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16 August 2024

UK Competition Law Investigations: What Are The CMA's New Powers?

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Gowling WLG

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The Digital Markets, Competition and Consumers Act strengthens the UK's Competition and Markets Authority (CMA) powers, expanding enforcement, investigatory reach, and compliance obligations, especially in digital markets and competition law.
United Kingdom Antitrust/Competition Law

The Digital Markets, Competition and Consumers Act (the "Act") received Royal Assent on 24 May 2024.

The Act will strengthen the powers of the UK's Competition and Markets Authority (CMA) in relation to:

  • consumer protection, including enabling the CMA to sanction businesses for breaches of consumer protection law;
  • digital markets, including giving the CMA a central role with regard to the regulation of businesses active in the digital sector in the UK;
  • UK merger control, including expanding the basis upon which the CMA is able to assert jurisdiction to investigate transactions under the UK merger control regime; and
  • UK competition law enforcement, including giving the CMA broader investigatory powers.

Key changes to the UK competition law enforcement regime are summarised within this update, with these amendments likely to enter into force later this year.

Extra-territorial application of the Chapter I Prohibition

The Competition Act 1998 (CA98) establishes a general prohibition upon anti-competitive arrangements1 that may affect trade within the UK, and are, or are intended to be, implemented in the UK (the "Chapter I Prohibition").

The Act will amend the Chapter I Prohibition so that this applies to anti-competitive arrangements that:

  • are, or are intended to be, implemented in the UK, and which may affect trade in the UK; or
  • are likely to have an immediate, substantial, and foreseeable effect on trade within the UK (i.e. even if they are not implemented, nor intended to be implemented, in the UK).

This substantially widens the territorial scope of the Chapter I Prohibition, which will be capable of applying to anti-competitive arrangements outside of the UK where a sufficient UK nexus exists.

Notably, this amendment is limited to the Chapter I Prohibition, with the territorial scope of the prohibition upon abuse of dominance under the CA982 (the "Chapter II Prohibition") remaining limited to the UK.

Provision of investigative assistance to overseas regulators

If an overseas public authority has competition law enforcement functions that correspond with, or are similar to, the CMA's own competition law enforcement functions under CA98 (an "overseas regulator"), then the Act will enable the CMA to provide investigative assistance in the UK to that overseas regulator, subject to certain conditions being satisfied.

Where the CMA provides investigative assistance to an overseas regulator, the general principle to be applied is that the CMA must use the powers it would normally exercise in relation to its own functions.

In addition, the relevant procedural safeguards that would apply when the CMA exercises its powers in relation to its own functions (e.g. the requirement for the CMA to obtain a warrant to enter and search domestic premises) would also apply where the CMA provides investigative assistance to an oversea regulator.

Expanded information gathering powers

The Act will strengthen the CMA's information gathering powers when investigating suspected infringements of UK competition law, including in relation to:

  • Obtaining information that is accessible from UK premises. When conducting an unannounced inspection ("dawn raid") under a warrant, the CMA will be able to require the production of information that is accessible from business or domestic premises in the UK, even if the information in question is not physically located at those premises. This could include electronic information stored outside of the UK, which is accessible from premises in the UK. CMA officers can require any person at the relevant premises in the UK to provide them with such assistance as they may reasonably require to access the information (e.g. confirming passwords to enable access).
  • Obtaining information from outside of the UK, including from third parties that are not subject to an investigation. The CMA will be able to require a natural or legal person located outside of the UK to produce documents or information held outside of the UK where:
    • the person's activities are the subject of a UK competition law investigation; or
    • the person has a "UK connection", meaning that they: (i) are a UK national; (ii) are an individual who is habitually resident in the UK; (iii) are a body incorporated under the law of any part of the UK; or (iv) carry on business in the UK.
  • Exercising "seize and sift" powers at domestic premises. While "seize and sift" powers can already be exercised by CMA officers at business premises, the Act extends the application of these powers to domestic premises. This means that during a dawn raid conducted under a warrant at an individual's home:
    • where it is not reasonably practicable for CMA officers to determine whether documents are covered by the warrant, they will be able to remove these documents for consideration at a later date; and
    • where documents are contained in something else (e.g. a filing cabinet, or an electronic device), and it is not reasonably practicable to separate out the relevant documents at the premises, CMA officers will be able to remove the item containing those documents, and determine at a later date whether the documents are covered by the warrant.
  • Strengthening compulsory interview powers. Pursuant to section 26A CA98, the CMA is currently able to conduct a compulsory interview (a "Section 26A Interview") with an individual who has a "connection" to a business under investigation (e.g. a current or former employee). The Act removes the requirement for a "connection" to a business under investigation, meaning that the CMA will be able to use Section 26A Interviews to gather information from a wider range of individuals.Where an individual is subject to a Section 26A Interview, they are required to respond to the CMA's questions, and the CMA is able to impose fines if an individual fails to comply without reasonable excuse (see below). An individual may also face criminal prosecution for knowingly or recklessly providing false or misleading information during a Section 26A Interview.

With this in mind, businesses should ensure that their existing UK competition law investigation procedures and training are appropriately updated, in order to address the CMA's strengthened information gathering powers, and ensure that staff understand how to respond to these in the event of an investigation.

Additional compliance obligations imposed upon businesses and individuals

The Act provides that if a person knows or suspects that a UK competition law investigation is being carried out, or is likely to be carried out – or that the CMA is assisting, or is likely to assist, an overseas regulator (see above) - that person must not:

  • falsify, conceal, destroy, or otherwise dispose of any document (i.e. information recorded in any form) that they know is - or suspect would be - relevant to the investigation; or
  • permit such a document to be falsified, concealed, destroyed, or disposed of.

The Explanatory Notes to the Act provide that, in practice, these obligations could arise in circumstances including where:

  • a business is informed by the CMA that it is under investigation;
  • an individual working for a business becomes aware that a customer has reported suspicions of anti-competitive conduct to the CMA and has been interviewed by CMA officers; or
  • participants in an anti-competitive arrangement are 'tipped off' that someone has informed the CMA.

Against this background, the CMA recently published for consultation an updated version of its guidance on its investigation procedures in CA98 cases3 (the "Consultation Guidance"), which addresses these additional compliance obligations.

The Consultation Guidance explains that the CMA will regard documents as being relevant to an investigation where these are connected to the subject matter of the investigation, including:

  • documents that tend to prove or disprove an infringement; and
  • documents containing background information - e.g. information about the conditions of the market within which the suspected infringement is alleged to have occurred.4

The Consultation Guidance also notes that as "a matter of good practice" if a person knows or suspects that the CMA is carrying out an investigation, then they should:

  • take a "broad view" in relation to what could constitute relevant documents;
  • ensure that any such documents they know or suspect to be relevant are retained and preserved; and
  • suspend routine document destruction in relation to any such documents.5

In this context, the Consultation Guidance makes clear that a "document retention policy should provide for the preservation of documents relevant to a CA98 investigation".6

While the publication of the Consultation Guidance is a welcome development, it would be helpful for the CMA to provide additional guidance, including in relation to its intended approach to determining whether a person knew or suspected that: (i) a UK competition law investigation was being carried out, or was likely to be carried out; and (ii) the CMA was assisting, or was likely to assist, an overseas regulator.

In the interim, it would be prudent for businesses to update their existing UK competition law investigation procedures and training, so as to ensure that as a minimum these address the compliance obligations articulated within the applicable CMA guidance (once finalised), including revising document retention policies.

Increased fines for non-compliance

The Act also increases the levels of fines that the CMA may impose upon businesses for non-compliance with obligations arising in the context of an investigation,7 including, for example where a person has without reasonable excuse:

  • obstructed a CMA officer in the exercise of their powers under a warrant;
  • destroyed or otherwise disposed of a document they were required to produce; or
  • provided information that is materially false or misleading.

The Act will enable the CMA to impose upon a business: (i) a fixed fine of up to 1% of its annual group worldwide turnover; and/or (ii) a daily fine of up to 5% of its daily group worldwide turnover.

In relation to individuals, the CMA will remain able to impose: (i) a fixed fine of up to £30,000; and/or (ii) a daily fine of up to £15,000. For example, a fine may be imposed where an individual fails without reasonable excuse to answer questions during a Section 26A Interview (see above). Alternatively, depending upon the nature of the act or omission, an individual may face criminal prosecution for non-compliance (e.g. if an individual undertook any of the actions outlined above, this could result in criminal prosecution).

Key takeaways

The Digital Markets, Competition and Consumers Act strengthens the powers of the UK's Competition and Markets Authority (CMA) across several areas, including UK competition law enforcement.

In relation to UK competition law enforcement, key changes resulting from the Act include: (i) the extra-territorial application of the Chapter I Prohibition, which will be capable of applying to anti-competitive arrangements implemented outside of the UK; (ii) the strengthening of the CMA's powers of investigation, including in relation to domestic premises; (iii) the imposition of additional compliance obligations upon businesses and individuals, including in relation to securing and retaining documents that are relevant to a UK competition law investigation; and (iv) increases to the levels of the fines that the CMA will be able to impose upon businesses in respect of procedural non-compliance.

With this in mind, business that have activities in the UK should ensure that their competition law investigation procedures and training are updated, in order to ensure that all relevant staff:

  • are made aware of the key changes resulting from the Act, including the additional compliance obligations in relation to securing and retaining documents; and
  • clearly understand what they can (and cannot) do in response to an investigation.

Footnotes

1 Specifically, agreements between undertakings, decisions by associations of undertakings, and concerted practices (see, section 2(1), CA98).

2 See, section 18, CA98.

3 nbsp;Investigation procedures in Competition Act 1998 cases: CMA8

4 See, paragraph 5.10, Consultation Guidance.

5 See, paragraphs 5.9, 5.11 - 5.12, Consultation Guidance.

6 See, paragraph 5.12, Consultation Guidance.

7 Including in circumstances in which the CMA is providing investigative assistance to an overseas regulator (see above).

Read the original article on GowlingWLG.com

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.

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