Fine for anti-competitive behaviour should be greater than the financial gain

In DPP v Aston Carpets and Flooring Limited and Brendan Smith [2018] IECA 194, Court of Appeal, 20 June 2018 (Mahon J, Birmingham J, Edwards J) the DPP applied to the Court of Appeal for a review of the defendants' sentences on the basis that they were unduly lenient. 

The defendants were charged with engaging in and implementing an anti-competitive agreement contrary to Sections 4(1), 6(1), 8(1) and 8(6) of the Competition Act 2002. Mr Smith was also charged with attempting to impede a prosecution contrary to Sections 7(2) and 7(4) of the Criminal Law Act 1997. The defendants entered pleas of guilty some months before their trial and they were sentenced on 31 May 2017 at the Central Criminal Court. Aston Carpets and Flooring Ltd was fined €10,000, and Mr Smith was fined €7,500 in respect of the competition offence. Mr Smith was also sentenced to three months imprisonment suspended for two years, in respect the impeding a prosecution offence.  Mr Smith was also disqualified from acting as a company director for a period of five years.

Background

Between 3 July 2012 and 30 April 2013, Mr Smith, acting as a director and manager of Aston Carpets, engaged in an anti-competitive agreement with Mr David Radburn, the operator of another flooring company, Carpet Centre (Contract) Limited. Over a two year period the Aston Carpets and Carpet Centre shared tendering information with each other in relation to sixteen separate, open market tenders for carpeting contracts. They agreed in advance which of the two companies would be given commercial advantage in relation to each particular tender and then ensured that the nominated company would tender a lower price for the work. 

The practice ended on 30 April 2013 when the Competition and Consumer Protection Commission, assisted by gardaí raided the offices of both companies. Mr Smith, in an effort to impede the investigation and prosecution sought to persuade Mr Radburn to delete e-mails. Mr Radburn, was granted immunity by the Commission in return for his co-operation in the investigation. 

Decision

The Court of Appeal noted that Aston Carpets was, for all practical purposes, controlled by Mr Smith at the time the offences were committed. While Mr Smith did not obtain a direct personal financial gain from the anti-competitive arrangements, there was clearly an element of indirect gain for him in that he was in receipt of an income from Aston Carpets and he benefited from the company's prosperity. Mr Smith left Aston Carpets in 2014 and the Court noted that the company now faced having to pay a substantial fine in circumstances where its current owners and shareholders were in no way responsible for the criminal conduct in question. 

The Court was satisfied that the fine of €10,000 imposed on Aston Carpets was appropriate and within the discretion available to the sentencing judge. Accordingly, it dismissed the undue leniency application in respect of Aston Carpets. 

In relation to Mr Smith, the Court was satisfied that the fine of €7,500 imposed on him was not just lenient but was unduly lenient. Mr Smith was the person with overall responsibility for the criminal behaviour in question in that he orchestrated it, and indirectly stood to benefit from it. The Court was of the view that the fine should have reflected more closely the actual financial gain arising from the criminal conduct which was in the region of €31,000. The Court was also of the view that, save in exceptional circumstances, a fine should be for a sum greater than the financial gain so that it satisfies the requirement that it is punitive and acts as a deterrent. The Court therefore imposed a fine of €45,000 on Mr Smith. 

The Court was satisfied that the suspended prison sentence imposed on Mr Smith in respect of attempting to impede an investigation was reasonable, proportionate, and appropriate. It also upheld the disqualification of Mr Smith as a company director.

For further information please contact Paula Mullooly.

Date published: 18 July 2018