My Lords, there is wide agreement in both Houses that having to prove “dishonesty” makes the criminal cartel offence unnecessarily hard to prosecute, so it is right that Clause 41 removes the dishonesty requirement. However, in the Government’s view one cannot simply remove that requirement and leave the offence otherwise unchanged. Rather, we have had to think through the implications. In place of the dishonesty requirement, the clause provides that the offence is not committed if customers are notified of relevant information or if that information is published in a prescribed manner. These are the provisions which Amendments 56 and 57 would remove.
The reason for allowing this protection is that a limited number of agreements may technically fall within the terms of the cartel offence once the dishonesty requirement has been removed but are lawful under the anti-cartel provisions of the civil antitrust regime that governs which agreements businesses may enter into. In such cases, it is right that we allow individuals to ensure they do not commit the cartel offence by checking that under the arrangements customers would be informed or the arrangements would be published as prescribed.
This approach builds coherently on existing provisions of the offence in Section 188 of the Enterprise Act. Subsection 6 provides that,
“arrangements are not bid-rigging arrangements if, under them, the person requesting bids would be informed of them at or before the time when a bid is made”.
All the arrangements caught by the offence involve price fixing, market sharing, output restrictions or bid rigging. These are all potentially damaging. Where such arrangements are put in place, the parties should be prepared to justify their actions. In principle, and in
most cases, it is reasonable that they provide notice of the arrangements to those likely to be affected by them, their customers, either directly or through publication as prescribed; and it would be unreasonable to prevent, as these amendments would, individuals entering into perfectly legitimate activities which they are prepared to publicise in one of the specified ways, just as the present offence provides in the case of bid rigging.
In the majority of cases, of course, the types of agreements caught by the offence will be clearly detrimental to consumers, and the participants will know that they are engaged in unlawful conduct. In those cases, the arrangements will not be published but will be kept secret, and quite rightly the individuals involved will be exposed to prosecution and punishment. Our intention is to remove the prosecutorial difficulties with “dishonesty” while ensuring that only conscious participation in hardcore cartels, which ought to be blameworthy, is caught by the offence.
Notwithstanding those provisions, however, businesses and their legal advisers continued to have some concerns that the amended offence would criminalise the participation of individuals in commercial conduct that would otherwise be lawful. I hope that there is widespread support for the view that it is right to crack down on cartels, but that we ought not to chill businessmen from engaging in legitimate business activities that serve and benefit customers.
Concerns were also expressed about the practicality in certain circumstances of disclosure or publication and the protection of commercially confidential information. In a limited number of cases, for example in relation to arrangements for the joint underwriting of certain insurance contracts, prior disclosure of the arrangements might be difficult. In such cases, customers would be aware that such arrangements were common even without notification or publication and would be untroubled by it. In other cases, the information would already be publicly available in an appropriate forum, such as technical standards. To meet these concerns, the Bill was amended in another place, including by providing individuals with a defence where they did not intend to conceal the nature of the arrangements in certain circumstances or they took reasonable steps to disclose them to professional legal advisers for the purpose of obtaining advice. This builds upon the present approach in the Bill of blessing arrangements that have been publicised or notified.
Amendments 56 to 61 would drastically dilute the protections that these provisions afford by removing the circumstances where the offence is not committed and transforming the defences into relevant mitigations. This would not provide protection to those who were engaged in otherwise lawful behaviour but who, for example, had neglected for whatever reason to give the arrangements the appropriate publicity. It would also discourage parties from entering into agreements that are exempt from the anti-trust prohibitions because they bring gains to consumers where prior disclosure would compromise the benefits the company gains from the agreement. Rather, the individuals would have no defence, but they would be able to plead a relevant mitigation in order to reduce their sentence.
That is an unattractive prospect that is likely to chill legitimate business activities, contrary to the Opposition’s stated intention.
I thought it might be helpful to address some points that were raised by the noble Lord, Lord Whitty, concerning the Government’s approach. What characterises the kind of hardcore cartel activity that we wish to make it easier to prosecute from legitimate behaviour is that it is clandestine to a high degree. That is where the bar is set. Those responsible meet in secret, use code words and communicate through unofficial channels, thus bypassing a company’s normal procedures. This element is already recognised in the Bill by the provisions that take outside the offence arrangements that are disclosed to customers or publicised. We therefore think it appropriate to give further comfort in relation to the offence by providing individuals with a defence that they did not intend to conceal the nature of the cartel arrangements from customers or prosecutors, or that before making or implementing such arrangements they took reasonable steps to disclose them to professional legal advisers for the purpose of obtaining legal advice. In the light of these explanations, I hope that the noble Lord will feel able to withdraw his amendment.