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breached competition law? sue your employees!

19 January 2010

The High Court has cleared the way for companies in the Safeway Group to seek damages from eleven ex-employees and directors in relation to an OFT penalty (yet to be imposed) for competition law breaches.  The penalty could be as high as £16.4 million. 

Safeway is alleging that the ex-employees were in breach of their employment contracts and fiduciary duties, that they were negligent and that they conspired to procure the companies’ participation in anti-competitive practices. 

The ex-employees argued that the claim should be struck out on public policy grounds and, in particular, the rule that a person who commits an illegal act or unlawful act cannot seek an indemnity for any consequent liability (ex turpi causa non oritur action).  They argued also that the claim is fundamentally inconsistent with the UK competition law regime. 

The High Court rejected the application to strike out the claim on the basis that Safeway has a “real prospect” of defeating the defences at trial. 

The concept of companies suing employees is not new but it is new in the field of competition law.  We must now wait to see if Safeway is successful at trial once all of the evidence has been considered.  If it is then it will signal further personal risk for employees who engage in anti-competitive practices.  The result will surely be that employees demand more and more guidance on what they can and cannot do.  Compliance officers and in house legal departments can expect their phones to be busy!

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