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Anti-competition enforcement - digging up the past

11 July 2007

In 2003 for the first time it became a criminal offence for UK individuals to participate in cartel activity. This is when the Enterprise Act 2002 took effect. The Act is part of a continuing trend towards the criminalisation of regulatory breaches and follows the US approach of vigorously pursuing and prosecuting individuals, rather than just the companies for which they work, in an effort to deter anti-competitive behaviour. UK businessmen and women are vulnerable in a way that they have never been before, facing the possibility not just of director disqualification, personal fines and imprisonment but even extradition abroad, as demonstrated by the high profile "NatWest Three" case which saw three British nationals extradited to face charges in the USA in the wake of the Enron affair.

Now, in a second extradition case, the House of Lords will decide whether price-fixing activity that took place before the 2002 Act constituted a criminal offence. The US Government is trying to extradite Mr Ian Norris, former Chief Executive of Morgan Crucible PLC, on charges of conspiracy to fix prices and interference with witnesses. The so-called "double criminality" rule means that a person cannot be extradited from the UK unless the alleged conduct abroad would have amounted to an offence in this jurisdiction if it had taken place here. The difficulty for the US Government, and the reason why the case is now going all the way to the House of Lords, is that at the time when the alleged events took place (before 1999) the Enterprise Act was not in force and in the UK there was no equivalent statutory offence of the US price-fixing offence.

The US Government contended that the alleged events amounted to the English common law offence of conspiracy to defraud which is an extradition offence. Norris argued that, without some form of dishonesty beyond mere secrecy, price-fixing in the form of a cartel agreement did not constitute conspiracy to defraud under English common law. Under the applicable US felony, price-fixing or bid rigging agreements are intrinsically illegal and there is no need to show that the perpetrators intended to defraud or deceive. Therefore, Norris contended, there was no comparable offence in the UK at the relevant time and so he should not be extradited. The High Court disagreed and found against Mr Norris. His conduct went beyond mere secrecy but even if it had not, the objective of secret price-fixing was almost always to mislead customers into believing that they were paying the true market price rather than the rigged price. Such behaviour would be regarded by ordinary people as dishonest, and realised to be so by the perpetrators.

Norris argued that the action against him was an attempt to criminalise conduct retrospectively but the High Court rejected this argument. If the House of Lords takes the same view UK businessmen and women could potentially face the threat of criminal price-fixing charges for conduct before the 2002 Act came into force. With the US taking an increasingly aggressive stance to anti-trust enforcement it seems very likely that extradition applications will become more common in the future. Leniency programmes encourage whistle-blowers but their allegations may not always be reliable. Under the controversial 2003 Extradition Treaty the evidence threshold for extradition from the UK to the USA has been lowered and the US no longer has to prove a prima facie case. Individuals may therefore find themselves unable to argue about the evidence until they have been transported across the Atlantic. One possible argument against extradition for events that took place a long time ago is that it would be unjust or oppressive to order extradition due to the passage of time. Last month, in another case, a UK based businessman succeeded in the Magistrates Court in escaping US extradition on charges relating to activities dating back to 1991 because of the time that had elapsed. However, that argument failed to convince the High Court in the Norris case. It took the view that Mr Norris had suffered no prejudice. He was on notice of the investigation and in any event would have an opportunity to raise this issue before the US courts.

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