News and Press
Competition law: High Court rules on recovery of fines from directors and employees

The High Court has recently made an important judgment suggesting that, in future, UK firms may be able to recover fines imposed on them by the Office of Fair Trading (OFT) - for breaches of competition law - from the individuals concerned in the infringing activity.

Engaging in anti-competitive activities can be costly for firms, due to the increasingly high resulting fines and because victims of anti-competitive activities may claim damages. It had always been thought that such fines (and damages) were not recoverable because such a claim would be based on the company's own wrongdoing, and public policy prevents courts from assisting claimants to benefit from this.

The case in question relates to the investigation of Safeway by the OFT into anti-competitive price fixing by supermarkets and dairy processors. Safeway reached an early agreement with the OFT to settle the investigation (in relation to conduct prior to its acquisition by Morrisons) and is likely to have its fine reduced for its co-operation throughout the investigation.

Safeway went on to claim damages from certain individuals who it alleges were responsible for the infringing behaviour. The defendant directors and employees applied to strike out its claim arguing public policy prohibited it. Safeway argued, however, that there was no provision in the Competition Act 1998 for direct civil liability on individuals in such circumstances and that to allow claimants to pass on fines to individuals would frustrate the objectives of the penalties regime. The court ruled against the defendant, concluding that Safeway had a real prospect of success at trial and of defeating the public policy defences. Safeway's claim may go to a full trial.

Nicola Kingaby, an associate in TLT's Competition Law Team says, "This is the first time in the UK that the courts have suggested that a firm may be able to recover a competition law fine or penalty from its employees and directors. In view of the increasing levels of fines for anti-competitive behaviour, the ability to be able to bring such a claim is of great importance. These sorts of claims, however, are only likely to be worth pursuing where the infringing employee or director has sufficient resources to meet the claim or is covered by Directors and Officers insurance.”

For more information, please contact Nicola Kingaby.