The OFT's Revised Leniency Guidance Advises Companies How To Conduct Internal Investigations Into Cartels

Article by Michael O'Kane. Partner in the Fraud

and Regulatory Department, Peters & Peters

Solicitors.

On 11 December 2008, the Office of Fair Trading (OFT) published

its revised guidance on leniency and no-action (OFT 803) ('The

Guidance'), in relation to cases where companies or individuals

come forward with information of their involvement in a cartel. It

supplements and elaborates on the procedures set out in the

OFT's Penalty Guidance (OFT 423), and No-action Guidance (OFT

513)1. The OFT's leniency programme offers members

of cartels, who provide evidence of involvement, reduced fines and

potential immunity from criminal prosecutions.

The Guidance is consistent with the European Commission's

most recent guidelines on immunity from fines and the reduction of

fines in cartel cases, which was designed to increase the degree of

convergence between leniency systems within the EU2.

This should mean that normally where a company qualifies for

leniency under the Commission's leniency notice, it should also

be able to obtain civil and criminal immunity for its employees and

directors under the OFT's leniency policy.

In the Guidance, the OFT have sought to offer a more detailed

explanation of what is required from the leniency applicant in

order to benefit from the programme. The OFT has introduced the

need for a 'genuine intention to confess' and

'continuous and complete cooperation'. The Guidance also,

for the first time, specifies how companies should conduct their

internal investigations, both prior to and after approaching the

OFT. The provision of such advice is very unusual from a UK

regulator and may derive from concerns that the OFT has about the

nature and conduct of internal investigations to date. It is also

noteworthy that the OFT suggests that companies seek specialist

criminal legal advice before conducting their internal

investigation, even where criminal proceedings are not a likely

outcome. As well as commenting on internal investigations, the OFT

has also taken the opportunity in the Guidance to stress the

importance of two key factors in any immunity application.

1. Genuine intention to confess

The basis of any leniency application is subject to the company

demonstrating that there is a concrete basis for a suspicion of

cartel activity and a "genuine intention to

confess"3. This means that the company must accept

that, as a matter of fact and law, the information available

suggests that it has been engaged in cartel conduct in breach of EC

and/or UK law4. The OFT recognises that in certain

circumstances it may not be possible for the company to be certain

as to whether it has engaged in cartel conduct; therefore, the

acceptance that they have been involved in a cartel may have to be

qualified. However, where the basic facts are available, a marking

will not be granted unless the company expresses a genuine

intention to confess to the cartel conduct.

2. Continuous and complete cooperation

The requirement to maintain continuous and complete co-operation

implies that the overall approach of the applicant to the leniency

process must be constructive, and is designed genuinely to assist

the OFT in efficiently and effectively detecting and investigating

cartel conduct, so that enforcement action can be taken. Failure of

a director, current or former employer, to cooperate may result in

the revocation of a company's leniency, unless the applicant

shows that it used its best endeavours and, overall, it provided

the OFT with sufficient evidence of the reported cartel

activity5. If a company's application does fail,

current or former employees who had co-operated will no longer be

eligible for blanket immunity, but the information provided by them

as part of the leniency process (under paragraph 3.7) will not be

used in evidence against them6.

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