23 October 2020 James Phoenix BusinessCrimeLinks

Will the SFO and CMA together bring new life to criminal cartel cases?

On 21 October 2020, the Serious Fraud Office (“SFO”) and Competition and Markets Authority (“CMA”) announced a memorandum of understanding (“MOU”) in respect of their intention to cooperate in investigating and prosecuting the criminal cartel offence.

A wide range of investigations appear to be contemplated, including joint investigations; SFO or CMA-led investigations with a joint team; and concurrent civil / criminal investigations. 

The MOU suggests that the SFO has appetite to explore new avenues of enforcement, in addition to its traditional fraud and bribery and corruption-focused caseload.

It remains to be seen whether the SFO and CMA’s joint efforts will reignite criminal cartel prosecutions, following a lengthy period during which it appears to have been a lesser enforcement priority for the CMA. 

The Memorandum of Understanding

The MOU states it is intended to facilitate cooperation in investigating and prosecuting the criminal cartel offence under section 188 of the Enterprise Act 2002 (“EA”). 

Set out below is a snapshot:

  • Overlapping, joint and cooperative investigations. The MOU envisages various types of collaborative investigations, including:

- Joint investigations: Importantly, this allows the SFO to share information with the CMA. In a joint investigation context, the CMA would no longer be an “external third party” and any disclosure of information by the SFO would be treated as an internal transfer.

- SFO or CMA-led investigations: SFO and CMA staff will be able to work together under the direction of the agency taking the lead on a given case. There will be a presumption of an open exchange of documents, with sharing of all case-related material.

- Concurrent civil and criminal investigations: The MOU envisages that, on occasion, the CMA will progress a civil investigation while an SFO-led case team will progress an overlapping criminal investigation into individuals.

  • Joint decision-making. The SFO and CMA will jointly consider the best course of action with regards to any allegations of fraud or other criminal activity which could involve criminal cartel activity, noting their respective priorities and any confidentiality requirements.
  • Delineation of responsibilities. The CMA has primary responsibility for undertaking all initial criminal enquiries. If the SFO receives information regarding suspected criminal cartel activity, it will refer that to the CMA in the first instance.
  • Collaboration and information-sharing. Unsurprisingly, the MOU provides for collaboration and information to be shared more freely between the agencies. There is provision for sharing technical expertise, secondments and training.
  • Criminal Justice Act 1987 (“CJA”) powers take primacy. There is a presumption that, once the SFO has accepted a criminal cartel investigation, its CJA powers will be used (rather than any equivalent or similar powers under the EA). 
Comment

SFO outlook

The MOU suggests the SFO has appetite to explore new avenues of enforcement, in addition to its traditional fraud and bribery and corruption-focused caseload. While the SFO has previously had some involvement in criminal cartel cases, the MOU suggests a willingness to expand and diversify the SFO’s caseload.

It is unsurprising to see the SFO strengthening ties with another enforcement agency. In a recent address to the Cambridge Symposium on Economic Crime, Lisa Osofsky (Director of the SFO) emphasised the success of the Airbus Deferred Prosecution Agreement and highlighted one of the SFO’s key priorities: to deepen and enhance cooperation with UK and international partners. The MOU appears to be a natural progression in this regard and continues to extend the SFO’s reach.

Competition perspective

The CMA is similarly not treading new ground, with a track record of formally cooperating with other enforcement agencies. The CMA already has MOUs with other regulators holding concurrent competition powers – for example the Financial Conduct Authority and Ofcom – and frequently cooperates with them on (civil) investigations.

The MOU may also be a step towards repairing the beleaguered reputation of the criminal cartel offence. Despite being on the statute books since 2003, the CMA is yet to secure a conviction for the cartel offence in a contested case, even after reforms in 2014 which removed the challenging dishonesty element from the offence. There has been only a handful of convictions over the last 17 years, all of which have followed guilty pleas given the reticence of criminal juries to return convictions in contested proceedings.

A renewed vigour in criminal cartel prosecutions?

Criminal cartel prosecutions have been effectively de-prioritised by the CMA over recent years, which has chosen to focus instead on securing competition disqualification orders / undertakings (i.e. director disqualification). The former Chairman of the CMA Lord Tyrie went as far as suggesting reforms that would see the CMA shed its responsibility for the criminal cartel offence to focus on its core functions (including civil infringement proceedings).

The ability for the SFO to take its own prosecutions forward could be a step in this direction even before formal reforms. For concurrent cases, the SFO’s criminal enforcement expertise may be a welcome addition to the overall enforcement arsenal in this area.