The UK’s competition law regime is on the cusp of the most fundamental and comprehensive reform in a generation, as a result of recently-enacted or planned reforms at both the UK-level and at EUlevel, which will come into operation over the next couple of years.

The two most significant sources of these reforms at UK-level are:

  • The Enterprise and Regulatory Reform Act 2013 (ERRA), which was enacted in April 2013 and whose reforms will mostly come into effect in April 2014.
  • The Consumer Rights Bill (CRB) currently being consulted on by the UK Government and could come into effect as early as late 2014.

Set against the background of a very challenging economic climate characterised by low/stagnating growth, these reforms are being presented as a necessary contribution to economic growth, aimed at stimulating competition and increasing efficiency and innovation levels, ultimately to the benefit of UK consumers. The proposed reforms include:

  • Replacing the Office of Fair Trading and Competition Commission with a new unified Competition and Markets Authority (CMA), aimed at reducing delay and duplication and enabling a more dynamic public enforcement of the competition rules.
  • Measures to improve the efficiency and transparency of investigations of suspected anticompetitive agreements or abuse of dominance under the Competition Act 1998 (CA98).
  • Lowering the bar for the prosecution of individuals for the cartel offence under the Enterprise Act 2002 (EA02) by removing the dishonesty element of the offence.
  • Bringing in new statutory time limits for merger control reviews and for market studies/investigations.
  • Promoting a greater use of the competition laws by sector-specific economic regulators and enhancing the CMA’s coordinating role as regards the use of the competition rules in regulated sectors.
  • Encouraging more private legal actions seeking damages/injunctive relief for violations of the competition rules including, if the UK Government’s current proposals are enacted, introducing US-style “opt out” class actions albeit with a number of safeguards against abuse (see February 2013 publication).

However, a number of the proposed reforms have the potential to significantly increase the costs and risks of doing business in the UK, which, given the continuing economic environment, is cause for considerable concern:

  • The reforms are likely to lead to an increase in the intrusiveness and burden of CA98 investigations, as the CMA will have broader investigatory powers, for instance to compel individuals to answer questions about suspected violations, and will have a greater ability to impose “interim measures” pending the outcome of an investigation.
  • The removal of the dishonesty element under the cartel offence, although replaced by a number of transparency defences, could lead to a period of uncertainty having the effect of slowing down commercial decision-making (much will depend on the content and clarity of the prosecutorial guidance which the CMA is obliged to publish).
  • The CMA will have enhanced powers to interfere with completed mergers (including a new power to unravel integration that occurred before the CMA calls-in a merger filing, on top of the existing power to impose forward-looking “hold-separate” obligations) and will have wider investigatory powers during a Phase I merger control review.
  • The CMA will have powers to conduct market studies and market investigations across markets, again with enhanced investigatory powers for market studies.
  • Introducing for the first time “opt-out” collective actions raises very significant concerns of importing some of the drawbacks of US style class actions, with the potential to impose a huge burden on UK businesses and creating incentives to settle questionable actions.

In short, there are legitimate concerns that these reforms will impose an additional and costly regulatory burden on UK business, shortly to face:

  • More (and more intrusive) competition investigations and market studies/investigations.
  • An increased risk of criminal prosecution.
  • Potentially more intrusive merger control reviews of completed mergers including very small mergers (the UK Government passed on the opportunity to establish a “safe harbour” for small mergers on the grounds that it was not “a high priority at this time”), edging the UK closer to those regimes which require pre-approval for qualifying mergers.
  • A much greater prospect of being sued for competition law infringements including by the representatives of classes of private litigants (many/most of whom may have simply failed to “optout” of the action).

In addition, the European Commission is also proposing/considering a number of reforms at EU level including:

  • A package of proposals to facilitate private antitrust damages actions (see June 2013 publication).
  • Reform of the EU Merger Regulation: on 20 June 2013 the Commission launched a consultation, including as regards options for extending the scope of the EUMR to the acquisition of minority non-controlling interests.

The combined impact of the various reforms to the UK competition regime represents a step-change for UK businesses. Whether this will be conducive to the growth of UK businesses and of the wider UK economy remains to be seen. One thing is certain; the reforms already enacted and coming into effect in April 2014 represent a materially increased level of antitrust risk for UK businesses (and individuals). Firms doing business in the UK would be well advised to review their compliance procedures and business practices now, to ensure they are prepared for April 2014.

Below, we outline in further detail the most significant reforms coming into effect under the ERRA.

Click here to view table.