UK Courts to Decide if Employees Must Pay Price Fixing Penalties Imposed on Corporation

Ongoing private litigation in the English courts will address whether a corporation that, through its employees, violated UK antitrust law may recover from those employees the penalties imposed on the corporation. This litigation involving price fixing of dairy products by Safeway is attracting much interest. If the corporation succeeds in recovering antitrust penalties and costs from the responsible employees, that will change the future dynamic between employees and the corporations that employ them. Engaging in unlawful conduct will put employees at greater individual risk, as they may be held financially accountable for those fines even if their employment has ceased, and the post-conduct interests of the employees and their corporations will diverge.

Background to the dispute

In 2007, the Office of Fair Trading (OFT), the UK's primary antitrust enforcement agency, charged several large supermarkets and dairy processors with price fixing. The OFT since has settled with many of the parties, but continues to investigate two of the supermarkets (Tesco and Morrisons, which owns Safeway Stores). Safeway has admitted antitrust laws were infringed and could face a penalty of between £10.5 million and £16.5 million.

Safeway initiated private litigation in the High Court against 11 former employees, including the chairman and several directors, whom Safeway views as having participated in or facilitated the price fixing practices. Safeway seeks to recover from the employees the penalty and Safeway's associated legal costs. The High Court ruled that Safeway's claim would be permitted to proceed to trial and on 2 March 2010 gave the employees leave to appeal.

The former employees sought to end the claim before trial by applying for summary judgment or strike out of the claim. The employees argued that:

The Safeway Stores committed an unlawful act and cannot therefore maintain an action for an indemnity against liability that results from the act. (The principle of ex turpi causa non oritur actio is that one cannot bring a legal action based on one's own wrongful conduct.) The claim is fundamentally inconsistent with the UK Competition Act 1998 on which the OFT's investigation is based. The Competition Act is addressed to companies, not individuals. Corporation's defense of its own wrongful conduct

In January the High Court decided that, although Safeway's unlawful acts were sufficiently serious to consider the ex turpi causa defence (the imminent...