The Competition Authority has again used a relatively new power to get court backing for an agreement reached between itself and an undertaking.

Section 14B

The Competition Authority is empowered by section 14B of the Competition Act 2002 (2002 Act) to apply to the High Court to have an agreement that it has reached with an undertaking,  which it has been investigating,  made an order of court. Section 14B is a provision which was inserted in the 2002 Act by the Competition (Amendment) Act 2012 (2012 Act). The Authority is required to publish the terms of such an agreement on its website not later than fourteen days before making an application to the High Court.

This section applies to agreements made between the Competition Authority and an undertaking, following an investigation, where the undertaking agrees to do (or refrain from doing) a number of things in return for the authority not prosecuting it.

Section 14B allows for a period of forty-five days before the order comes into effect.  This is to allow certain affected third parties the opportunity to apply to court to have the order annulled or varied.  Once made, such an order expires after seven years but may be extended for up to a further three years.

FitFlop

The first application made by the Competition Authority for such an order came on 18 December 2012, when the Authority applied to the High Court relating to an Agreement dated 14 November 2012 between the Authority and Brazil Body Sportswear (BBS), the distributor of the FitFlop brand of footwear on the island of Ireland.

The Authority found evidence of serious restrictions being placed on retailers' freedom to trade by BBS and it formed the preliminary view that BBS had infringed section 4 of the Act and Article 101 of the Treaty on the Functioning of the European Union, through resale price maintenance. The Authority contacted BBS and offered it the opportunity to avoid High Court proceedings for infringement of section 4 and Article 101 by providing a series of cease-and-desist commitments to the Authority and having these commitments made an order of the Court under section 14B.

BBS agreed to proceed in this manner and offered suitable commitments to the Authority rather than presenting any justifications or defences that may have been available to it and in order to achieve a speedy resolution of the matter.

The Agreement provided that, in return for complying with its terms, the Competition Authority would not bring proceedings against the company. The order was granted by the High Court and no third party application was made to the Court, so the order took effect on 2 February 2013.

Irish Medical Organisation

The Competition Authority began High Court proceedings against the IMO in July 2013. On 28 May 2014, the IMO provided undertakings to the High Court:

  1. not to organise or recommend the collective withdrawal of services or boycotts by its members, and
  2. to advise its members that they should decide individually and not collectively whether to participate in publicly funded GP health services on such terms as are offered by the Minister.

The terms of the settlement set out, from a competition law perspective, the nature of the IMO’s role and the safeguards which are necessary to ensure that competition law is not breached and patients and taxpayers are protected. In particular, it emphasises that the Minister/State must make the final decision on contract terms and conditions, including fees. Under competition law, self-employed individuals cannot act collectively with the aim of affecting fees paid to them.

On the other hand, the IMO secured confirmation from the Competition Authority that the IMO is entitled to represent its GP members with the HSE and the Government in respect of any proposed changes to publicly funded contracts with General Practitioners. Therefore, the Agreement amounts to a framework which acknowledges the IMO’s right to communicate with its members regarding proposed contractual arrangements, but prescribes the limits to its activities.

Contempt of Court

Failure to comply with such an order constitutes contempt of court. Before granting such an order, the High Court must be satisfied that the undertaking that is a party to the agreement has obtained legal advice, that the agreement is clear and unambiguous and capable of being complied with, and that the undertaking that is a party to the agreement is aware that failure to comply with any order made under s.14B would constitute a contempt of court.

A feature of contempt of court is that the sanction is coercive and consists of imprisonment until such time as the order is complied with or waived. The contempt laws have already been applied in the competition law context where one individual was jailed for contempt of court regarding his failure to pay an €80,000 fine for participating in the Citroën motor dealer cartel.

Comment

From the point of view of a trade association or professional body in the future, the content of the commitments given in the cases explained above appear less important than the form they are given in. The cases so far feature explicit commitments from the defendants to abide by the law as it stands, without seeming to place any extra burden on them.

However, the effect of the Section 14B Order should make it easier for the Competition Authority to enforce the terms of the underlying Agreement because it would appear that the Authority simply needs to appeal to the discretion of a High Court judge in order to secure a judgment for non-compliance with the order in question.

The above provision is ultimately designed to assist the Authority in imposing enforceable obligations on undertakings that breach competition law. The main safeguard, however, is the fact that the consent of the firm under investigation is required before a Section 14B Order order is made by the court.

Another element for firms to consider is the potential for compensation claims by victims of anti-competitive conduct. Under the 2012 Act, private individuals can use a firm’s prior conviction for competition offences to help them prove their case. Orders under Section 14B, however, cannot be used in such a manner. Therefore, contrary to a full conviction, the fact of there being a Section 14B Order in place does not automatically open the door to private follow-on actions for compensation.

In conclusion, the use of Section 14B Orders would appear set to increase because of the relative ease of securing one for the Competition Authority compared to the difficulty involved in obtaining a full conviction. For the undertaking involved, it may be an attractive option because of the certainty it lends to their operations on an ongoing basis.