UK: It’s not fair! – balance between protecting confidentiality and assuring procedural fairness

The UK Competition Commission, in its final months before being absorbed into the new Competition and Markets Authority, has had a procedural decision overruled by the Competition Appeal Tribunal (Britain's specialist judicial body that oversees decisions by the competition authorities). In the case, BMI Healthcare and others v Competition Commission,38 the Tribunal held that the Competition Commission had been unfair in the balance it struck between, on the one hand, allowing parties under investigation to see information relevant to their case and, on the other, protecting confidential business information. The Tribunal held that the Competition Commission had erred too much in favour of protecting confidentiality, prejudicing the rights of the parties under investigation.

Context

The case arose in the context of the UK's "market investigations" regime. This allows the UK competition authorities to investigate entire sectors to see whether any features of that sector (or market) have adverse effects on competition. If, on a full investigation (which typically lasts a year or two), the Competition Commission finds that there are such adverse effects, it can order changes to remedy those adverse effects - ranging from orders to modify business practices, to requirements that companies dispose of business units or split up. (For example, BAA, the operator of the three main London airports, was recently ordered to reduce the number of London airports under its control.)

The particular market investigation in this case concerns the private healthcare sector in Britain, and is ongoing. The Competition Commission began its investigation in April 2012 and is due to complete it in April 2014. In September 2013, it published its "provisional findings", indicating that various characteristics of the private healthcare had adverse effects on competition – including high barriers to entry for private hospitals and weak competitive constraints in many local markets such as central London. It also proposed, provisionally, that three of the major private hospital groups – BMI Healthcare, HCA and Spire – be required to sell off some of their hospitals by way of remedy.

Just a few weeks after the Competition Commission published its provisional findings, BMI, HCA and Spire all lodged an appeal to the Competition Appeal Tribunal claiming that the Competition Commission had treated them unfairly by not giving them sufficient access to relevant information. The Tribunal reached its decision on their appeal on October 2, 2013.

The issue – the rules on disclosure, confidentiality rings and data rooms

The appeal concerned procedural fairness. Indeed, the only grounds on which appeals may be lodged against decisions of the UK competition authorities in market investigations (and in merger control) are "judicial review" grounds. This is much more limited than a "full merits" appeal. It allows decisions to be overturned only on the basis of procedural unfairness, or of the authority exceeding its legal powers, or of the substance of the decision being "irrational" (i.e., so unreasonable that no reasonable public authority could have reached the decision).

In the BMI appeal, the appellants claimed that the Competition Commission had shown procedural unfairness towards them in unfairly limiting their rights to see relevant material, giving disproportionate and excessive protection to that material on grounds of business confidentiality.

They founded their appeal on both (i) the English common law judicial review principle of "natural justice", which includes a right to be properly consulted, and (ii) the specific statutory regime governing consultation, disclosure and the protection of confidential information in the UK legislation on market investigations and merger control, the Enterprise Act 2002.

As regards the statutory regime, four main elements provide a delicate balance between the right of the party being investigated to have access to relevant information and the right of the "owner" of that information to have confidential business secrets protected from disclosure.

First, there is a presumption of procedural fairness towards the parties being investigated. The legislation, the Enterprise Act 2002, requires the competition authority conducting a market investigation (a) to consult persons (individuals or companies) on whom its decision is likely to have a substantial impact, and (b) to give them reasons for that decision – in both cases "so far as practicable".

Second, there is respect for the confidentiality of business information.

  • The statutory duty to consult and give reasons is qualified by the proviso "so far as practicable", and this includes having regard to (i) timetable and (ii) confidentiality.
  • The legislation also provides for the protection of confidential information, saying that information not in the public domain that relates to a business, or an individual's affairs, should not be disclosed.

Third, the protection of confidential information is itself subject to a proviso – namely, that it may be disclosed "for the purpose of facilitating the exercise by the authority" of its statutory functions.

Fourth, even this disclosure is subject to three considerations. Information should be excluded from disclosure where:

  • Disclosure is contrary to the public interest;or
  • Disclosure "might significantly harm" legitimate business interests of the company concerned (or, in the case of an individual, the individual's interests); or
  • Disclosure is not "necessary for the purpose for which the authority is permitted to make the disclosure".

Practical application

The UK Competition Appeal Tribunal held that the Competition Commission had incorrectly applied the statutory regime, and in common law terms had denied the appellants natural justice, in being excessively restrictive in granting them access to relevant confidential business information.

Confidentiality rings and confidential data rooms

The Tribunal recognised the legitimacy of striking a balance by way of "confidentiality rings". Under these, disclosure to a party is often limited to the party's external professional advisers in the case – for example, its lawyers and economic advisers who have to give a binding undertaking that they will not disclose the information to anyone else and that they will only use the information in specified ways.

A variation on this is the confidential data room, a secure location in which the confidential documents are held, and to which only external advisers are granted admission (again, on the basis that they give various undertakings).

The Tribunal made clear its acceptance of these measures in principle:

"We recognise that market investigations involve... considerable amounts of very confidential material, and if that material is not appropriately safeguarded, confidence in Commission investigations will be eroded and – quite possibly – damage done to the operation of markets because of the market sensitivity of information involved.39 ... The undertakings given by the professionals who participate in confidentiality rings and data rooms to do, or not to do, certain things are essential to the operation of these confidentiality rings and data rooms. "40

The rules of access

On the facts of the case, the UK Competition Appeal Tribunal saw nothing wrong with the Competition Commission putting the confidential information in a confidential data room, to which access was limited to external professional advisers who had to sign undertakings. But it found those undertakings too restrictive, and said that – given that this was a data room and therefore a secure location – it was unfair that:

  • The advisers were not allowed to make notes in the data room about the documents they found there – given that the making of notes is "plainly required if they are to make effective use of their access" to the data room;
  • Conversations in the data room had to be as brief and quiet as possible, which meant that "there was no real way in which the advisers could discuss points amongst themselves";
  • Internet access was unavailable, and the advisers were prohibited from bringing in their own electronic devices, so that they had no access to other material that they might need to look at; and
  • The period of time allowed for access to the data room (9 a.m. to 5 p.m. on just two consecutive days) was "unreasonably short"; the Tribunal thought that, as a "general rule of thumb, a data room ought to be open at reasonable business hours up until the end of the consultation period, and ought to provide for multiple visits".41

Wider application

These helpful guidelines on the rules on disclosure of confidential data have wider application.

  • The UK merger control regime, as noted, has similar statutory rules governing the balance between procedural fairness and protection of confidential information. Indeed, the airline Ryanair, which in August 2013 was subject to an adverse merger control finding by the Competition Commission in connection with its 29.8 per cent shareholding in Aer Lingus, has appealed against that decision – including on the grounds that
  • "The Commission's procedure was unfair, in that the Commission's case relies upon evidence and allegations that have been kept secret from Ryanair."42

  • Moreover, the same issues are highly relevant to the delicate balance between protection of confidential information and "access to the file" for parties under investigation in the context of the EU and UK prohibitions on anti-competitive agreements and use of dominant positions.

The Competition Appeal Tribunal's judgment in the BMI Healthcare case is an important contribution to the on-going process of striking the right balance.

A version of this article first appeared in the ILO (International Law Office) Competition Newsletter in November 2013.

Footnotes

38 UK Competition Appeal Tribunal, Case 1218/6/8/13 BMI Healthcare and others v Competition Commission [2013] CAT 24.
39 Paragraph 63 of the judgment in BMI Healthcare.
40 Paragraph 58 of the judgment.
41 Paragraphs 71 to 73 of the judgment.
42 Case 1219/4/8/13 Ryanair Holdings v Competition Commission, summary of application, 24 September 2013.

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