Jacques Lefevre, John Smith, Hank Jones and Raj Patel were delighted to find themselves sitting together in business class on the way to the Cup Final. Between them, they owned the four companies that ran all the car parks in Bison, Canada. And whilst they were business rivals they were also close friends having been to school together, where they all played for the local ice-hockey team. Indeed, they were now major sponsors of the Bison Blades.
On their journey, after they had exhausted talking about the Blades’ chances for the next season, who would win the Cup, and family news, their conversation turned to business. Hank, who was town Mayor, mentioned that the council had recently adopted a policy whereby planning permission would not be given for any more car parks within the town boundaries. It was Jacques who exclaimed that they could now charge what they pleased for their car parks in future.
Suggestions for the proposed increase were flying around, starting at 10%, and it was finally agreed that they would adopt an across the board 300% increase in parking fees.
On his return home, John Smith took out a full page advertisement in the Bison Bugle announcing a 300% increase on charges in all his car parks. Following the publication of the advertisement Jacques, Hank and Raj also imposed 300% increases to all their charges.
Molly Malone, an ACCA member in practice, in Bison, has been instructed to undertake due diligence in connection with the purchase of Raj’s company. From the adverse publicity that the 300% increases have generated, she is concerned that the increases may be caught by anti-trust legislation. She has learnt of the fortuitous meeting on the way to the Cup Final from her best friend, Hank’s wife, Nancy.
WHAT ACTION, IF ANY, SHOULD MOLLY TAKE?
“Members must obey the law. It is the responsibility of members to familiarise themselves with the law that applies to them and ensure that they work within the law.” [ACCA Rulebook 2007 section 3.8 paragraph 4]
Cartels (groups of producers or suppliers who join together to fix price) are prohibited by anti-trust laws and price-fixing legislation in most countries. Molly will therefore need to establish the local legal framework.
She will also need to form an opinion as to whether or not the four friends had indeed joined together to fix prices or whether the chance meeting on the aeroplane and ensuing discussion had merely been jocular.
Perhaps it was in response to John’s advertisement that the other three had increased their prices not as a result of their encounter in the air.
It is likely that there is nothing illegal in taking business decisions in response to publicly available information so Molly will be required to form an opinion as to whether or not the four friends have acted illegally. She would be well advised to take legal advice since the legal position and its application to any given set of facts may not be straightforward.
Once she has determined whether or not the activities of the friends constitute an illegal act she may need to take action according to the local jurisdiction. This will include having regard to reporting procedures.
“So far as [ACCA] regulations may be inconsistent with any local statutory provision, rule of law or any direction or order of a court of competent jurisdiction that may from time to time be applicable to a member, compulsion of law shall be a defence to a breach of any provision of the regulations and these regulations shall be read as being subject to the applicable provision of the law.” [Rulebook 3.8 paragraph 5]
Thus, the professional duty of confidence can be overridden in the circumstances envisaged by 3.8 paragraph 5 quoted above.