Since 2003, under section 9A to 9E of the Company Directors Disqualification Act 1986 (1986 Act), as amended by the Enterprise Act 2002, the CMA (previously, the Office of Fair Trading (OFT)) has had the power to apply to court for a disqualification order to be made against a director where a company of which he is a director has breached competition law and where his conduct as a director makes him unfit to be concerned in the management of a company. A breach of competition law for these purposes is an infringement of the Chapter I or Chapter II prohibition of the Competition Act 1998 (1998 Act), or Article 101 or 102 of the Treaty on the Functioning of the European Union. The maximum length of disqualification under the 1986 Act is 15 years and during the period of disqualification it is a criminal offence for the individual to act as a director or to take part in the management of a company. Section 9B of the 1986 Act also allows the CMA to accept a disqualification undertaking from a director instead of bringing proceedings.

Trod Ltd and GB eye Ltd (trading as GB Posters) are both suppliers of licensed sport and entertainment merchandise and related products. The CMA launched an investigation on 1 December 2015 into suspected anti-competitive arrangements in breach of the Chapter I prohibition of the 1998 Act.

On 21 July 2016, the CMA announced that Trod had admitted to agreeing with GB Posters not to undercut each other’s prices for posters and frames sold on Amazon UK’s website by using automated re-pricing software. Trod agreed to pay a fine of £163,371 for taking part in the cartel, which reflected a 20% discount as a result of Trod’s admission and co-operation with the CMA’s investigation. GB Posters received immunity, having reported the cartel to the CMA and co-operated with the investigation.

The CMA has now announced the five-year disqualification of Mr Daniel Aston, the managing director of Trod. The CMA accepted a disqualification undertaking from Mr Aston instead of applying to the court for an order disqualifying him as a director. Mr Aston has undertaken that, for the next five years, he will not: be a company director; act as a receiver of a company’s property; be involved in the promotion, formation or management of a company; or act as an insolvency practitioner. The CMA did not, consistent with its guidance, apply for a disqualification order against the director(s) of the immunity applicant, GB Posters (see box “CMA guidance”).

The CMA’s decision to accept a disqualification undertaking from Mr Aston suggests, as many commentators had predicted, a preference for obtaining an undertaking (rather than a court order) where possible, as a more swift and efficient way of pursuing directors for their company’s competition law breaches. The CMA will save time and court costs, although it will still need to prepare the case sufficiently at the initial stages to establish liability.

In its decision, the CMA also recognised that where a disqualification undertaking is offered, this will normally result in some discount in the period of disqualification that the CMA is prepared to accept. Here, the CMA considered a five-year disqualification period to be appropriate, rather than the maximum length of disqualification of 15 years under the 1986 Act. However, this was a small cartel, and it was the first time that the CMA has used these powers. In future cases involving larger businesses, the CMA may be expected to impose a longer period of disqualification.

In the UK, like the US and other jurisdictions with criminal sanctions for competition law breaches, the CMA can use individual sanctions as part of a wider policy of deterrence. Director disqualification, although limited to board-level appointees and not middle management, is an important weapon in the CMA’s armoury given that, in principle, it confers the power to disqualify an entire board of directors and, as a civil sanction, has both a lower standard of proof and avoids many of the difficulties for the CMA associated with the criminal cartel offence, which has brought down two contested criminal prosecutions to date.

Although less severe than a prison sentence, the personal implications of disqualification for an individual’s career can, in the CMA’s view, act to reinforce top-down board-level commitment to competition law compliance in organisations. It remains to be seen whether this first disqualification order will open the floodgates to many more.