Competition Law And Director Disqualification For Up To 15 Years

The first six months of 2019 have provided several interesting headlines as director disqualification starts to wield greater influence in the world of competition law.

What is director disqualification?

Disqualification orders (by the court) or disqualification undertakings (agreed by the director) are perhaps more commonly known as being imposed upon directors of insolvent companies when the Secretary of State for Business, Energy and Industrial Strategy considers their conduct (as directors) to be "unfit".

However, disqualification can also be relevant in the competition law context when (i) a company of which that person is a director commits a breach of competition law, and (ii) that person's conduct as a director makes him/her unfit to be concerned in the management of a company.

The relevant statutory provision is section 9A of the Company Directors Disqualification Act 1986 (CDDA), with the CMA having the power to apply to the court for a disqualification order following its own investigations into the company.

How is this applied to competition law and company directors?

Court proceedings commence after the CMA has served on a director a Section 9C Notice (in terms of the CDDA) putting the director on notice of the grounds for the application. A successful application to the court can result in a period of disqualification of up to 15 years depending on the seriousness of the conduct.

A breach of competition law is defined as being an infringement of any of: the Chapter 1 or Chapter 2 prohibitions of the Competition Act 1998 or Articles 101 or 102 of the TFEU (put shortly, agreements affecting trade, or abuse of dominance).

CMA Guidance

However, on 6 February 2019, the CMA issued its revised Guidance in relation to the disqualification regime.

The guidance is detailed, but what is clear is that the CMA (i) will recognise material assistance and co-operation by the director to the CMA as mitigation, and (ii) will take the stage at which an undertaking is offered into account when considering the appropriate period of disqualification.

It is worth reflecting that whilst only 3 directors had been disqualified between 2003 and 2016 (the first disqualification undertaking having been obtained in December 2016), that number was exceeded in the following five months and so marking a clear change that the CMA intends to use the powers open to it more frequently.

Recent disqualification undertakings

This has resulted in directors being...