This presentation by Peter WHELAN, Professor of Law, University of Leeds, was made during the discussion “Director Disqualification and Bidder Exclusion” held at the 139th meeting of the OECD Competition Committee on 29 November 2022. More papers and presentations on the topic can be found out at https://oe.cd/ddbe

1. ‘Director Disqualification for Competition
Law Violations: Lessons from the UK’
29 November 2022
OECD
Paris
Professor Peter Whelan
Professor of Law
School of Law
University of Leeds
@drpeterwhelan

2. Aim and Layout of the
Presentation
Aims:
To examine the concept of employing director disqualification to enforce
competition law
To explain and to examine critically the UK experience with such orders
Layout:
Part I: Director Disqualification as an Enforcement Tool in the UK Competition Law
Regime
Part II: The UK Enforcement Practice
Part III: Lessons to be Learnt
2

3. Part I:
Director Disqualification as an
Enforcement Tool in the UK Competition
Law Regime

4. The UK Competition Regime
UK Competition Act 1998 – prohibits anticompetitive agreements (Chapter 1) and
abuse of dominance (Chapter 2)
Enforced by Competition and Markets Authority (CMA) [OFT before 2014]
Main sanction – administrative fines imposed upon infringing companies
UK competition law has two notable enforcement aspects:
- Existence of criminal cartel offence [not v successful]
- Existence of director disqualification
- - Introduced primarily for deterrence purposes
- - They act ‘as an important sanction for deterring breaches of competition
law. [They] impact on the individual responsible for the breach. They
complement the OFT’s power to impose financial penalties, which impact
on the company and its shareholders’ (OFT, 2010)
4

5. The Legal Basis and Effect
• The legal basis for director disqualification for competition offences is provided in
Section 204 of the Enterprise Act 2002
• Two forms: a competition disqualification order (CDO) and a competition
disqualification undertaking (CDO):
• CDO – Court must order one where: (a) her company commits a competition law violation
and (b) her conduct as a director makes her ‘unfit to be concerned in the management of a
company’
• CDU – CMA can accept if (a) and (b) AND director voluntarily offers it
Can last up to 15 years
Both have the same effect: director cannot act as a director, or be involved in
the management or formation of a company
Public register of disqualified directors is maintained
If breached: criminal sanctions (2 years and/or fine); personal liability for debts
5

6. Part II:
The UK Enforcement Practice

7. Two Take-Aways on
Enforcement Practice
(1) OFT/CMA have seriously reflected on and finessed its guidelines
• The changes have been sensible and improved the CMA’s approach
• Guidelines have improved transparency
(2) The CMA has, after a slow start, been successful in securing various
director disqualifications:
• Started in December 2016; been ongoing since
• Focused almost exclusively on CDUs
• Clearly not perfect: needs more cases; more CDOs; more resources
7

8. The Refinement of the Guidelines
on Competition Disqualification
8
2003 to 2010
• 5 step procedure introduced
• Required previous decision
• Required company to be fined
• A hierarchy of conditions existed, whereby
(i) ‘likely to apply for a CDO against a director who has been directly
involved in the breach’
(ii) ‘quite likely to apply for a CDO against a director [who] improperly
failed to take corrective action against the breach’
(iii) ‘not rule out applying for a CDO against a director [who] failed to
keep herself sufficiently informed of the company’s activities which
constituted the breach’

9. The Refinement of the Guidelines
on Competition Disqualification
9
2010 to 2019 (April 2014 – adopted by CMA)
• Kept the 5 step procedure
• Introduced changes (can be supported for deterrence)
(a) in exceptional cases, could apply for CDO without previous decision or judgment
(b) removed need for company to be fined
(c) leniency – can apply for CDO in two circumstances:
(i) Director removed/left due to role in competition breach and/or opposing leniency
(ii) Director has not cooperated within a leniency/immunity process
(d) removed hierarchy
‘[i]n all cases’ the CMA would consider whether the director falls within any of the three
earlier categories and where it finds ‘sufficient evidence of conduct falling into one or
more of these categories’, it would be ‘likely’ to take forward a CDO application

10. The Refinement of the Guidelines
on Competition Disqualification
10
2019 to present
Abolished the 5 step procedure
Now – just set of principles/factors rather than steps
• Overarching principle: will consider ‘the facts and circumstances of each individual
case, the evidence available and the public interest in the disqualification of the director’
• Non-exhaustive factors include duration and nature of breach; previous infringement;
deterrent effect; conduct during investigation
• NB factor: will consider ‘responsibility’ (when looking at ‘fitness’ requirement):
- the director’s conduct contributed to the breach of competition law;
- the director’s conduct did not contribute to the breach of competition law but [she] had
reasonable grounds to suspect that the undertaking’s conduct constituted a breach and took
no steps to prevent it; or
- the director did not know but ought to have known that the conduct constituted a breach
Director might get reduction if she cooperates and hasn’t gotten leniency

11. The Number of Competition
Disqualification Undertakings
11
Total number = 24 vs 1 Competition Disqualification Order
(July 2020; 7 years)
Number of CDUs Obtained by the CMA Per Year (2016 to September 2022)

12. The Duration of Competition
Disqualification Undertakings
12
Total duration: 121.5 years
Range: 10.5 years
Modal duration: 5 years
Median duration: 5 years
Average duration: 5.06 years
Standard deviation: 2.57

13. Part III:
Lessons to be Learnt

14. Lesson 1: Improving Deterrence
UK acts as prime example of a competition regime that operates director disqualification
DD can incentivise the director to use powers to be pro-active about competition compliance
DD provides that incentive through impact upon reputation and/or career prospects
DD can also help to counter sub-optimal fines
Scholars from many different jurisdictions advocate following the UK example for deterrence
purposes (eg Huffman; Weber Waller; Ginsburg and Wright (US anti-cartel law))
‘orders of debarment would allow the Antitrust Division to accrue much of the benefit of a prison
sentence—publicizing the offense and keeping the offender from recidivating—without undertaking the
risk and cost of a criminal trial’ (G & W)
‘debarment would bolster currently weak reputational penalties, thereby reducing the need for
individual fines, which are less likely to deter efficiently because of individuals’ wealth constraints’ (G & W)
Not panacea though re deterrence:
- Only applies to directors
- Effect depends on how close director is to retirement
- Can be difficult to enforce (e.g., with small, family-based businesses)
14

15. Lesson 1: Improving Deterrence
UK regime demonstrates the importance of choosing the correct link between the
conduct of the director and the breach of competition law
After a very questionable start, UK regime has now adopted sound policy on this link
• Abolished the hierarchy of conditions re responsibility: ‘likely’; ‘quite likely’; ‘would not rule out’
• Now consider ‘whether to pursue director disqualification in all cases where competition law has
been broken - scrutinising the responsibility of individual directors to see whether they
contributed to the breach, or had reason to suspect it but failed to stop it, or ought to have known
about it’
Key point: there is no need to be too strict here [as the UK initially was]
Authorities should not confine themselves to pursuing those directors who had displayed a
direct link with the competition breach (i.e. participated in it)
• incentivises directors to remain ignorant of competition compliance, rather than encouraging
them personally to become proactive in seeking competition compliance
Likewise, it should not pursue directors simply because there is a competition law violation
• Puts off good directors
15

16. Lesson 1: Improving Deterrence
UK regime now gets it right [emphasises link with negligence]
For deterrence reasons, a negligence standard (as a minimum) is arguably
very sensible here in that it:
(a) creates a clearer message regarding the specific efforts that are
needed to avoid disqualification
(b) does not put off potential directors that would use all reasonable
efforts to implement competition compliance
16

17. Lesson 2: The Importance of
Culpability
Irrespective of deterrence, there is good reason to allow culpability of the
director to influence the decision whether to apply for a CDO and/or the courts’
decision concerning that application:
• avoids claims of unfairness [where director does all she can]
• it helps to ensure that the director disqualification regime is perceived by
stakeholders to be legitimate
The UK regime provides scope for the culpability to be considered (even if the
legislation does not require it to be present):
• comes in under query about ‘fitness’ – factors to be considered that
implicate culpability
• the current guidelines acknowledge this
• Law could go further: CMA can only seek DD when culpability is present
(thus introducing a de jure ‘compliance defence’)
17

18. Lesson 3: Transparency
Commendable effort of the UK competition authorities to inject transparency
into both the creation and refinement of enforcement policy and the operation
of decisional practice
This process also improves both deterrence and legitimacy
18

19. Lesson 3: Transparency
Good practice: Competition disqualification orders and undertakings are published
on the CMA website:
19

20. P. Whelan, ‘The Emerging Role of
Director Disqualification in UK
Competition Law’
Chapter 11 in B. Rodger, P.
Whelan and A. MacCulloch
(eds),The UK Competition
Regime: A Twenty-Year
Retrospective, (Oxford University
Press, 2021)
Available on SSRN:
https://ssrn.com/abstract=3664603
Further Reading