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The Competition and Markets Authority has recently obtained a disqualification undertaking from the director of a company found to be in breach of competition law. It is the first time this power has been used.

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Director disqualified for breach of competition law

12 December 2016

The Competition and Markets Authority has recently obtained a disqualification undertaking from the director of a company found to be in breach of competition law. It is the first time this power has been used.

The disqualification follows the CMA’s finding that two companies selling sports and entertainment posters, GB eye Limited ("GBE") and Trod Limited, had infringed the provisions of the Competition Act 1998 by agreeing not to undercut each other’s prices on Amazon Marketplace.

Section 2 of the Competition Act prohibits ‘agreements between undertakings, decisions by associations of undertakings or concerted practices which (a) may affect trade within the United Kingdom and (b) have as their object or effect the prevention, restriction or distortion of competition within the UK’. This prohibition ‘applies, in particular, to agreements, decisions or practices which directly or indirectly fix purchase or selling prices’.

GBE is one of the largest producers and distributors of posters in the UK, selling both as a wholesaler and to retail customers directly. Trod, a retailer of posters, was both one of GBE’s largest customers (at the wholesale level) and also a competitor (at the retail level).

When GBE expanded its retail business to Amazon Marketplace, where Trod also operated, Trod complained that GBE was undercutting its prices. In order not to lose Trod’s wholesale custom, GBE reached agreement with Trod that neither would undercut the other’s prices. Between 2011 and 2015, each company used repricing software to ensure that its prices were never lower than the other’s.

After investigation, the CMA concluded that the agreement between GBE and Trod appreciably restricted competition for the sale of posters and frames to UK consumers, in contravention of the Competition Act.

Trod was fined £163,371. GBE was not fined, under the CMA’s leniency policy, because it had reported the agreement to the CMA.

The CMA has now obtained a disqualification undertaking from Daniel Aston, Trod’s managing director, not to act as a director of any UK company for five years. It commented:

As Mr Aston was the managing director of Trod at the relevant time, and because he personally contributed to the breach of competition law, the CMA considers that his conduct makes him unfit to be a company director for a specified period.’

This case is a helpful reminder to directors to ensure that their companies do not engage in anti-competitive practices. Any infringement may have consequences not only for the company but also for the directors personally.