Enforcement proceedings in dominance in United Kingdom

Enforcement proceedings

Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?

The CMA is the primary public enforcer of abuse of dominance rules. In addition, the following regulators have concurrent powers to enforce competition law in their sectors:

• Civil Aviation Authority (air traffic and airport operation services);
• Financial Conduct Authority (financial services);
• NHS Improvement (healthcare services);
• Northern Ireland Authority for Utility Regulation (gas, electricity, water and sewerage services in Northern Ireland);
• Ofcom (electronic communications, broadcasting and postal services);
• Office of Gas and Electricity Markets (Ofgem) (gas and electricity);
• Office of Rail and Road (ORR) (railway services);
• Payment Systems Regulator (payment systems); and
• Water Services Regulation Authority (Water and sewerage).

The CMA and concurrent competition enforcers have extensive investigation powers, including issuing requests for information, which may result in penalty payments if the company does not respond in time (or at all). In April 2016, the CMA imposed a fine for the first time for failure to provide the requested information (Pfizer).

The CMA and concurrent regulators can conduct unannounced inspections (‘dawn raids’) at a company’s premises, and it can require individuals to attend interviews provided they have a connection with a business which is a party to the investigation. They can also carry out inspections of private premises if the Court or CAT has issued a warrant.

What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?

The CMA and concurrent competition authorities have the following extensive powers to impose sanctions and remedies.

Fines

Fines can be up to 10 per cent of the undertaking’s worldwide turnover in the past business year and are calculated according to the CMA’s 2012 guidance (taking account of factors like duration, aggravating or mitigating factors, deterrence, proportionality and settlement discounts) (OFT 423). The largest fine that the CMA has imposed for an abuse of dominance is the £84.2 million fine imposed on Pfizer for excessive pricing.

An undertaking may be fined only if its conduct was intentional or negligent. Any undertaking whose turnover does not exceed £50 million benefits from immunity from fines for infringing the Chapter 2 Prohibition (but not article 102), although immunity may be withdrawn on a prospective basis.

Remedies

The CMA and concurrent competition authorities may issue directions as they consider appropriate to bring an abuse of dominance to an end, which can be enforced through the civil courts (sections 33 to 34, Competition Act 1998). The CMA has no power to impose structural remedies, although it is possible for an investigation to be closed on the basis of structural commitments (Severn Trent).

Individual sanctions

The CMA and concurrent competition authorities cannot sanction individuals directly for an abuse of dominance. They may, however, apply for a competition disqualification order that prevents an individual who was a director of an infringing company from being a company director for up to 15 years. The court must be satisfied that the individual’s conduct makes him unfit to be a company director. Competition Disqualification Orders have not yet been appied in abuse of dominance cases.

Commitments

The CMA and concurrent competition authorities have the power to accept binding commitments from an undertaking to bring the suspected infringement to an end. An undertaking can thereby avoid a finding of an infringement and a fine.

Can the competition enforcers impose sanctions directly or must they petition a court or other authority?

The CMA and concurrent competition authorities can impose sanctions (as well as interim measures) directly.

What is the recent enforcement record in your jurisdiction?

The CMA’s enforcement activity has grown considerably in recent years, particularly as market studies and investigations draw to a close, and enforcement remains a high priority. In a speech in November 2017, Dr Michael Grenfell, Executive Director of Enforcement, noted that the CMA had issued nine infringement decisions from April 2016 to March 2017 and from April to November 2017 it had issued three further infringement decisions and two commitment decisions.

Moreover, as Dr Grenfell noted in a speech in May 2018, the CMA opened 10 new antitrust cases per year in April 2016 to March 2017 and in April 2017 to March 2018 - a marked increase compared with the 6.8 competition cases opened per year by the OFT (the CMA’s predecessor). As of January 2019, the CMA had 17 open antitrust cases (in which no infringement, commitment or other final decision has been taken).

Recent abuse of dominance probes have focused on the pharmaceutical sector, where the CMA has open investigations into issues such as excessive pricing and allegedly unlawful rebates. High-profile infringement decisions in the ‘pay-for-delay’ (GlaxosSmithKline), excessive pricing (Pfizer/Flynn Pharma), and price discrimination (Royal Mail) cases have resulted in high fines (£37.6 million on GlaxoSmithKline; £50 million on Royal Mail; and £84.2 million on Pfizer). By contrast, from 2012 to 2014 the OFT imposed only £65 million of fines in total.

CMA investigations vary significantly in duration, and no statutory deadlines apply. Very broadly, a CMA investigation is likely to take around three years (from case-opening until decision).

Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?

In EWS Railway v E.ON the High Court held that contractual terms that infringed article 102 and the Chapter II Prohibition were void from the moment the contract was concluded. Because those clauses could not be severed, the contract as a whole was void and unenforceable.

To what extent is private enforcement possible? Does the legislation provide a basis for a court or other authority to order a dominant firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract?

Two types of private action exist in the United Kingdom: follow-on actions and stand-alone actions. A follow-on action for damages is founded on an infringement decision by a UK competition authority or the European Commission, which binds the Court or the CAT. The claimant therefore only needs to show loss and causation. In a stand-alone action, the claimant must also prove that the defendant infringed competition law.

Since October 2015, stand-alone actions and follow-on actions can be brought before the CAT as well as the civil courts, both of which have jurisdiction to award damages and equitable remedies, including injunctive relief, specific performance and declarations of illegality.

The CAT also has the power to admit collective actions for damages on an opt-in or opt-out basis (a ‘collective proceedings order’). The claimant has to show that it is a suitable representative and that the claims in question are sufficiently similar to be brought in collective proceedings.

UK Regulations implementing the EU Damages Directive address limitation periods for bringing private actions (ie, six years from the date that the infringement ceased or the claimant knew - or could reasonably be expected to know - of the infringement, subject to certain provisions suspending the limitation period). The UK Regulations also address disclosure and the weight to be afforded to findings of competition authorities and courts in other EU member states. The UK Regulations apply to violations of both EU and UK competition law.

Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?

Damages in competition claims are intended to be compensatory: they are intended to place the victim in the position he or she would have been in had the infringement not occurred.

In exceptional circumstances, where compensatory damages would be an inadequate remedy, damages may, in principle, be awarded on a restitutionary basis (ie, an account of the profits earned unjustly by the defendant), although this has not happened in practice.

UK Regulations that implement the EU Damages Directive prohibit awards of exemplary damages in antitrust actions. Previously, exemplary damages had been awarded in Cardiff Bus.

To what court may authority decisions finding an abuse be appealed?

Any person who is found to have infringed article 102 or the Chapter II Prohibition by the CMA or a concurrent UK competition authority has a right of appeal to the CAT, which can hear appeals on points of fact or law. Further appeals (on points of law) can be made to the Court of Appeal.