UK: All Change: What Businesses Need To Know About The UK’s Competition Law Shake-Up

Last Updated: 12 December 2013
Article by Russell Hoare

Summary and implications

Businesses should be aware that there is more than institutional change afoot when the new Competition and Markets Authority (CMA) replaces the Office of Fair Trading (OFT) and Competition Commission (CC) from 1 April 2014.

Reform of the UK competition regime is also aimed at sharpening up enforcement. This is likely to mean:

  • more criminal prosecutions;
  • more dawn raids;
  • compulsory interviews for current and former employees;
  • enforcement of competition law in new sectors; and
  • cross-sector market investigations.

Companies need to consider how they will update compliance training, procedures and dawn raid manuals.

Those operating in sectors under increased scrutiny need to consider again what features of their industry might fall foul of the regulators and take steps to mitigate any exposure.

a) Which changes will impact on compliance programmes?

Criminal charges for individuals

At the moment, it is an offence for an individual to agree dishonestly with others to make or implement arrangements relating to:

  • price fixing;
  • limiting supply/production of goods or services;
  • market sharing; and
  • bid rigging.

By now, the Government had expected to secure up to 100 convictions under this offence, but has in fact only secured three. The OFT has found it difficult to show where individuals have acted dishonestly, according to the standard criminal law test.

This requirement will be removed from 1 April 2014. However:

  • There will be no offence if the customer is informed in advance about a proposed arrangement, or if information on that proposed arrangement is published.
  • A defence will also be available to a person who entered into an agreement but did not intend to conceal it either from customers or regulators, or took legal advice before going ahead.

Penalties will not change – these are currently a prison term of up to five years, a fine, or both. However, these are likely to be levied more frequently.

Action – despite these additional wrinkles, the compliance message remains to avoid secret anti-competitive agreements with competitors.

Easier for the CMA to gather evidence in investigations

The Competition Appeal Tribunal (CAT) has been granted powers to sign warrants to authorise unannounced inspection of premises (i.e. dawn raids). These are used not only in relation to business premises but also employees' and directors' homes and vehicles. The ability to obtain warrants from a specialist court rather than the High Court may embolden the CMA to make more applications – potentially leading to more warrants overall.

The CMA will be permitted to publish a notice of investigation on its website as soon as possible after a formal investigation has been opened (except where this would prejudice the investigation or any open criminal investigation). The CMA will only name parties if appropriate, e.g. if the names are already public. The CMA will therefore be able to gather third party comments on an investigation significantly sooner than at present.

Action – Offices, cars and homes will be more at risk of an inspection than ever before. Companies should ensure that compliance guidance on document creation and retention remains up-to-date and relevant.

Public relations teams should be aware that in the event of an investigation, it could be necessary to deal with public comment/speculation very quickly after an investigation is launched.

The CMA's powers to interview employees

Currently, the OFT can only compel individuals to attend an interview if they are suspected of having committed a cartel offence, or to provide information on the location of, or meaning of specific documents. The CMA will, however, enjoy considerably wider powers from 1 April 2014.

Any individual "with a connection to" a company under investigation can be required to attend a stated location at a stated time, to answer questions. This includes both present and previous employees.

However, there will only be a duty for the CMA to inform a company under investigation that an individual will be interviewed if they have a "current connection" to the company, i.e. the duty does not apply in the case of ex-employees. Therefore, a business many simply not know if an ex-employee is being interviewed.

Action − Businesses should consider:

  • appropriate guidance for current employees;
  • appropriate terms and conditions including robust obligations on ex-employees; and
  • how to co-ordinate a media strategy for an investigation where non-employees are beyond the reach of public relations teams.

b) Increased emphasis on sector specific investigations

More sectoral bodies with competition law powers

In spite of its much-trumpeted "bonfire of the quangos", the UK Government continues to increase the number of sector-specialist competition regulators in the UK.

The latest additions are Monitor with respect to healthcare, and the granting of competition law enforcement powers to the new Financial Conduct Authority. This is likely to lead to more investigations and potential penalties.

Action – operators in sectors covered by these new regulators should familiarise themselves with competition law and ensure that appropriate compliance programmes are in place.

Increasing use of competition law powers in non-traditional segments

Competition law principles are also being introduced into more and more areas which were traditionally characterised by a public service focus; or provided by organisations with exclusive rights.

The Government is seeking to use these principles as a tool to drive the embedding of a competitive culture. Examples:

  • The OFT's decision to investigate competition in the higher education market (click here).
  • An intensifying focus on competition in the healthcare sector, due to the increasing role of market principles in procurement and service delivery. Examples include attacking collaborative pharmaceutical arrangements; the private healthcare market being investigated by the CC; or the CC controversially blocking the merger of two NHS foundation trusts (click here).
  • In energy markets, the prime minister has pledged to carry out a "proper competition test" over the next year to determine whether the sector is properly competitive (click here).

Action - Operators in these sectors should consider now any practices that could attract regulatory attention, and take steps to mitigate them.

Cross-market investigations

The OFT is currently empowered to make a preliminary market assessment of features that are common to a number of markets. However, it cannot make a reference to the CC for an in-depth market investigation without opening the possibility of the CC investigating every feature of every market concerned. This means that markets tend to be investigated individually.

By contrast, the CMA will be able to undertake detailed cross-market investigations; it will be able to review a specific practice or conduct (or combination of practices) in more than one market or sector.

Take-away points

Prior to 1 April 2014, businesses should:

  • update compliance training materials to capture changes to the cartel offence;
  • update dawn raid packs to cover new rules on warrants and employee interviews;
  • assess whether they operate in a sector where competition law is increasing in importance – and take appropriate steps to ensure employees and directors are up to speed on risks; and
  • be alert to the increased possibility of market investigations, especially in sectors experiencing high levels of negative publicity. Can any investigations be anticipated and prepared for?

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.