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The Enterprise Act 2002 introduced a criminal offence for individuals who dishonestly engage in cartel agreements - ‘The Cartel Offence'. The Cartel Offence will operate alongside the Competition Act 1998 which allows the imposition of civil sanctions on businesses which breach the prohibitions on anti-competitive agreements.

While no definition of "cartel" is provided, section 188 of the Enterprise Act indicates that an individual is guilty of an offence if he or she dishonestly agrees with one or more other persons, that undertakings will engage in one or more of the prohibited cartel activities. These are:

• Price-fixing

• Limitation of supply or production

• Market-sharing, and

• Bid rigging.

The offence will be committed, irrespective of whether or not the agreement reached between the individuals is actually implemented by the undertakings and irrespective of whether or not the individuals have the authority to act on behalf of the undertakings, at the time of the agreement. If the agreement between the individuals is made outside the UK, proceedings may only be brought where the agreement has been implemented in whole or in part in the UK.

On conviction on indictment, an offender may receive a maximum of five years' imprisonment and/or an unlimited fine. However, summary trial before the magistrates gives rise to a maximum of six-months imprisonment and/or a fine up to the statutory maximum.

What does this mean in practice?

The Enterprise Act criminalises individuals who "dishonestly" engage in cartel agreements. The OFT argue that this concept is well understood in criminal law. They refer to the test case of R. vs Ghosh in 1982. This case provided an interpretation of the Theft Act 1968 and the test for dishonesty, which is a necessary component of the offence of theft. It seems that the individual must have realised that they were acting dishonestly and that there was an intention to obtain some form of pecuniary advantage. The question then arises whether the individual has to directly receive or intend to receive such pecuniary advantage or whether such pecuniary advantage may be obtained by the Business, which employs him and pays his salary. We anticipate that the legislators and indeed the OFT, intend that it should be the latter.

A grey area may exist when a non-participant and non-victim of the cartel becomes aware of it. Say a QS responsible for a client's procurement of construction work becomes aware that participants in the tendering process are seeking to maintain a non-competitive pricing structure. He is not liable under the Act, unless it can be shown that he was to obtain some form of pecuniary advantage from the cartel arrangement.

The QS may be duty bound to report his concerns to his client under the general duty of care of the professional man but is he obliged to report to the OFT or other authorities? It would seem not.

The OFT may require those seeking immunity to act as agent provocateur to procure evidence against others involved

The liability that can arise under the Enterprise Act is more likely to affect Q.Ss who are employed by tenderers. They may be the chief employees involved in bid rigging arrangements. Organisations may organise so as to take turns to be awarded overpriced jobs, which are meant to be regulated by secret tenders. However, if the QS responsible for the bid of the company whose turn it is to get the job rings round the others in the tender process and states the price that he needs to achieve, they can ensure that their prices exceed that bid by him on behalf of his employer.

It is the QS in this situation, perhaps coerced by a profiteering employer, who might need the protection of the Act or find himself to be the recipient of a proverbial ‘stick'. To promote the Cartel Offence the OFT has introduced the ‘carrot' of grant immunity from prosecution to individuals who inform the competition authorities of cartels and who then cooperate fully in the investigation and any prosecution.

In the context of the cartel offence, immunity from prosecution will be granted in the form of a ‘no-action letter', issued by the OFT under section 190(4) of the Enterprise Act. In order to benefit from a no-action letter an individual must:

• admit participation in the criminal offence

• provide the OFT with all information available to them regarding the existence and activities of the cartel

• maintain continuous and complete cooperation throughout the investigation and until the conclusion of any criminal proceedings arising as a result of the investigation

• not have taken steps to coerce another undertaking to take part in the cartel

• refrain from further participation in the cartel from the time of its disclosure to the OFT (except as may be directed by the investigating authority).

The latter condition indicates that the OFT may require those seeking immunity to act as agent provocateur, to procure evidence against others involved, who they wish to prosecute.

However, the fact that these conditions are satisfied in any particular case is not in itself sufficient for the issue of a no-action letter. Where the OFT believes that it already has, or is in the course of gathering, sufficient information to bring a successful prosecution of an individual, it will not issue a no-action letter to that individual. In some cases the no-action letter may be revoked, if the recipient of it has recklessly provided misleading information.