UK: Countdown To The CMA - Enterprise And Regulatory Reform Act Receives Royal Assent

Last Updated: 24 June 2013
Article by Guy Lougher, Alan Davis, Giles Warrington and Jenny Block

The Enterprise and Regulatory Reform Act 2013 (the "Act") is expected to herald the development of a more effective and efficient competition law regime in the UK. The changes to the existing system of Competition Act enforcement in particular are intended to make processes more robust and enhance the authorities' ability to detect and punish illegal activity. It is hoped that tighter deadlines and strengthened investigatory powers under the Act's merger control and markets regimes will also reduce burdens on businesses overall, but at the cost of some additional obligations as a quid pro quo.

Most of the key changes are expected to be implemented in spring 2014, but steps can be taken now to begin to prepare for the new regime. Much will also turn on how the new Competition and Markets Authority ("CMA") intends to exercise its new powers and a number of important substantive and procedural matters are expected to be the subject of consultation in the coming months.

What does your business need to do now to comply with the new legislation?

  • There are no changes to the underlying competition law rules in terms of the prohibition on anti-competitive agreements and abuse of a dominant position
  • However, the way competition law will be enforced is being changed. It would therefore be prudent to refresh and update your dawn raid guidance, competition law compliance guidelines and HR policies to take account of the new Act. The changes required will not just reflect changes in terminology but also the enhanced powers of investigation for the CMA and an increased focus on criminal investigations
  • Other more strategic issues to consider in the medium term are:

- What areas of your business may now come under scrutiny by an authority with a refreshed mandate that includes more intrusive powers of investigation and inquiry and lower thresholds for intervention in urgent cases?

- How may the new procedural powers under the merger control regime limit your deal flexibility?

Single CMA

The CMA will combine the UK's Office of Fair Trading ("OFT") and the Competition Commission ("CC"). The basic structure of two-stage merger and market reviews is retained with safeguards to ensure that the Phase II process provides a genuinely 'fresh pair of eyes', while enabling a more streamlined process at staff level to improve efficiency. It has been suggested that there may be a role for Phase II panel members used in these cases to support the CMA's competition enforcement activity but there are no clear proposals on this yet.

Competition Act enforcement

The main changes here are procedural, reinforcing the work the OFT has already undertaken to improve the rigour of the enforcement regime as well as bringing the system more into line in some respects with other policy developments in recent years. It is worth noting though that the threshold for the imposition of interim measures will also be lowered: the CMA will have to be satisfied that action is required to prevent 'significant damage' as opposed to 'serious, irreparable damage'.

  • Procedural fines – Consistent with a general move away from imposing criminal sanctions in the context of essentially civil regimes, the CMA will have the power only to impose fines on companies for breaches of procedural requirements, such as a failure to provide information in a certain timescale. Criminal sanctions will remain where a party has been obstructive, provided false/misleading information or destroyed documents.
  • Oral evidence – The CMA will have enhanced powers to ask individuals (including former employees) questions orally as well as in writing during civil investigations, subject to the privilege against self-incrimination and other safeguards. This will increase the need for care in assessing whether individuals need to be separately represented during investigations and potentially a greater risk that their interests will diverge from those of the company and at an earlier stage.
  • Greater transparency – More information about the CMA's caseload will be published in order to encourage third parties to assist in the evidence-gathering process.This means that companies may have more public exposure earlier on in the process.
  • Greater access and engagement – Parties will have a greater opportunity to engage with the CMA during the process, including through ongoing state of play meetings. The Act formalises certain procedural safeguards in relation to, for example, the conduct of oral hearings, procedural fairness and handling complaints. It also provides a clear statutory basis for the settlement procedure.

Criminal Cartel Offence

The most significant substantive change to the law is the removal of the requirement for "dishonesty" from the criminal cartel offence. This caused great controversy during the passage of the Bill and additional defences were introduced to mitigate the risk of substantially extending the scope of the offence. The essence of the offence will remain the same: engaging in price-fixing, market-sharing or bid-rigging with competitors. However, the Act provides for the following defences:

  • Disclosure or publication – The provision of 'relevant information' to customers or, in the case of bid-rigging, the tendering body: similarly if relevant information were published before the arrangements were implemented. However, precisely what information must be made available, or how publication would have to be made, is not yet clear and there remain concerns that in order to ensure protection, companies will have to disclose commercially sensitive information.
  • No intention to conceal – Where an individual can show that, at the time the arrangement was entered into, they did not intend the information to be concealed from customers or from the CMA. This raises similar issues in relation to confidential information and how these defences can be demonstrated.
  •                
  • Legal advice – Taking reasonable steps to ensure disclosure of the nature of the arrangements to obtain legal advice before the agreement is made or implemented. However, again it is not clear how widely (or narrowly) this defence would be construed, for example how much would turn on the extent of the disclosure.
  • Compliance with a legal requirement.

Concurrency – "Use it or lose it"

Sector regulators with concurrent competition powers will be encouraged to use them rather than relying on other regulatory enforcement mechanisms, with a new explicit duty to consider whether the competition law route is more appropriate before exercising other powers. The Secretary of State ("SoS") may by regulation set out the circumstances in which the CMA would take the lead where there is concurrent jurisdiction and as to what information must be shared. Ultimately, there is the threat that concurrent enforcement powers will be withdrawn from any economic regulator (other than Monitor, the UK's health care regulator) if the Government feels that this split regime is not working effectively.

Mergers

The reforms here principally relate to information gathering, timetables and the 'hold separate' process. The jurisdictional thresholds remain unchanged and notification voluntary in principle but:

  • Hold separate – The CMA will now have a discretionary power not only to suspend integration, but also to reverse steps already taken in completed mergers at the start of Phase I. This may include obliging parties to recreate separate reporting lines or functions within a business. The risk of completion in potentially problematic cases in terms of business continuity and uncertainty will increase substantially. This change is likely to further encourage parties to pre-notify for clearance mergers over which the CMA will have jurisdiction.
  • Penalties – The CMA will be able to impose fines (up to 5% of the combined worldwide turnover of the companies concerned) for breach of an order preventing or reversing integration.
  • Faster timetable at Phase I – Phase I decisions will have to be taken within 40 working days. This does not apply on a referral back under the EU merger regime. This 40 day period may be extended in certain circumstances, including for failure to comply with a formal request for information. Businesses can therefore expect a greater use of the CMA's formal powers with their associated sanctions.
  • Undertakings in lieu – Under the new regime, parties will be able to wait until receipt of the reference decision before submitting undertakings in lieu (rather than having to submit them immediately after the issues meeting). This should provide greater transparency.
  • Remedies – The existing 24 week timetable for Phase II remains, but the Act provides that the CMA must take a decision on remedies within 12 weeks of its Phase II decision. In terms of substance, in addition, parties may be required to publish certain non-price information and to appoint and remunerate a third party to monitor and arbitrate on the implementation of remedies. This will also apply to market investigations (see below).

Market investigations

Again the changes here principally relate to timetables, information gathering and pre-emptive action and in the case of the latter to align procedures with the mergers regime. In terms of jurisdiction, the CMA will also have greater flexibility to consider issues that are common to more than one sector.

Where there has been a public interest intervention notice, the CMA may also be asked by the SoS to consider the relevant public interest issues alongside the competition aspects during a Phase II investigation. The SoS can appoint public interest experts to advise the CMA. Even if the SoS does intervene, the option of making a restricted reference for the CMA to consider only the competition issues will remain.

  • Statutory time limits for all stages – Market studies (Phase I) must be completed within 12 months of publication of a market study notice, and where a reference for a market investigation (MIR) is being considered, the public consultation must take place within six months of the launch of the market study. The timescales for Phase II will also be reduced from 24 to 18 months (subject to a six month extension in special cases).
  • Information gathering and pre-emptive action – Compliance with a market study information request will be mandatory, as in the case of market investigations. The CMA may impose financial penalties for failure to comply. Similar measures to prevent or unwind pre-emptive action are introduced as for mergers.
  • Remedies – Phase II remedies must be implemented by the CMA within 6 months, extendable by four months if there are special reasons for doing so. This should provide greater certainty for businesses.

Comment

The Act requires the new authority to publish guidance on both procedural and substantive issues, such as the principles the CMA will apply in deciding whether to pursue criminal proceedings. It is expected that consultation in many of these areas will be initiated prior to the main competition-related provisions in the Act coming into force next year.

It clearly remains to be seen whether the aspirations of the Government will be realised but businesses can at minimum expect renewed vigour in terms of enforcement activity on the part of the CMA and greater use of its strengthened powers of investigation and inquiry in all contexts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.