New legal powers will be a vital weapon against cartels

At a court sentencing in Galway in 2012, the final chapter in a complex story of price-fixing came to a close when Pat Hegarty, a then 40-year-old former manager of a home-heating oil company, was handed a two year suspended prison sentence and fined €30,000 for his central role in a west coast cartel.

The conviction of Hegarty, of Coole, Gort, Co Galway, was the 18th in the case and was a triumph for the then Competition Authority which had landed the first ever jury conviction for a price-fixing operation in Europe.

The case came about thanks to an anonymous tipoff to the authority, making allegations against several heating oil companies across the west of Ireland. Distributors in Galway city and county had agreed to an increased margin on the price of kerosene and gas oil, officials were told.

Final sentencing hearing

Speaking at the final sentencing hearing, Judge

Raymond Groarke

spoke of those who “work hard to eke a modest living and act within the law, people who make up the overwhelming majority, obviously, of people in this country and who suffer the consequences at the hands of bullies such as Mr Hegarty and his associates who cause huge economic damage”.

In all, eight people were convicted by the courts in a case that would ultimately last 11 years.

Recently, the Competition and Consumer Protection Commission (amalgamated last year from the Competition Authority and the National Consumer Agency) has been granted new powers to pursue these cartels.

The commission receives dozens of complaints every year. The difficulty is: how to investigate something that, in a sense, doesn’t exist? In pursuing cartels and price-fixing conspiracies, commission investigators must search for operations that, by their very nature, do everything they can to remain secret.

In recent weeks, in conjunction with the Director of Public Prosecutions (DPP), the commission launched its Cartel Immunity Programme, which it hopes will make it easier to gather information, thereby increasing the number of successful prosecutions.

The commission defines cartels as “secret conspiracies between companies that should be competing with each other to fix prices, limit output or sales, share markets or customers”.

“Cartels, in effect, shield the parties involved from the competitive forces which would normally occur in the market,” it says, damaging consumers and the wider economy.

In 2007, the DPP brought charges against six Citroen dealerships and seven associated individuals who had agreed to set prices on cars being sold to members of the general public. Fourteen convictions were secured with fines and suspended prison sentences rising to as much as nine months and €80,000. The severity of these penalties can be seen to reflect the damage such actions can have on ordinary people.

Many victims

Going back to Judge Groarke’s comments in the Hegarty case, he said “there are many victims as a direct or indirect result of the criminal conduct,” the motivation for which is greed.

The new programme means that those involved with cartels can be granted immunity if they agree to help in their prosecution, before a case has been submitted to the DPP. The Commission essentially acts as an intermediary between the applicants and the DPP in seeking immunity in return for giving evidence at trial.

"Material witnesses are critical," says Pat Kenny, a member of the commission, which receives in or about 30 complaints of illegal activity each year.

“Not all of them would work up to be worth pursuing because there wouldn’t be the evidence.

“If you have a crime that is secret, firstly how do you detect, and secondly, if you do detect how can you convince the DPP that there is a crime here? Paperwork [alone] won’t work. You need somebody to animate the evidence.”

Those holding the cards

This may now change if those holding the cards can be compelled to come forward. The provision could be a powerful weapon in the commission’s armoury. It even allows for those involved in “instigator companies” to qualify for immunity, although those guilty of coercing or somehow forcing others to remain involved cannot.

Aside from price fixing, the new rules will apply to other forms of illegal behaviour. These include market sharing, in which competitors illegally agree on “turf”– where, or to whom, they can ply their trade or sell their wares. Then there is production limitation by which prices remain high, and bid rigging or collusive tendering where those involved in a bidding process will pre-decide the winner, usually in a form of quid pro quo agreement.

The white-collar crimes of cartel offences carry potential penalties of up to 10 years in prison or fines of as much as €5 million. Since the introduction of the 2002 Companies Act, there have been 33 convictions on indictment. Will there be an increase now with the immunity programme?

Pat Kenny considers it. “We can’t know. We are hoping that we will see new ones and we also hope that the ones that have not gone far enough [will go further].”

But, he adds quickly, those running the cartels who thought they were beyond the effects of whistleblowers may now “sleep a little bit less easy”.