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Taking no prisoners? Key milestones in the history of Irish enforcement action against cartels

Introduction

Although Ireland first criminalised cartels in 1996, their detection was initially ineffective. In an effort to boost enforcement activity, the Competition Act 2002, as amended (the "Act") was adopted. This legislation facilitated the investigation and prosecution of alleged cartels while increasing the deterrent effect. Since the Act's adoption, the Competition and Consumer Protection Commission (the "CCPC") and its predecessor, the Competition Authority have prioritised the detection of cartels, resulting in some significant achievements including the first successful criminal cartel trial in the EU.

Substance and Sanctions

Section 4(1) of the Act prohibits arrangements between undertakings which have as their object or effect the prevention, restriction or distortion of competition in the trade of any goods or services in the Republic of Ireland. The wording of Section 4(1) is similar to that of Article 101(1) of the Treaty on the Functioning of the European Union (TFEU).

Under Section 6(1) of the Act, any breach of Section 4(1) or Article 101(1) TFEU is an offence. 'Hard-core' infringements (distinguished by Section 6(2)), such as price-fixing, bid-rigging or market-sharing, are presumed to have anti-competitive object, unless the defendant proves otherwise.

An undertaking participating in an infringement commits a criminal offence and is liable on summary conviction for a fine of up to €5,000, or on indictment/felony conviction to a fine of up to the greater of €5 million or 10 percent of its worldwide turnover. An individual guilty of such an offence (whether as a sole trader or as an employee or officer of the relevant participant), faces (in addition to the above fines) imprisonment for up to 6 months on summary conviction or up to 10 years on conviction on indictment.

Irish Cartel Immunity Programme

In 2015, a revised Cartel Immunity Programme (CIP) was adopted by the CCPC and the Director of Public Prosecutions (the "DPP"), which takes cartel prosecutions on indictment. The CIP, which replaced a previous programme launched in 2001 by the Competition Authority, provides immunity from prosecution for cartel offences under the Act.

The CIP is an immunity programme rather than a leniency programme: if successful, an applicant (including any relevant directors/employees) may avail of full immunity from prosecution. The CIP follows a "first past the post" approach: immunity is only available to the first member of a cartel qualifying for its protection. This is distinct from the European Commission's and many other EU Member States' programmes, which provide for 'sliding scale' reductions in fines for the first successful applicant and/or other parties co-operating with an investigation.

To obtain immunity an applicant must co-operate fully and in a timely manner with the investigation and disclose all known information on anti-competitive activities such as all cartel offences of which they are aware, not only those offences in which they were involved. While cartel instigators and/or leaders may qualify for immunity, an applicant cannot avail of the CIP where it took steps to coerce another party to participate in the cartel.

Previous cartels – Home Heating Oil and Citroën Motor Vehicle Dealers

Home Heating Oil

In 2004, following an application under the 2001 CIP, the DPP initiated criminal proceedings for price-fixing against 24 individuals and companies involved in the distribution of home heating oil in the west of Ireland. A series of convictions were secured in 2005/2006, the majority of the defendants having entered guilty pleas. Fines of up to €12,500 were imposed on the participants. The cartel organiser (albeit not an actual participant), who pleaded guilty to aiding and abetting price fixing, was fined €15,000 and received a prison sentence of six months, suspended for twelve months. This was the first custodial sentence imposed on a criminal defendant in a competition case in Europe.

In one notable case, Pat Hegarty, a former oil company employee unanimously found guilty of having participated in the cartel, challenged his prosecution on the basis that his employer had not been convicted of any offence. However, in October 2011, the Supreme Court ruled that individuals may be tried for competition offences, even where their employer has not been formally convicted. It is sufficient in such circumstances that the jury makes a finding of fact that the company has committed a competition offence. Ultimately, Mr Hegarty received a €30,000 fine and a suspended two-year prison sentence.

Citroën Motor Vehicle Dealers

The Citroën motor dealers cartel lasted for nearly nine years, during which time participants met regularly to set prices for Citroën cars and spare parts. Six companies and seven individuals pleaded guilty to price-fixing and one individual pleaded guilty to aiding and abetting the cartel. In 2008/2009, suspended prison sentences ranging from six to nine months were handed down by the Irish courts, together with fines ranging from €2,000 to €80,000. In one instance, a participant's failure to pay a fine resulted in the imposition of a prison sentence of 28 days.

One of the cases, namely DPP v. Patrick Duffy and Duffy Motors (Newbridge) Limited resulted in the publication of a lengthy and interesting written judgment by Judge McKechnie, serving in Ireland's Central Criminal Court. The Duffy judgment emphasised that serious competition law infringements require tough punishment, namely, prison sentences to incentivise individuals to obey the law; fines on undertakings may be insufficient for this purpose.

In sentencing, the judge considered various criteria including the gravity, nature and duration of the offences and the personal circumstances of the accused. Apart from the guilty plea, the judge rejected various proposed mitigating factors. For example, he stated that Mr Duffy participated actively in the price-fixing conspiracy on a long-term basis – his conduct was thus not 'out of character'. The judge also emphasised that the low likelihood of recidivism would not be a mitigating factor. Judge McKechnie concluded by stating that while the first wave of Irish cartelists may have escaped prison sentences, the next generation may not be so fortunate. Ultimately though, to align with his co-conspirators' punishments, Mr Duffy received a suspended prison sentence.

Commercial Flooring Contracts Cartel

Commercial flooring contractors supply and install carpets and other flooring products to/for the owners/tenants of office blocks and large industrial facilities. Whether in the public or private sector, contracts are typically awarded on the basis of tender competitions.

In early 2011, Mr Brendan Smith of Aston Carpets and Flooring (ACF) engaged with Mr David Radburn, a counterpart in another of Ireland's leading commercial flooring suppliers, Carpet Centre (Contracts) Limited (Carpet Centre). The parties agreed not to compete for certain flooring contract tenders, where either ACF or Carpet Centre had a sense it was likely to be successful (for example, due to previous work for the same customer). When a particular tender was 'assigned' to one contractor, the other party would, knowingly, bid a higher price. (This approach is commonly referred to as 'cover bidding'.) Messrs Smith and Radburn communicated by e-mail/telephone and met each other 'face to face' for the duration of the infringement which terminated in late April 2013 when the CCPC launched a series of dawn raids on relevant premises. During the dawn raid, Mr Smith was overheard telling an individual on the telephone (who subsequently turned out to be Mr Radburn) to "delete all e-mails".

In November 2013, Mr Radburn and Carpet Centre sought immunity under the CIP. Both were thus under an obligation to co-operate with the CCPC's investigation. In 2015, the DPP, on recommendation of the CCPC, issued charges against Mr Smith and ACF for competition law infringements. Mr Smith was also charged with perverting the course of justice.

In early 2017, both ACF and Mr Smith pleaded guilty to competition law offences. In May 2017, Judge McCarthy fined ACF and Mr Smith €10,000 and €7,500, respectively. The latter, having also admitted to the obstruction of justice charges, was given a three-month prison sentence, suspended for two years.

The DPP has appealed the sentences imposed by the Central Criminal Court on both Mr Smith and ACF on the grounds of "undue leniency". This may have been prompted by the Court's decision not to impose a suspended sentence on Mr Smith for the actual competition infringement and/or by the relatively low level of fines imposed compared to previous Irish cartelists.

Conclusion

The DPP and the CCPC's overall cartel enforcement record remains reasonably favourable. The Hegarty case shows that the regime applies just as strongly to individuals as it does to undertakings. However, despite the severe penalties that can be imposed, the level of fines levied by the Courts, particularly on companies, has remained low. Furthermore, with one 'technical' exception (i.e., the failure to pay a fine in the Citroën case), nobody has been sent to prison. It's not certain that this will change.