Employees may have help to pay employers' fines if they breach competition law - 06/08/2010

Who should carry the can?

The global crack-down on anti-competitive behaviour by Competition Authorities world-wide sees the imposition of colossal "deterrent" fines on organisations that flagrantly engage in anti-competition practices.

A recent High Court judgment seems to offer businesses a way to spread the load when they incur such fines. The case relates to Safeway (now owned by Morrison) who participated in a dairy products price-fixing cartel and collected a fine of £16.7 million, later reduced to £10.7 million for co-operation with the OFT. Safeway/Morrison has brought claims against former directors and employees for damages arguing that the directors and employees breached their employment contracts by participating in anti-competitive practises and not informing their superiors.

The high court ruled that directors and employers can be pursued for compensation by their employers if they were found to have been involved in anti-competitive behaviour. This did not pass without challenge; the former employees argued that such a judgment was contrary to public policy and inconsistent with the competition regime. Nevertheless the claim was allowed to stand and the court said that the public policy defence (where a person must not benefit from his or her wrong doing) would only stand if the organisation had directly endorsed the ant-competitive acts.

Furthermore, the court felt that employees and directors are duty bound to ensure that their employers are not in breach of competition law, concluding therefore that any penalty visited upon the employers could be reasonably passed on, by way of a claim for damages, to the individuals who perpetrated the breach.

Should Safeway/Morrison win the day it could make employees reluctant to divulge their knowledge of any anti-competitive acts during an OFT investigation for fear of being implicated personally and being landed with a damaged reputation and bank account. This could lead to companies missing out on the leniency usually extended to the whistle-blowing company during an investigation.

Employers cannot afford to lose control of their staff at any level and a continuous and comprehensive training programme outlining legal obligations which apply to businesses should be part of their risk management programme. With fines running into millions it is imperative to ensure that all staff fully understand, not only the law relating to anti-competitive practises, but the consequences and penalties that can arise from breaching the law.

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