Today is an important day for competition law in the UK. Not only do we have a new competition authority (in the form of the Competition and Markets Authority), but a number of important changes have been made to the UK competition regime.
The New Authority
The new Competition and Markets Authority (the "CMA") is now open for business. The CMA has assumed the Competition Commission's functions and responsibilities, together with the Office of Fair Trading's competition enforcement functions. This means that we now have a single authority with responsibility for competition law in the UK.
The UK competition regime has been the subject of some criticism over the last few years, with the Office of Fair Trading under particular scrutiny. The collapse of its flagship cartel prosecution back in May 2010, together with a number of significant defeats on appeal and doubts cast over its fining policy, did little to aid its cause.
The creation of the CMA will not by itself remedy any perceived failings in the 'old' regime. It is however widely expected to be the catalyst for improved, streamlined procedures which, when combined with the changes to the regime itself (discussed below), will lead to more effective and robust competition law enforcement in the UK.
Changes to the Competition Regime
The changes introduced by the Enterprise and Regulatory Reform Act 2013 (the "Act") affect the UK competition regime as a whole, with amendments being made to the mergers, markets and anti-trust regimes. The most significant change however concerns the Cartel Offence.
The Cartel Offence (in its original form) contained a dishonesty requirement – in other words, in order to secure a conviction, the prosecutor had to prove that the individual engaged in the cartel activity was acting dishonestly. This dishonesty requirement has now been removed. So, subject to the new exceptions and defences, engaging in a cartel activity (whether dishonestly or otherwise) is a criminal offence which carries a penalty of up to five years in prison and/or an unlimited fine.
This should be a source of some concern for those individuals who are involved in cartel activity, as the removal of the dishonesty requirement should make it easier to prosecute individuals for cartel activities.
The Act has introduced three statutory exceptions to the Cartel Offence, the common feature of which is disclosure (whether to the customer, bid requestor or generally) of relevant information about the arrangements in advance by way of notification or publication.
There are also three statutory defences, the most interesting of which is the 'Legal Advice' defence. This provides a defence where the individual can show that, before the agreement was made, he or she took reasonable steps to ensure that the nature of the arrangements would be disclosed to professional legal advisers for the purposes of obtaining advice about them.
There are certain aspects of the defence which are unclear at this stage – for instance, what if you take legal advice but then choose to ignore that advice? - and it remains to be seen how it will be interpreted by the courts. Nevertheless, the defence does emphasise the importance of taking legal advice!
It is also worth stressing that these exceptions and defences only apply to the Cartel Offence. So even if you can successfully plead an exception or defence, the business may still be liable for penalties under the Competition Act 1998.
Some other anti-trust changes which are worth noting are:
- The CMA now has the power to require individuals to answer questions as part of an investigation under the Competition Act 1998; The Human Rights Act may lead to conflicts here.
- The criminal penalties for failing to comply with a Competition Act investigation are replaced by civil sanctions in the form of fines. The fine may be a fixed amount (capped at £30k), a daily amount (capped at £15k per day) or a combination of both.
- The Competition Appeals Tribunal now has the power to issue warrants for dawn raids.
We will be reporting on these developments in future e-updates.
The CMA has existed in 'shadow' form since October 2013 and will therefore hit the ground running. We expect that the CMA will be keen to make a visible and material impact as quickly as possible - so be warned!
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
