A former company director caught operating a price fixing scam in the carpet business has had his €7,500 fine increased to €45,000 after the Court of Appeal found the original penalty too lenient.
Brendan Smith (40), of Greenane, Dunshaughlin, Co Meath, and the company he worked for at the time, Aston Carpets and Flooring, had pleaded guilty to engaging in and implementing an anti-competitive agreement between July 2012 and April 30, 2013, contrary to the Companies Act 2002.
The agreement involved Aston Carpets and another firm, Carpet Centre (Contracts) Ltd, attempting to fix prices for their products by knowingly tendering bids that were above the amount tendered by the other firm.
At a sentencing hearing in the Central Criminal Court, Daniel Kenna of the Competition and Consumer Protection Commission explained that the scam was exposed by David Radburn of Carpet Centre (the second party in the scam). Mr Radburn sought immunity from prosecution by revealing details of the agreement he had entered into with Smith.
The scam came to an end on April 30, 2013 when gardai raided the offices of the two companies. During the raid Mr Smith was overheard calling Mr Radburn by phone and asking him to delete emails and was therefore charged with attempting to impede a prosecution.
Mr Justice Patrick McCarthy fined Smith €7,500 and Aston Carpets €10,000 on May 31, 2017. Smith was also handed a three-month prison sentence, suspended for two years, for attempting to impede a prosecution. Smith was also disqualified from acting as a company director for five years.
The maximum penalties for the offences were a fine of up to €5 million and/or ten years in prison for price fixing and up to five years imprisonment for obstructing a prosecution.
The Court of Appeal found Smith’s €7,500 fine to be “unduly lenient”, on foot of an appeal brought by the Director of Public Prosecutions. Smith’s fine was accordingly increased to €45,000 today with six months to pay. His suspended sentence and the fine imposed on the company were unaltered.
Giving judgment in the Court of Appeal, Mr Justice Alan Mahon said the profits made as a result of the unlawful activity were, in the words of the sentencing judge, “modest”.
Equally, he said the customers affected, or potentially affected, by the unlawful cartel activity were relatively few and, in general, confined to large corporations or businesses.
Mr Justice Mahon said the Court of Appeal was satisfied that the fine of €7,500 imposed on Smith was “not just lenient but was unduly lenient”.
Smith was in reality the person who “orchestrated, authorised and conducted the criminal behaviour” in question. In the Court of Appeal’s view a fine of €7,500 was unduly lenient. The fine should have reflected more closely the actual financial gain accruing from the activity which was in the region of €31,000.
Mr Justice Mahon, who sat with President of the Court of Appeal Mr Justice George Birmingham and Mr Justice John Edwards, said the court would impose a €45,000 fine on Smith with six months to pay.
Mr Justice Mahon said Smith was, for all practial purposes, in control of Aston Carpets at the time of the offences.
While Smith made no identifiable personal gain, there was clearly an element of indirect gain for him in that his personal prosperity benefitted from the prosperity of the company.
After parting company, the judge said Aston Carpets now faced considerable liability of 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.
Mr Justice Mahon said the court was satisfied that the €10,000 fine imposed on Aston Carpets was appropriate and within the judge’s discretion. The undue leniency application in respect of the company was therefore dismissed.
Smith suspended sentence was not interfered with and Aston Carpet’s fine of €10,000 remained unaltered.
Giving background, Mr Justice Mahon said Smith, acting as a director and manager of Aston Carpets ltd, implemented and engaged in an anti-competitive agreement with David Radburn, the operator of another flooring company, Carpet Centre (Contract) Ltd.
Smith made the initial approach, which subsequently led to the anti-competitive agreement, to Mr Radburn in early 2011.
Both companies were said to be the two major carpet and flooring companies operating in the area of Dublin at the time. It was alleged that over the course of approximately two years, Aston Carpets and Carpet Centre shared tendering information with each other in relation to sixteen separate open market tenders for carpeting contracts.
It was alleged that they agreed in advance which of the two companies would be given commercial advantage in relation to each particular tender. That ensured that the company nominated as the favourite for a particular contract would render a lower price for the same work than the tender from the company agreed to be the loser.
In the course of this unlawful activity, the companies shared confidential and price sensitive information.
The second count in respect of Smith arose from evidence that in an effort to frustrate or impede the investigation and prosecution of the anti-competitive offences, Smith avtively sought Mr Radburn to delete relevant emails.
It was alleged that the parties implemented and engaged in anti-competitive agreements in relation to sixteen successfully tendered transactions, with an average contract price of €137,000.
The total value of tenders won by Carpet Centre was €617,675 while the value of bids said to have been won by Aston Carpets was €758,221.
Two of the largest contracts related to to the multi-national companies Pay Pal, Dell and Google. They made bids for other contracts but were unsuccessful.
The practice ended on April 30, 2013 when the Commission, assisted by gardai, raided the offices of both companies.
Mr Radburn was granted immunity by the Competition and Consumer Protection Commission in return for his co-operation in the investigation.
There has been no relationship between Smith and Aston Carpets since 2014.