Comparative Guides

Welcome to Mondaq Comparative Guides - your comparative global Q&A guide.

Our Comparative Guides provide an overview of some of the key points of law and practice and allow you to compare regulatory environments and laws across multiple jurisdictions.

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4. Results: Answers
Investigations – step by step
What initial steps do the enforcement authorities take to commence a cartel investigation?
allAnswer ... egations and whether any further clarification or information is needed from the relevant complainant. On the basis of this preliminary assessment, the CMA will identify whether the conduct complained of falls within its remit.

The CMA will then apply its Prioritisation Principles, sometimes alongside informal discussions with the complainant. This process is designed to assist the CMA in efficiently allocating resources, taking account of:

  • the likely impact of an investigation, directly or indirectly, for consumers;
  • the strategic significance of the case;
  • the risks involved in taking on the case; and
  • the resources required to complete any such investigation.

The CMA will allocate the case to the appropriate area of the Enforcement Directorate, responsible for antitrust and cartel investigations within the CMA, for further investigation. The CMA will generally seek to gather more information from a range of sources, including the complainant, the entities under investigation and third parties. Such information will be gathered on an informal basis at this stage, relying on voluntary cooperation with requests for information, clarifications and face-to-face meetings or interviews.

The case is then allocated a designated case team, for the day-to-day running of the case, and a senior responsible officer for certain oversight functions, including authorisation for opening a formal investigation. Once the CMA has decided to open a formal investigation, the parties being investigated will be sent a case initiation letter identifying the alleged conduct, the relevant legislation, the case timetable and key contact details.

The CMA will publish notice of the investigation on its website as soon as practicable, provided that doing so will not prejudice the investigation.

The CMA can also open a criminal investigation into the alleged conduct, but only where there are reasonable grounds to suspect that a cartel offence has been committed and there is good reason to exercise its powers to investigate individuals.

For more information about this answer please contact: Matthew Readings from Shearman & Sterling LLP
Are dawn raids commonly conducted in your jurisdiction? If so, what are the pre-conditions for conducting a dawn raid? When, where and by whom are they conducted? Do the enforcement authorities have the power to search private as well as company premises?

Answer ... Dawn raids are often carried out by the CMA in the course of its investigations. The CMA carried out dawn raids in relation to eight ongoing investigations in 2017 and seven more in 2018.

For investigations under the Chapter I prohibition, the CMA has the power to enter and, in certain circumstances, search premises for documents relevant to a suspected infringement of UK or EU competition law. A warrant may be required depending on the circumstances.

In order to enter business premises (ie, any premises or part thereof not used as a dwelling), no warrant is required. The CMA must give two days’ notice to the occupier of the intended visit unless the occupier is a party to the suspected infringement, the CMA has otherwise made all reasonable attempts to notify the occupier or the CMA has obtained a warrant.

The CMA may seek a warrant from the High Court or Competition Appeal Tribunal to enter and search business premises if:

  • the CMA has reasonable grounds to believe that there are documents on the premises which should have been produced;
  • there are reasonable grounds to believe that relevant documents would be concealed, removed, tampered with or destroyed if the CMA required that they be produced; or
  • an officer was unable to gain entry without a warrant and there are reasonable grounds to believe that the premises contain documents which would need to be produced.

Where the CMA wishes to gain entry to domestic premises, a warrant is always required and may be sought on the basis of the first and second grounds above.

Dawn raids will be carried out by CMA officials, who will generally arrive at the premises at 9:30am if entering the premises with a warrant or without giving notice. Competition act warrants must usually be executed between 9:30am and 5:30pm, unless the court orders otherwise. Where the premises are entered with notice, officials will adhere to the timings set out in the notice.

In relation to criminal cartel investigations, the CMA may also seek a warrant from the High Court to enter business or domestic premises, provided that there are reasonable grounds to believe that there are documents on the premises relevant to the investigation and:

  • a person has failed to comply with a notice requiring the documents to be produced;
  • it is not practicable to serve a notice requiring the production of the documents; or
  • the service of a notice requiring the documents to be produced might seriously prejudice the CMA’s investigation.

For more information about this answer please contact: Matthew Readings from Shearman & Sterling LLP
What powers do officers have during the dawn raid? Are there any limitations on these powers?

Answer ... For investigations under the Chapter I prohibition, the CMA has the authority to enter business premises without a warrant and to seize evidence.

However, a party cannot be required to produce or disclose privileged communications.

Undertakings cannot be required to answer questions where the answer may involve the admission by the undertaking of the existence of a breach of the Competition Act. However, this does not protect parties from disclosing documents which may be used to establish such infringements.

Where a warrant has been issued, the officials named in the warrant shall also have additional powers to:

  • use such force as is reasonably necessary to enter the premises;
  • search the premises; and
  • take possession of relevant documents if necessary to preserve them or prevent interference with them, or where it is not reasonably practicable to take copies on the premises.

Officials may authorise third persons – for example, computer experts – to accompany them to carry out specific tasks under the supervision of the authorised CMA officials.

The CMA may also make use of certain other powers, known as ‘seize and sift’ powers, when searching commercial premises, subject to certain statutory considerations. These allow the CMA to take copies, or take possession of, documents where it is necessary to determine their relevance at a later date, or where the document comprises both relevant and irrelevant information, and it is not reasonably practicable to make such determination or separate out such material on site.

CMA officials can also enter premises and seize evidence in relation to a criminal cartel investigation with a warrant, and may authorise third parties to exercise these powers on its behalf

In addition, the CMA may utilise the ‘seize and sift’ powers outlined above during criminal cartel investigations, taking into account the same considerations and subject to the same limitations.

For more information about this answer please contact: Matthew Readings from Shearman & Sterling LLP
What are the rights and obligations of the target company and any individuals targeted during a dawn raid?

Answer ... Where CMA officials intend to enter business premises without a warrant, they must provide the occupier of the premises with the following on arrival:

  • details of the subject matter and purpose of the investigation; and
  • details of the offences committed by not complying with the CMA.

Before entering the premises, CMA officials must provide the occupier with evidence of their authorisation to carry out the visit. This will be a document signed by a senior CMA official authorising the CMA investigator to enter the specified premises. CMA investigators will usually present photo identification to demonstrate their authority to enter the premises.

When exercising their ‘seize and sift’ powers, CMA officials are further required to give notice of the following to the occupier of the premises:

  • a description of the items that have been seized;
  • the grounds for seizing the documents; and
  • details of provisions of the Criminal Justice and Police Act 2001 in relation to making an application to the court for the return of documents.

If no one is at the premises at the time the CMA intends to enter by force, officials must take reasonable steps to inform the occupier of the intended entry and give it and/or its legal representative reasonable opportunity to attend.

If the premises are unoccupied or the occupier is absent, officials must leave the premises as secure as they found them. Where an occupier cannot be informed of the inspection, a copy of the warrant must be left in a prominent place within the premises.

In all cases, the occupier is entitled to legal advice and, where deemed reasonable by CMA officials, reasonable time will be allowed to enable legal advice to be sought.

Parties have a right to apply to the High Court to vary or discharge a warrant in civil investigations. Parties must make any such application immediately and keep CMA officials informed. CMA officials will generally delay the search for a reasonable period, not exceeding two hours.

A party has the right to notify the CMA officials where it believes that a document does not fall within the scope of the investigation and query why copies are being taken. Where copies are taken nonetheless, the party has the right to make representations to the CMA after the inspection as to why the document is not relevant and should be returned or destroyed.

Where the CMA takes copies or extracts of a document, the party has the right to receive its own copy. The party is also entitled to accompany CMA investigators during the inspection of the premises, in order to monitor what steps they have taken.

In general, parties must ensure they comply with CMA officials and avoid:

  • intentionally obstructing CMA officers;
  • destroying or falsifying documents; or
  • providing false or misleading information.

For more information about this answer please contact: Matthew Readings from Shearman & Sterling LLP
What evidence can be seized during a dawn raid? Do the enforcement authorities have the power to interview witnesses and take statements during a dawn raid?

Answer ... During a dawn raid, CMA officials have the power to:

  • require the production of documents relevant to the investigation;
  • require the provision of information relevant to the investigation;
  • require explanations of relevant documents;
  • require a person to state where a document may be found;
  • take copies of, or extracts from, relevant documents;
  • require production of any information stored in visible and legible electronic form which can be taken away;
  • take any steps necessary to prevent interference with relevant documents;
  • take with them any equipment as appears necessary – for example, to take copies of relevant documents; and
  • require individuals connected with a party to the investigation to answer questions on matters relevant to the investigation.

The CMA also has the right to question persons connected with the business.

In relation to the cartel offence, the CMA has the power (with a warrant) to:

  • enter the premises using such force as is reasonably necessary;
  • search the premises;
  • take possession of relevant documents;
  • take any steps necessary to preserve or prevent interference with documents;
  • require any person to provide an explanation of any relevant document;
  • require any person to state where a relevant document may be found; and
  • require any information stored electronically to be produced in a form in which it is visible and legible and in which it can easily be taken away.

For more information about this answer please contact: Matthew Readings from Shearman & Sterling LLP
How can a company best prepare itself for dawn raids? What best practices should it follow in the event of a dawn raid?

Answer ... Companies should have a clear procedure in place in the event of a dawn raid and ensure that all members of staff are familiar with it. The following best practices are encouraged:

  • Alert senior executives on site and in-house counsel to attend.
  • Cooperate with the officials – failure to cooperate may constitute a criminal offence for any individuals found to be obstructive.
  • Verify contact details for the official in charge and check that the investigation mandate to the inspection is authorised.
  • Contact external lawyers and request that officials delay the start of their investigation until external counsel arrive.
  • Gather an internal team to assist with the investigation.
  • Ensure that on-site employees are informed of the investigation and what is expected of them during the raid.
  • Ensure that internal document destruction protocols are suspended.

Employees should not delete, destroy or conceal any evidence, and there should be no external communications regarding the investigation with any competitors or with third parties, including customers, without the prior consent of the company’s executives/lawyers. The company should consider any stock exchange announcements which may be necessary and prepare a press release in the event that one becomes necessary.

For more information about this answer please contact: Matthew Readings from Shearman & Sterling LLP
What are the next steps in the cartel investigation following a dawn raid? What timeframe do these typically follow?

Answer ... There are no set timelines or limits on the timeframe for CMA investigations. This will depend on a range of factors, such as the complexity of the matter and the level of cooperation from the parties involved.

Dawn raids are only one tool at the CMA’s disposal during its investigatory phase, alongside other powers to issue written requests for documents and information and to question individuals at interview.

As the CMA continues with its investigation, it will review and analyse the information collected in order to establish any relevant theories of harm. The CMA will generally provide updates to the business involved via email or phone during this period, informing them of the progress of the investigation, the next steps and the expected timings moving forward.

The CMA will hold more formal ‘state of play’ meetings – at a minimum, after the initial investigatory steps and prior to announcing a decision as to whether a statement of objections will be issued.

If the CMA issues a statement of objections, the parties will have an opportunity to make representations in response. During this time, the parties will be invited to inspect the file held by the CMA in relation to the matter, in order to provide them with the opportunity to form a proper defence. The parties will often have the chance to make representations to the CMA at an oral hearing also.

The CMA will then issue its final decision on the case, providing the parties with a draft penalty notice and providing opportunity to comment, both in writing and at an oral hearing.

For more information about this answer please contact: Matthew Readings from Shearman & Sterling LLP
What factors will the enforcement authorities consider in assessing whether cartel activity has taken place?

Answer ... The CMA will first consider whether there is evidence of an agreement between the parties with an explicitly anti-competitive object, such as price fixing, limits on production or investment or market sharing.

If no such agreement can be identified, the CMA will consider whether any agreements nonetheless demonstrate such anti-competitive effects, so as to prevent, restrict or distort competition in the United Kingdom.

Any anti-competitive effects of the agreement must be appreciable. Where an agreement has an anti-competitive object, the effects are automatically deemed appreciable.

In the case of agreements with an anti-competitive effect, however, this will be judged according to the parties’ combined market share. A restrictive ‘horizontal’ agreement (an agreement among competitors) between entities with a combined market share of 10% or more will be deemed to have an appreciable anti-competitive effect. The effects of a ‘vertical’ anti-competitive agreement (an agreement among the parties at different levels of the supply chain) will be considered appreciable if it is made between entities with a combined market share of at least 15%.

An agreement or practice will be exempt where it contributes to improving the production or distribution of goods, or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit. The exception will not apply if the restrictions imposed are more than what is necessary for this purpose, or where they enable the parties to eliminate competition in a substantial part of the products concerned.

For more information about this answer please contact: Matthew Readings from Shearman & Sterling LLP
In case of a finding of cartel activity, can the company seek to negotiate a settlement, plea bargain or similar resolution? If so, what is the process for doing so?

Answer ... A party may approach the CMA in order to initiate settlement discussions before or after the statement of objections is issued. The CMA will seek a mandate to engage in such discussions from the CMA’s Case and Policy Committee. If considered appropriate, all businesses involved will be invited to explore settlement with the CMA.

Discussions will follow a set timetable appropriate to the case, rather than a fixed or pre-determined timeframe. Settlement discussions can proceed with all or only some of the businesses involved – non-participating parties will be investigated in parallel under ordinary investigatory procedures.

Where the discussions take place before the statement of objections, the CMA will present the party with a summary statement of facts and the key documents on which the CMA is relying, along with a list of documents on the CMA’s file. The parties will be given the opportunity to make limited representations as to the summary statement of facts, particularly with regard to any factual inaccuracies.

Each business considering settlement will also be presented with a draft penalty calculation, which will reflect the extent of its involvement in the alleged cartel. The parties will have the opportunity to make limited representations with regard to the draft calculation.

The Case and Policy Committee will need to approve any decision to settle. The party must then confirm its agreement to the settlement, including the necessary admission, in writing. The CMA will then issue an infringement decision against the settling party.

Businesses seeking settlement must accept upfront a maximum penalty – that is, the maximum amount that the CMA could impose under an infringement decision. This is then subject to a settlement discount, capped at 20% for settlements reached prior to the statement of objections and 10% for those reached after. Any potential discount will be revoked if the decision is appealed to the Competition Appeal Tribunal. The CMA also has the discretion to decide that it will not pursue a disqualification order or undertaking against a party’s directors as part of the settlement process.

A party may pull out of the settlement process at any time prior to confirming its acceptance in writing, including its admission. Where the party pulls out of settlement discussions or the discussions are otherwise unsuccessful, the case will revert to the usual administrative procedure.

The CMA does not engage in negotiation or plea bargaining of any kind outside of the established settlement process.

For more information about this answer please contact: Matthew Readings from Shearman & Sterling LLP