liable.

An employer, in his view, was not in all cases bound to take further steps (ie have a compliance programme) to prevent the agreement being concluded.These judgments gave companies the opportunity of escaping the rigours of the Restrictive Trade Practices Act 1976.

If they instituted comprehensive compliance programmes and expressly prohibited their employees from entering restrictive agreements, apparently they could escape contempt proceedings arising from agreements caught by the Act.Only if it could be demonstrated that the company's prohibition was a sham (for example, because a director participated in or ratified the agreement), could the director-general of fair trading commence contempt proceedings.It also gave solicitors the opportunity to offer 'protective' services to their clients.

Anti-trust compliance manuals, training seminars, even videos became important aids in ensuring that proceedings were not instituted.It also increased administrative burdens on in-house lawyers, as the monitoring of compliance programmes was added to their responsibilities.However, the Court of Appeal's judgments were expressly rejected by the House of Lords.

The earlier judgments had proceeded on the basis that there had to be an element of consensus on the part of the company (ie the senior management or the board) before it could be party to an unlawful agreement.The House of Lords, on the other hand, now says that no distinction can be drawn between a company and its employees for these purposes.

This is because, 'the actions of its employees, acting in the course of their employment, are what constitute the carrying on of business by the company'.

The only consent required in their Lordships' opinion was 'the consent of the employees who could and did make the agreement effective'.Contempt under the Restrictive Practices Act 1976 is thus turned into a form of strict liability 'offence'.

This is in keeping with a trend, for example in environmental cases, for companies to pay the penalty for the actions of their employees where they offend the public interest.

Thus National Rivers Authority v Alfred McAlpine [1994] The Times, 3 February involved a prosecution brought under s.85 of the Water Resources Act, which creates a strict liability offence of causing pollution of controlled waters.The defendants denied liability on the basis that their employees were of insufficient standing for their acts to be attributed to the company.

In support they cited Tesco Supermarkets v Nattrass [1972] AC 153, as did the company respondents in the ready mixed concrete cases.

In both cases, the analogy was rejected.The consequence of the ready mixed concrete judgment for other areas of company liability should not be exaggerated, however.The House of Lords followed an earlier line of authority, in pa rticular the case of Stancomb v Trowbridge Urban District Council [1910] 2 Ch 190, which is confined to cases concerning breaches of injunctions issued against corporations.

It does not consider the liability of a company more generally for the actions of its employees.Nonetheless the judgment's importance should not be underestimated.

It does not mean that compliance programmes and all other forms of protective paraphernalia have become redundant overnight.

The steps which companies took in light of the Court of Appeal's judgments have, paradoxically, became even more important.

This is for two principal reasons.First, the House of Lords judgment has made the bringing of contempt proceedings in restrictive practices cases easier.

The result is that we are likely to see the director-general institute more proceedings, although this depends, to some extent, on his limited resources.The director-general is also more likely to go to court to obtain an order against a company which has entered an unregistered but registrable agreement under the Restrictive Trade Practices Act 1976, as a necessary first step to bringing a 're-offending' company to book.Secondly, Lord Templeman suggested obiter that the fines in the proceedings were 'derisory'.

This is a comment which the director-general has stressed in his press release on the case and, as a consequence, we are likely to see the director-general seek even greater fines.

Compliance programmes will therefore have an increasingly important role to play in mitigation, as indeed they currently do in proceedings before the European Commission.Paradoxically, the House of Lords judgment has made legislative reform a little less likely.

It will be harder for the director-general to argue for a slot in the legislative timetable for repeal of the Restrictive Trade Practices Act when its 'effectiveness' has been restored.The much vaunted, but little acted on, ambition of the government to replace the Act with a European-style Article 85 prohibition on anti-competitive practices is likely to stay dormant for a while longer.

But then a government with a bevy of Eurosceptical backbenchers was never very likely to introduce it any way.