The UK Government recently published the Digital Markets, Competition and Consumers Bill. As well as changes to the regulation of the largest tech firms (see Part One in this four-part series) and to the UK's merger control regime (see Part Two), the Bill makes a number of changes to the Competition and Markets Authority's (CMA's) powers to investigate competition law breaches, including on an extra-territorial basis, as well as changes affecting the conduct of competition litigation and of market studies / investigations.
Stronger Investigation Measures
The Bill contains a number of measures that will strengthen the CMA's investigative powers.
These include expanding the CMA's power to require an individual to answer questions in relation to an investigation so that it will cover people unconnected to the target business, giving the CMA the ability to conduct interviews remotely, and conferring a power on the CMA to give an individual an undertaking that information they provide for the purposes of investigating the cartel offence will not be used against them in any criminal proceedings (although, as with granting immunity from prosecution under the CMA's leniency process, this power does not extend to Scotland where the Lord Advocate has sole authority over prosecutions).
The Bill also introduces a new proactive obligation on any person who knows or suspects that the CMA is conducting (or likely to conduct) an investigation not to falsify, conceal, destroy or dispose of any potentially relevant document.
The maximum fine the CMA can impose on a business that obstructs or otherwise fails to comply with an investigation requirement (including the new proactive obligation above), or that gives false or misleading information to the CMA, will be increased from the current maximum of £30,000 to 1% of global group turnover. The £30,000 limit will remain in place for individuals.
There are also changes to what a warrant can authorise the CMA to do during a 'dawn raid' (and we thank the UK Government for timing the Bill to coincide with our podcast on how to deal with a dawn raid!). At present a warrant will permit the CMA to obtain documents that are "on" business or domestic premises. The Bill will amend this to include documents "accessible from" the premises. It will also provide for warrants to authorise the CMA to use any equipment on the premises to access electronic information and take copies or possession of anything relevant, and to require any person on the premises to give CMA officers any assistance they reasonably require.
In combination, these changes will expressly permit the CMA to raid premises that it believes will offer a route "in" to electronic documents stored elsewhere, for example on remote servers. This is perhaps an overdue change for a "paper-light" age, and may in any event have been prompted by recent issues arising in relation to the CMA seeking to secure information held outside the UK.
On that subject, the Bill will expand the CMA's investigation powers to allow it to give a section 26 notice (demanding documents or information) to a person outside the UK and/or requiring the production of information held outside the UK. This amendment – and the above change to what a warrant can authorise – follows the CAT's recent striking down of section 26 notices served by the CMA on German BMW and Volkswagen companies (with no UK connections) demanding the production of documents held outside the UK, and of a fine imposed on the BMW entity for failing to comply with the notice served on it. These were in addition to orders served on UK subsidiaries of the companies, which were not disputed. The CAT held that the existing section 26 power does not extend to ordering a company with no UK presence to produce information held outside the UK. The amendments will expressly change that, though the CMA's power will still be limited such that a notice can only be served on a person whose activities are being investigated or who otherwise has a UK connection (i.e. is a UK national or habitual resident, or is a body incorporated in the UK, or carries on business in the UK).
The Competition Act's application to non-UK agreements will also be amended by the Bill. At present the 'Chapter I infringement' in section 2 of the Act only applies if an agreement that has the object or effect of preventing, restricting or distorting competition within the UK is (or is intended to be) implemented in the UK. This may have reflected the pre-Brexit reality that an agreement implemented outside the UK, but which nevertheless had an adverse effect on competition in the UK, would very likely be caught by EU competition law. The Bill will remove that limitation and expand the Chapter I test to include anti-competitive agreements that are not (and are not intended to be) implemented in the UK if they are "likely to have an immediate, substantial and foreseeable effect on trade" within the UK. This would catch, for example, an agreement between competing businesses in France to fix the prices at which they sell goods to a French distributor for onward sale to UK customers.
Interestingly, the CMA's power to carry out an investigation (in section 25 of the Act) will not be amended by the Bill and so will continue to refer only to the CMA suspecting that there is an anti-competitive agreement which may affect trade within the UK. This may be an oversight that will be corrected, but if not then the CMA will prima facie be empowered to investigate non-UK agreements without necessarily having to point to a suspected "immediate, substantial and foreseeable" effect on trade within the UK.
In the other direction, the Bill introduces a new regime for the CMA to use its investigatory powers to assist its overseas counterparts with their investigations. This regime includes various criteria by which the CMA must decide whether it would be appropriate to offer assistance, and also requires that the Secretary of State has authorised the CMA to assist the overseas regulator in question (with the Secretary of State able to put in place standing authorisations as well as respond on an ad hoc basis to specific requests).
Changes to appeals / damages claims
Interim measures imposed by the CMA during an investigation can currently be appealed to the Competition Appeal Tribunal on the merits, but the Bill amends this so they will be challengeable only on judicial review grounds (which give appellants a much higher bar to clear). This will significantly strengthen the CMA's hand in defending the use of interim measures.
The Bill will also give the CAT a new jurisdiction to consider claims for declarator / declaration in relation to competition infringements that took place on or after 8 March 2017, in addition to its existing ability to hear damages claims. However, the CAT will remain unable to grant an interdict in a Scottish action, despite being able to grant an injunction in England & Wales.
The CAT and other courts will also be given the power to award exemplary damages in competition cases, except in collective proceedings or in claims against immunity recipients. Exemplary (or punitive) damages are used to deter illegal behaviour, and in this case the change will allow damages to be awarded against a business that has infringed competition law in excess of any actual loss suffered by the claimant. This amendment will further increase the risks involved in violating competition law, and therefore give businesses even more incentive to ensure they comply.
However, there is nothing in the Bill that would displace, for the purposes of competition proceedings in Scotland, the general rule of Scots law that exemplary / punitive damages are not available – i.e. the Bill removes the Competition Act's current bar on courts awarding exemplary damages in competition proceedings, but does not itself confer any power to award such damages. The Explanatory Notes to the Bill suggest that this change is intended to extend to Scottish proceedings, so there appears to be an oversight somewhere that will require correction – either in the Bill or in the Explanatory Notes.
Market Studies and Investigations
Finally, the Bill introduces some procedural changes to the way the CMA carries out market studies and investigations (see, for example, our recent piece on the CMA's market study into the housebuilding sector). These changes include more flexible time limits for the CMA and a new power for a market study to refer only a particular set of market features for review in a market investigation, rather than having the investigation look again at the entire sector from scratch. This should allow market investigations to be more efficient and focused, while also removing duplication of work as between the two stages.
The Bill will also allow the CMA to accept undertakings from businesses at any point during the process and not only at the end of a market study or investigation, which should again make for a more efficient process. It will also allow the CMA to apply remedies on a "trial" basis before deciding whether to impose them permanently.
Although not the most eye-catching part of the Bill's shake-up of competition law, these changes do amend the CMA's powers in potentially significant ways. In particular, they increase both the potential penalties for breaching competition law and give the CMA greater power to uncover such breaches. Each of these categories of change increase the incentives on businesses to ensure they are complying with competition law.
For more information on the competition law aspects of the Bill please parts one and two in this series: changes to the regulation of digital markets and changes to the UK merger control regime. For more information on the consumer protection aspects of the Bill please see part four: the Impact on UK Consumer Protection Law.