OFT Signals Tougher Stance on Director Disqualification Orders

Following a consultation process, the Office of Fair Trading ("OFT") has published new guidance setting out its revised approach to the use of director disqualification orders in competition cases ("CDOs"). With a view to increasing the incentives on company directors to take compliance seriously, the OFT warns that the new guidance should be taken as a clear message that the OFT will be actively seeking the disqualification of directors in appropriate cases. The prospect of being disqualified as a director is seen by the OFT as one of the most powerful deterrents to anti-competitive behaviour regardless of the size of the company.

Under the Company Directors Disqualification Act a director can be disqualified from acting as a director for up to 15 years if their company is involved in a breach of competition law and the court considers they are unfit to be concerned in the management of a company as a result. Directors for this purpose include shadow directors and partners in limited liability partnerships.

Cases will be chosen based on the evidence available and seriousness of the conduct. Aggravating factors (such as past involvement in competition breaches or obstructing a competition investigation) will increase the likelihood of a CDO being sought.

A key policy shift is the tougher stance the OFT will be taking on directors that are not directly involved in an infringement. The new guidance clarifies that directors who ought to have known of a competition law breach (or suspected there may be a breach but took no steps to prevent it) will now be targeted to the same extent as those who are directly involved. Accordingly, more than ever, directors need to keep themselves well informed of their company's activities and intervene as soon as any suspicious conduct comes to light. The OFT considers this shift allows it to better target directors of large companies, who tend not to be involved in the day-to-day decision making.

The OFT also confirms that as part of its leniency package, immunity from a CDO is possible where the director's company is granted leniency in respect of the same activities, provided:

the director cooperates with the OFT's investigation, and; he has not been removed or resigned from office in connection with the infringement. The new guidance, which replaces the 2003 guidance, adopts most of the proposed changes that were consulted upon. In addition, the OFT has indicated that it will be developing further...