The Enterprise and Regulatory Reform Act 2013 (ERRA) received Royal Assent on 25 April 2013, ushering in a swathe of competition reforms likely to enter into force in April 2014.
Among the reforms in the ERRA are the merging of the Office of Fair Trading (OFT) and the Competition Commission (CC), the removal of the requirement of "dishonesty" for criminal cartel offences and increased powers for the new Regulator in carrying out merger reviews.
In many ways the reforms should benefit both private practitioners and parties to an antitrust investigation through more efficient and streamlined procedures. The abolition of the dishonesty element for establishing individual criminal liability is likely to lead to increased criminal prosecution and convictions of cartelists in the United Kingdom. The new reforms have therefore significantly upped the stakes for those involved in price-fixing or market sharing practices and the like.
Uniting the OFT and the CC
The OFT and the CC will be merged to form one entity, the new Competition and Markets Authority (CMA). It is likely that the centralisation of UK competition enforcement will create a more efficient regulatory body. For example, the know-how among employees of the two previously separate entities will now be shared, and the presentation of merger filings to the case teams will no longer be duplicated.
Abolition of Dishonesty
The need for there to be a finding of dishonesty on the part of prosecuted cartelists will no longer be required. This element has hampered OFT investigations to date because of the difficulty in establishing that a person has dishonestly engaged in cartel activity. The CMA will still have to establish the other mental elements of the crime, such as the intention to form the cartel agreement, but the ERRA’s introduction of new defences in this area waters down the potentially far-reaching impact of the removal of the dishonesty element from the cartel offence. These defences include
- The individual did not intend to conceal the agreements from customers
- The individual took steps to obtain legal advice before implementing the agreements
New Merger Review Process
The merger control regime remains voluntary. The CMA will now, however, be able to suspend an anticipated merger pending its own review of that proposed merger. At present, the OFT can only take action aimed at preventing further integration of the relevant companies after the merger has been completed. Additionally, the time limit for a Phase I review has been changed to 40 days for both a statutory merger notice and an informal submission. The time limit of 24 weeks for a Phase II review for both types of notification remains the same. The Phase I review will likely be carried out by former OFT employees, while the Phase II review will be carried out by former CC employees.
New Market Investigation Process
Market investigations will henceforth have to abide by statutory time limits for each phase of an investigation. In Phase I, the CMA will be required to publish a Market Study Notice outlining its intended investigation and the time frame involved, which cannot extend beyond 12 months. The CMA will have to have published a Market Study Report recording its findings by this deadline. If warranted, a Phase II investigation will then start. The time limit for Phase II will be decreased from the current 24 months to 18 months, with the possibility of extending this period by six months in exceptional circumstances.
The CMA will also have greater investigatory powers in the Market Investigation Process. Among these enhanced powers will be the ability to conduct "cross-market investigations". These are enquiries into a particular part of a market that exists not only in the market under investigation, but also in other markets. This type of enquiry into a market segment does not amount to an enquiry of a new market. Cross-market investigations will allow the CMA to conduct investigations on market segments that span several markets without it having to analyse the entirety of these markets.
The CMA also will have the ability to carry out public interest interventions. This refers to the ability of the CMA to analyse public interest issues in conjunction with a Phase II market investigation, when directed to do so by the Secretary of State. This might occur where the CMA takes on an in-depth investigation of a market that has attracted a lot of public, and therefore political, attention. Markets in the health sector, for example, may be appropriate candidates for public interest interventions. These interventions will allow the CMA to propose remedies more suitable for addressing public concerns than remedies based solely on economic competition concerns.
These reforms of the UK competition landscape represent the biggest change to competition law in more than a decade. The setting up of a new one-stop shop for competition matters should benefit legal practitioners and regulators alike. Similarly, clear time limits for market investigations are of benefit to practitioners and investigated parties.
Practitioners and businesses should also be aware, however, that the lack of a need to prove dishonesty in cartel cases may now herald a new dawn in effective prosecution against individuals.