Director Disqualification For Breach Of Competition Law

While fines imposed on companies for breach of competition law have become a quite common notion in the business world, the decision of the Competition and Markets Authority (“CMA”) in December 2016 in relation to the disqualification of the company’s managing director comes as a surprise (in fact for the first time since the enactment of the respective law) and urges importance of compliance with competition law at all levels of the corporate structure. Currently Mr. Aston is prohibited from taking a director post at any UK company in the next 5 years. The business community, also in Turkey, should be clear that the competition authorities are likely to continue to scrutinize the conduct of the directors/managers/employees and resort to such individual sanctions more often with a view to preserving the competition compliance culture effectively.

The story in short

Mr. Aston, a managing director of Trod Ltd, agreed with one of its competing online sellers not to lower each other’s prices for products sold on Amazon’s UK website. The CMA fined the company £163,371 for the anticompetitive behavior. Since Mr. Aston, being the director, personally contributed to the breach of competition law, the CMA concluded that he was not fit for being a director in any company in the UK for the next 5 years.

Legal grounds

The CMA has a power under the Company Directors Disqualification Act 1986 to seek the disqualification of a company’s director, which has breached competition law. The CMA may exercise this right either (i) via applying to the court for the disqualification order, or (ii) by accepting a disqualification undertaking from a director. The latter offers some discount in the period of disqualification, which may be up to 15 years.

The disqualification of  Mr. Aston followed the CMA’s decision dated 12 August 2016 that the company breached competition law. In the present case Mr Aston gave his undertaking before the court proceedings were commenced, hence his period of disqualification was reduced to 5 years.

As for Turkey

Article 4 of Law of Turkey No 4054 On Protection of Competition (“Law No 4054”) also prohibits agreements, concerted practices and decisions restricting competition. A financial penalty (administrative fine) is normally imposed on a legal entity in breach of competition law. At the same time according to Article 16 of the Law No. 4054, directors, managers and/or employees may also be faced with individual penalties where they have a decisive influence in the infringement.

Concluding remarks

Compliance with competition law should be taken seriously by all participants of the economic activity, including company’s directors and employees in other capacities. It is very likely that the competition authorities will continue looking at conduct of directors and apply individual sanctions (in addition to fines imposed on companies) for breach of competition law in order to ensure competition compliance culture more effectively.

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