On 25 May 2023, the High Court ordered that an individual disqualified by the Competition and Markets Authority (CMA) may continue as the director of Cantillon, a construction company fined £1.92 million for its involvement in a bid-rigging cartel.[1]  The High Court’s Order—which was opposed by the CMA—is the fourth time since 2019 that the Court has granted an exemption from a director disqualification undertaking obtained by the CMA.

In handing down the Order, the Court commented that permitting Paul Cluskey (Applicant) to continue as director of Cantillon would not “take the teeth away” from the CMA’s director disqualification regime, and noted that both the Applicant and Cantillon would remain subject to extensive competition law compliance measures.[2]

Rules on Director Disqualifications & Exemptions

Under the Company Directors Disqualification Act 1986 (Act), the CMA may seek the disqualification of directors for a period of up to 15 years where (i) the individual in question is a director (or shadow director) of a company that has infringed UK competition law and (ii) their conduct renders them “unfit” to be involved in the management of a company.[3]  The CMA can seek a Competition Disqualification Order (CDO) from the Court or can accept a voluntary Competition Disqualification Undertaking (CDU) from a director.

In February 2019, the CMA published guidance streamlining its director disqualification investigation procedure.[4]  Following the introduction of the new guidance, the CMA has significantly increased the use of its powers: between February 2019 and June 2023, the CMA has secured 25 disqualifications (including the Applicant), compared to just four in the prior 17 years where the disqualification regime was in force. 

Under Section 17 of the Act, disqualified individuals may apply to the Court for an exemption from the terms of a CDO or CDU so that they can act as a director of a company.  Applicants are typically required to demonstrate a “reasonable need” for the exemption,[5] and the Court may impose such safeguards as are necessary to protect the public in granting an application.  Prior to the Applicant’s case, the CMA had granted three exemption orders to CDUs in respect of five directors disqualified by the CMA.[6]  All three orders were granted subject to conditions designed to ensure future compliance with competition law (e.g., the appointment of non-executive directors to oversee compliance and the provision of training to high-risk employees).

The Application for Exemption

In June 2022, Cantillon admitted to its involvement in a bid-rigging cartel relating to demolition and asbestos removal contracts and was subsequently fined £1.92 million for its conduct in March 2023. 

In exchange for a reduced disqualification period, the Applicant—a director of Cantillon—entered into a CDU with the CMA on 20 February 2023.  The CDU provides that the Applicant could not act as a director of any company for four and a half years, effective from 1 May 2023.

Before the CDU came into effect, however, the Applicant applied under Section 17 of the Act requesting a partial exemption from the CDU so that he could continue as director of Cantillon.[7]  The Applicant was granted interim relief to continue acting as director on 24 April 2023, pending a final hearing.

The Hearing and the Order

At the main hearing on 10 May 2023, the Applicant argued that the requested exemption was reasonably necessary as Cantillon would likely fail if he was not allowed to continue in his role.  The Applicant argued that no one else within Cantillon had relevant experience in the day-to-day running of the business or could replicate his relationships with key clients.  The Applicant further argued that it was necessary for him to be a director because Cantillon’s clients preferred to deal with decision-makers.

The Applicant submitted that there was no risk that granting the application could result in further competition law breaches.  This was because Cantillon had already put in place a number of competition law compliance measures in response to the CMA’s investigation, including revoking the Applicant’s control over tenders, and appointing two new executive directors.

The CMA’s principal opposition to the application was that disqualifying directors is an important deterrent against competition law breaches.  The CMA expressed concern that granting the Order could undermine this deterrence effect and allow the Applicant to convey the impression that Cantillon was unaffected by the investigation.  The CMA also suggested that, if the Court was to grant an exemption, this should be limited to permitting the Applicant to hold a management position at Cantillon, but not to remain as a director.[8]

The Court ultimately granted a partial exemption to the CDU, so that the Applicant could act as a director for Cantillon.  Under the terms of the Order, however, the Applicant is not permitted to act as Managing Director for Cantillon, or to be a director of any other company.  The Court stated that the Order would not “take the teeth” away from the CMA’s director disqualification regime, noting that the CMA could take comfort from the Order being conditional on the Applicant and Cantillon complying with an extensive competition compliance regime,[9] which includes:

  1. Retaining a non-executive director responsible for supervising Cantillon’s and the Applicant’s compliance with competition law.  The non-executive director is required to submit quarterly reports on competition law compliance to Cantillon’s board and to the CMA upon its reasonable request;
  2. Retaining a competition compliance officer;
  3. Competition compliance training for Cantillon’s directors and high-risk employees; and
  4. At least twice a year, conducting searches of Cantillon’s email servers, as well as samples of the Applicant’s text and call records for potential infringements.

Conclusion & Implications

The CMA may appeal against the Order but has not yet indicated whether it plans to do so.  Meanwhile, this case further shows that an individual subject to a CDO or a CDU may be permitted to continue as a director of a company if they can show that (a) this is reasonably necessary to ensure that company’s survival; and (b) that reasonable safeguards are in place to prevent a recurring breach of competition law.

The CMA’s approach is understandable, given its aim of deterring and punishing breaches of competition law compliance.  The Court, however, is required to have regard to the principal objective of the director disqualification regime, which is aimed at protecting the public from harm caused by companies managed by unfit individuals.  The Court’s approach indicates that it places greater weight on whether there are sufficient safeguards to prevent future breaches of competition law than punishment for past behaviour or wider deterrence.

[1]               CMA press release, “Construction firms fined nearly £60 million for breaking competition law by bid rigging”, 23 March 2023.

[2]               See reported comments of Burton J in Global Competition Review, “Construction company director allowed to continue after disqualification order”, 25 May 2023.

[3]               See Section 9A of the Act.  This provision was added to the Act by Section 204 of the Enterprise Act 2002.

[4]               See CMA’s guidance on CDOs.  See also our previous blog post “CMA’s Use of Director Disqualification Powers Reflects Renewed Focus On Individual Responsibility”.

[5]               See the Insolvency Service’s Guidance on making an application under Section 17 of the Act here

[6]               See Claim No. CR-2019-005982, Aki John Stamatis and Sion Emyr Davies v. CMA, order dated 10 December 2019; Claim No. CR-2020-MAN-000925,Robin Davies v. CMA, order dated 23 November 2020 ; and Claim No. CR-2021-000750, Maurice Elliot Sherling and Graham Charles Hudson v. CMA, order dated 22 July 2021.

[7]               The Applicant also requested permission to act as director for two additional companies, but this was not granted by the Court.

[8]               See Global Competition Review, “Disqualification regime ‘strikes at the heart’ of company leadership”, CMA tells UK court”, 10 May 2023.

[9]               See reported comments of Burton J in Global Competition Review, “Construction company director allowed to continue after disqualification order”, 25 May 2023.