The regulator which governs this area is “The Competition and Markets Authority” (CMA) in the United Kingdom. It is a non-ministerial department, and its role is to tackle unfair behaviour, strengthening business competition and preventing and reducing anti-competitive behaviour.
Competition regulations are governed by the following legislation:
Breaching competition regulations can lead to severe consequences.
With such drastic penalties, it is crucial that businesses are familiar with their obligations.
However, the Competition and Markets Authority has had real difficulty in achieving contested convictions, with the overwhelming number of these coming as a result of a guilty plea. If a company finds itself under investigation, rather than acting in haste, the company should engage legal representation with experience in business crime.
In the UK, the primary enforcement agency for antitrust law is the Competitions and Markets Authority). The CMA regulates the market in a civil capacity but, alongside the Serious Fraud Office, criminally prosecutes cases concerning ‘cartel activity’, the most serious of anti-competition behaviour.
A cartel is formed when a group of businesses agree to act in a way which restricts competition, either to a buyer or to other businesses. The statutory basis for the CMA can be found in the Competition Act 1998 and the Enterprise Act 2002, with the prosecution bases coming under section 188 of the latter.
Cartel activity includes:
A finding of criminal cartel activity, there must be an ‘agreement’; this is deliberate. An individual passing on confidential pricing information is not of itself cartel activity but is potentially evidence of a wider cartel agreement.
As mentioned above, price-fixing describes the action of two or more businesses agreeing to set a price between one another, be it to raise, lower or maintain that price. There are multiple types of price-fix, such as ‘retail price management’, where suppliers fix the price a retailer can sell a supplied product. This agreement thus deprives customers of natural competitive choice in pricing. Depending on the severity of the fix, the CMA may investigate and prosecute for price-fixing.
Under section 25 of the Competition Act 1998, the CMA may launch an investigation where there are ‘reasonable grounds for suspecting that there is an agreement’ which either:
This is a low hurdle to clear, leaving companies well exposed to investigation from the CMA.
Before any investigation, a business may receive a warning or advisory letter. Though it is not a prerequisite for investigation – companies may be ‘dawn raided’ without warning – the letter will lay out any concerns the CMA has about the business in question, before requesting that the business respond or take prescribed action.
We at ABV recommend that businesses engage expert legal representation at this stage. Non-compliance with a request from the CMA can itself be an offence under the Enterprise Act, leading to harsher penalties if a business is later found to have broken the law. It is thus worth taking advice despite this being an early point.
Once an investigation starts, the CMA may interview employees both past and present, search premises without warrant and demand a wide array of documents in any form. The sheer volume of items requested can drown companies in procedural administration, warranting the instruction of specialist outside organisations to manage the process.
Companies under CMA investigation also require professional experience when interacting with the regulator. For example, a business in a cartel can ‘confess’ to the CMA and in return benefit from immunity from – or a reduction in – any resultant penalty. Yet this itself is not without risk.
Furthermore, while the CMA has wide-reaching powers to request company documents, these do not extend to those documents which are protected by legal privilege. Destroying, falsifying or concealing documents from an investigation carries up to five years in prison; engagement of legal advisors can help companies classify and separate their documents in a compliant manner.
The CMA may then decide to pursue a prosecution, for which two tests must be met.
To meet the evidential standard, there must be sufficient evidence available to provide a ‘reasonable prospect of conviction’.
If that test is met, the CMA then move to consider whether it is in the public interest to pursue the suspect’s prosecution.
Should the CMA find that company has not acted in line with competition rules, a company may appeal that finding to the Competition Appeal Tribunal (CAT).
The CAT is the first-tier tribunal of appeal in competition matters but also hears other appeals, such as those seeking to overturn decisions from OFCOM. It is governed by The Competition Appeal Tribunal Rules 2015. Business subject to an adverse finding from the CMA should carefully consider their options, taking legal soundings as a matter of priority.
Whether a company may appeal a finding by the CMA is a complex matter of law and one which requires experience in competition matters. The CAT cannot hear appeals for conviction, which are heard according to criminal procedural rules.
Should a CAT appeal prove unsuccessful, a further appeal may be heard in the Court of Appeal, Court of Session (Scotland) or Court of Appeal in Northern Ireland.
03445879996
EMAIL US