Mr. Waterson: I am trying to assist the Under-Secretary. Opposition Members are not suggesting that cartels do not exist or that they should not be rooted out and dealt with. The issue is whether there should be criminal sanctions on individuals. Does the hon. Lady believe that Mr. Taubman was deterred by the possibility of a criminal sentence?
Miss Johnson: It would appear not. Who can tell what Mr. Taubman was doing? We only know the outcome of the court hearings and what the evidence presented revealed. Yesterday, he was given a sentence of a year and a day in prison and fined some £5 million.
Column Number: 169We are going for criminalisation because of the need to deter individuals from entering into such agreements. What Mr. Taubman did or did not do is irrelevant. There will always be individuals who ignore the deterrent because they believe that they will not be caught. The hon. Gentleman was a lawyer in a previous life, so I am sure that he will not tell me that the law is ineffective because some individuals break it. As my hon. Friend the Member for Wolverhampton, North-East said, the law is there to highlight messages about certain behaviour that society wants to give individuals, in order to bring about a culture in which some things are acceptable but others are not. There will always be individuals who decide to go against that, but the legislation will be a deterrent to many individuals who would otherwise act differently.
Mr. Djanogly: Is the message more important than whether the provision works?
Miss Johnson: No. I was making the point that the message is important, as it is part of the working of the provision. Of course, the message is useful if it causes few cartels to be created. It is as simple-minded to assume that there will be no cartels after they are criminalised as it is to think that no murders will be committed because murder is a statutory offence. That will never be so. However, there is an important relationship between an offence on the statute book and a deterrent. The current measures do not have that deterrent effect, as they do not deal with individuals, but allow them to hide behind companies. There are commercial trade-offs for companies between fines that they may receive for entering into such arrangements and any commercial gain that, as we all accept, they may receive from cartels.
Mr. Djanogly: On that point, I assume that the Government considered the possibility of introducing such provisions on a civil rather than a criminal basis. Will the Under-Secretary explain why the Government decided to opt for criminal rather than civil proceedings?
Miss Johnson: I will discuss one or two comparators in a moment. For serious offences, prison is obviously the sanction used for individuals. There are parallels with insider trading and similar offences.
My hon. Friend the Member for Hemel Hempstead mentioned co-operation agreements. They are currently the subject of correspondence and discussion and, given my ministerial responsibilities, it might not be appropriate for me to comment on them at great length. I am well aware that co-operation agreements may be entered into legitimately; they affect my constituency as well as my hon. Friend's. They would never breach the provision, as they are honest by nature. Dishonesty is an important part of the provision, as I have emphasised and members of the Committee have accepted. I agree with my hon. Friend that cartels are theft. We must not lose sight of that important point.
Several hon. Members made comparisons with other EU countries and other regimes. There are a few points to make. Four EU countries—France, Ireland, Germany, and Austria—currently make the
Column Number: 170forming of cartels a criminal offence. In Ireland, the maximum prison sentence is five years. In France, only suspended sentences have been passed so far, the highest of which was for 13 months. The offence of fraudulent conspiracies in France carries a maximum prison sentence of four years. In Germany, the criminal offence is bid-rigging, which carries a maximum prison sentence of five years. The point is not about how many people we send to prison. We do not want to have any cause to send anyone to prison for anything. However, if people break the law and the law states that a prison sentence is necessary, that is what they will receive. We would rather that people did not end up operating cartels, but it is important if they do that we send a message, both to the individual and to society, that that is unacceptable and a serious offence.
On the interplay with the EC regime, under the exemptions from article 81 of the treaty, there is no Community law requirement for an exact correspondence between EU competition law and the criminal offence. However, as far as possible, we should seek to ensure that the two operate consistently in practice. That will be achieved on the one hand by prosecutorial discretion—for example, the OFT and the SFO will not prosecute where genuine possibility of compatibility with Community law on the agreement between undertakings exists—and, importantly, on the other by the need to prove dishonesty.
Mr. McWalter: Obviously, I agree with much of what my hon. Friend says but I am concerned to clarify what is meant by dishonesty. As the clause is drafted, one could argue that if someone commits one of the offences listed in subsection (2), he has behaved dishonestly; in other words, engaging in those actions is a sufficient condition for exhibiting dishonesty. In that argument, ''dishonest'' is not a substantive qualifier of ''agrees'' and goes on to be merely spelled out in subsection (2). The phrase is amphibolous. That interpretation is different from the one that implies that one could engage in those activities honestly; in that interpretation, ''dishonestly'' becomes a substantive qualifier. I am not sure whether my hon. Friend the Under-Secretary has given proper weight to my invitation to reflect on that matter.
Miss Johnson: I assure my hon. Friend that I always give his remarks proper weight. I will reflect on his point but I do not want to be drawn into the discussion because it deals with a specific case.
On the reaction of the European Commission, Mario Monti said in September:
and that they
The Commission has said about our legislation that
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The Commission therefore has no concerns on that front.
On the interplay with the regimes of other member states, the criminal offence applies to cartels that are implemented or intend to be implemented in the UK and therefore there is no conflict with civil proceedings in other member states. If more member states introduce or make use of criminal penalties, we will need to work with them on an appropriate allocation mechanism for assigning cases, but that is merely to implement the routine methods of working together that exist in parallel situations.
On the interplay of leniency with the EC regime, the OFT can grant leniency for the UK jurisdiction. Where the cartel activity affects interstate trade, the OFT already advises potential whistleblowers to approach overseas competition authorities, including the EC authorities in parallel, and will continue to do so. The OFT will continue to work closely with colleagues in DG COMP to ensure effectiveness of the competition regimes including leniency programmes at national and EU level.
On the relationship of the modernisation of the EC regime with the primacy of EC law and the implementation by member states, the proposals are not finalised, but as they proceed, we shall focus on avoiding any possible conflict with the new offence. The Commission has said that modernisation does not preclude criminalisation, so we have no reason to await the outcome of the modernisation process, which would only delay us from putting our own house in order in the UK.
As to the interplay of civil and criminal proceedings, the OFT's role in civil proceedings is in the investigation of a criminal offence designed to ensure a streamlined approach. That makes good sense. The OFT will, of course, need to collect evidence to different standards according to whether it is dealing with a criminal or civil case.
In criminal cases, the OFT will need to follow procedures in the Police and Criminal Evidence Act 1984, caution suspects before taking statements and so forth. Obviously, it will be different under the civil regime. The Serious Fraud Office will undertake prosecution of criminal cases.
Mr. Carmichael: What protections will the Under-Secretary put in place to ensure that cases are not lost in criminal prosecutions because evidence was obtained by using civil procedures in the 1998 Act, which are not admissible in criminal cases?
Miss Johnson: I may return to that point later and perhaps write to the hon. Gentleman. My current understanding is that if evidence is acquired through civil arrangements, it cannot then be used for criminal purposes. That acts as a safeguard to some extent and
Column Number: 172the right decisions must be taken about which route should be pursued.
Mr. Carmichael: It is a safeguard to an extent, but it is a potential pitfall for prosecutions. The Under-Secretary, as well as the hon. Member for Wolverhampton, North-East, has spoken about sending messages. The worst possible message to send, following the criminalisation of cartels, is that any prosecutions that are brought will subsequently be unsuccessful. It is inherently difficult when a single public body is in the business of evidence gathering and it also has to decide under what procedures that evidence was obtained and how it should be applied in the courts.
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