Investigation and settlement

Legal representation

Under which circumstances would the company and officers or employees need separate legal representation? Do the authorities require separate legal representation during certain types of investigations?

The company and its officers or employees typically require separate legal representation where there is a risk of a conflict of interest. For example, this could arise in cartel investigations that might also involve lead to criminal prosecutions of individuals, separate from the civil investigation of the company. Particular considerations arise where the company is applying for type B or C leniency and is, therefore, obliged to cooperate with the CMA’s investigation but individual employees or officers may not have been granted immunity from criminal prosecution (see question 15).

CMA guidance refers to the need to consider conflicts of interest where the CMA exercises its powers to summon individuals who have a connection with the company to a compulsory interview. The CMA considers it inappropriate that the interviewee should be accompanied by a legal adviser who is acting only for the company, and reminds advisers acting for both the company and the interviewee to consider any risk of a conflict of interest arising.

Dawn raids

For what types of infringement would the regulatory authority launch a dawn raid? Are there any specific procedural rules for dawn raids?

The CMA can conduct dawn raids as part of an investigation into suspected anticompetitive agreements, abusive conduct, the criminal cartel offence and possible applications for director disqualification orders. It may also carry out inspections on behalf of the European Commission or other EU national competition authorities. Inspections fall into the following three categories:

Inspections of business premises without a warrant

The CMA’s officers are entitled to:

  • require anyone on the premises to produce documents that the officers consider relevant to the investigation;
  • provide an explanation of such documents;
  • state where such documents may be found;
  • take copies of documents;
  • require electronic information that they consider relevant to be produced in a legible form that can be taken away; and
  • take steps that appear necessary to preserve documents that they consider relevant to the investigation.

Inspections of business premises with a warrant

In addition to the above powers, a warrant allows officers to use such force as is reasonably necessary to enter the premises (including unoccupied premises). Officers also obtain the right to carry out searches, not merely to require documents to be produced to them.

Inspections of domestic premises

The High Court or CAT may issue a warrant to search domestic premises that are used in connection with a company’s affairs.

Inspections of business or domestic premises relating to the criminal cartel offence always require a warrant.

In 2017, the CMA faced its first challenge to a warrant granted under section 28 of the Competition Act. The case concerned a warrant to search Concordia’s premises in respect of documents relating to two pharmaceutical drugs that were already the subject of an ongoing investigation. Concordia applied to vary or discharge the warrant, arguing that there was no risk of such documents being concealed or destroyed. The warrant was originally granted ex parte and defended partly on the basis of evidence that was subject to public interest immunity (and that therefore would not be disclosed to Concordia). In January 2019, the High Court dismissed Concordia’s application, finding that the CMA had reasonable grounds to suspect that the documents in question might otherwise have been concealed or destroyed.

What are the company’s rights and obligations during a dawn raid?

It is a criminal offence to obstruct the CMA’s unannounced inspections, which, in the case of inspections carried out under a warrant, can result in imprisonment. It is also a criminal offence to destroy, falsify or conceal documents that the CMA has required to be produced, or to provide false or misleading information to CMA officials.

The company has the following rights in relation to ‘dawn raids’:

  • Right of information. A right to be provided with evidence of the CMA authorisation, a document setting out the subject matter and purpose of the inspection, and the warrant (as applicable).
  • Right to legal privilege. The CMA is not entitled to take copies of privileged documents. To establish that the document is privileged, CMA inspectors may want to see at least the letterhead (or sender email address), as well as the subject line. In cases of disagreement, the inspectors may agree to ‘seal’ the documents to resolve the question of privilege at a later stage.
  • Right of privilege against self-incrimination. The CMA’s right to require factual explanations of documents cannot compel a company to provide answers that would involve the admission of an infringement of competition law.
  • Right to legal advice. The occupier of the premises is entitled to have their legal adviser present. The CMA will typically wait a ‘reasonable time’ for legal advice to be sought (although it does not have to), possibly subject to requiring filing cabinets to be sealed, refraining from moving business records, and suspending external email (CMA8).
Settlement mechanisms

Is there any mechanism to settle, or to make commitments to regulators, during an investigation?

The CMA can accept commitments from, or enter into a settlement agreement with, companies under investigation.

Commitments procedure

The CMA can accept binding commitments from the company in cases where ‘the competition concerns are readily identifiable, will be fully addressed by the commitments offered, and the proposed commitments can be implemented effectively and, if necessary, within a short period of time’ (CMA 8, paragraph 10.16). CMA guidance also explains that commitments are very unlikely to be accepted in cases concerning ‘secret cartels’ or a ‘serious’ abuse of dominance.

If the CMA accepts commitments, there is no finding - or admission - of an infringement. Commitments can, in principle, be accepted at any stage of the investigation (although the CMA is unlikely to accept commitments after it has issued a Statement of Objections). The CMA will give third parties an opportunity to comment on the commitments (CMA8), and decisions to accept commitments are subject to judicial review (for example, Skyscanner v CMA (2014)). Recent cases resolved through commitments include the CMA’s investigations in Epyx (2014) and Road fuels (2014), as well as the Office of Rail and Road’s Freightliner (2015) investigation.

Settlements procedure

Settlement generally arises at a later stage of the investigation once the CMA is satisfied that it has met the evidential standard for issuing an infringement decision. Under the settlement procedure, the company admits that it has infringed competition law and agrees to pay a financial penalty of a maximum amount that takes into account a discount of up to 20 per cent for cases settled before a statement of objections is issued, or 10 per cent afterwards.

The company also accepts a streamlined administrative process, involving reduced access to file (eg, limited to key documents only), no written representations in response to the statement of objections (except in relation to ‘manifest factual inaccuracies’), and no oral hearing. The settling company agrees to be bound by the ultimate infringement decision, even if other addressees of the decision successfully appeal against it.

The settlement procedure has to respect the principle of equal treatment. In the OFT’s Tobacco decision (2010), the OFT gave assurances to one - but not all - settling companies that it would repay the fine in the event of a successful appeal by non-settling defendants. The settling parties that did not benefit from the same assurances argued that the OFT had breached the principle of equal treatment and therefore ought to repay the fines that they had paid. The OFT refused to do so and its decision was appealed to the courts. The Supreme Court ultimately held that, while the principle of equal treatment did apply, the OFT was not obliged to repay fines that had been lawfully imposed and paid at the time.

What weight will the authorities place on companies implementing or amending a compliance programme in settlement negotiations?

The CMA may be willing to grant a discount on the financial penalty of 5 to 10 per cent (see question 4). This discount is also available to companies that participate in the settlement procedure (see question 32). For example, in Gaviscon (2010), Reckitt Benckiser received a discount of 5 per cent on the basis that it had ‘demonstrated that it has taken adequate steps to ensure compliance, in particular, by investing significant resources into developing a comprehensive and effective competition law compliance policy’.

Corporate monitorships

Are corporate monitorships used in your jurisdiction?

‘Monitoring trustees’ are typically used to ensure that merger parties comply with ‘hold separate’ orders (see question 25). Under the CMA’s merger guidance, it will normally consider the need for a monitoring trustee at Phase I of the investigation where, among other factors, there is substantial integration of the businesses already. At Phase II, the CMA will usually require a monitoring trustee to be appointed in completed mergers unless the parties provide compelling evidence that there is little risk of pre-emptive action (CMA2). The CMA has also required monitoring trustees to be appointed to oversee the implementation of remedies in mergers and market investigations.

The role of the monitoring trustee is generally to oversee compliance and the parties have a duty to cooperate. Any breach of an initial enforcement order (including provisions requiring cooperation with a monitoring trustee) can expose the parties to fines of up to 5 per cent of worldwide turnover.

Monitoring trustees may also be used to oversee compliance with remedies or commitments in antitrust (anticompetitive agreements and dominance) cases, although this is relatively rare in practice.

Statements of facts

Are agreed statements of facts in a settlement with the authorities automatically admissible as evidence in actions for private damages, including class-actions or representative claims?

Under the settlement procedure, the CMA issues an infringement decision that the settling company agrees not to challenge except for manifest factual inaccuracies. This infringement decision is binding on the High Court or CAT for the purposes of private damages actions, just as any contested infringement decision would be, as are any ‘findings of fact’ in the decision (sections 58 and 58A of the Competition Act 1998).

Under the EU Damages Directive (implemented in the UK by the Claims in respect of Loss or Damage arising from Competition Infringements (Competition Act 1998 and Other Enactments (Amendment)) Regulations 2017), the UK courts and CAT cannot order the disclosure of a defendant’s settlement submission in a private damages action.

A commitments decision expresses only the CMA’s preliminary conclusions and does not give rise to a finding of infringement that enables private ‘follow-on’ actions, although claimants are free to cite it as part of a standalone action.

Invoking legal privilege

Can the company or an individual invoke legal privilege or privilege against self-incrimination in an investigation?

Companies facing antitrust or merger investigations cannot be required to disclose privileged documents or information in response to requests for information and CMA officials are not allowed to copy privileged information when carrying out inspections of business or domestic premises (see questions 30 and 31). Individuals cannot be compelled to disclose privileged information when summoned to compulsory CMA interviews. The following types of privilege most frequently raise questions.

Legal advice privilege applies to confidential communications between a client and legal adviser for the purposes of giving or obtaining legal advice. Unlike EU rules on privilege, legal advisers include in-house counsel. English law has, however, developed a narrow definition of the ‘client’, which may only include a small group of people who are tasked with obtaining legal advice (following the Three Rivers case). Thus, the recent RBS Rights Issue litigation made clear that lawyers’ records of discussions with company employees (who did not form part of the client) would not be protected by legal advice privilege. To address this risk, a company’s board may wish to designate particular employees with authority to seek legal advice on behalf of the organisation.

Litigation privilege applies to communications between a legal adviser and client or a third party that were for the dominant purpose of litigation that is reasonably in prospect. In an appeal against the OFT’s Dairy products (2011) decision, the CAT held that communications between Tesco’s lawyers and potential third-party witnesses were covered by litigation privilege since, by that point, the OFT had issued a statement of objections (and supplementary statement of objections), so that ‘by this point the character of the administrative procedure was no less confrontational than ordinary civil proceedings’ (Tesco v OFT (2012)). In ENRC v SFO (2018), the Court of Appeal clarified that litigation privilege may nevertheless apply in the context of regulatory investigations even before formal allegations had been made; for example, to documents created by organisations conducting internal investigations in contemplation of possible regulatory enforcement action.

Privilege against self-incrimination means that a person cannot be compelled to give answers that would require an admission that they have infringed the law. The CMA can, however, ask factual questions about documents that are already in existence and ask for them to be produced. It can also require individuals to attend formal interviews.

Confidentiality protection

What confidentiality protection is afforded to the company and/or individual involved in competition investigations?

The CMA is allowed to name any companies that it is investigating and benefits from statutory privilege against defamation. The CMA’s policy, however, is generally not to name the parties under investigation until a later stage of the investigation, typically once a statement of objections has been issued (CMA8).

The UK competition authorities are restricted from disclosing ‘specified information’ as defined under part 9 of the Enterprise Act 2002. This includes confidential information about a firm or an individual that the authority acquires in the exercise of any function it has under legislation, including the Competition Act 1998. ‘Specified information’ can only be disclosed in accordance within certain ‘information gateways’. These include disclosure with the company’s consent, where disclosure is required under EU law, to facilitate the exercise of a statutory function, in connection with criminal proceedings or disclosure to overseas public authorities for the purposes of certain types of investigation.

Refusal to cooperate

What are the penalties for refusing to cooperate with the authorities in an investigation?

Failing to produce requested information within the deadline, providing false or misleading information, failing to attend a compulsory interview or obstructing an inspection can result in financial penalties. The first fine for failure to supply requested information was imposed on Pfizer in April 2016. The CMA fined Pfizer £10,000 for failing to provide underlying data for a claim that Pfizer made at an oral hearing. The CMA also fined Hungryhouse in 2017 for failing to provide information in the context of a merger investigation, and fined Fender £25,000 in 2019 because one of its employees concealed information potentially relevant to a Competition Act investigation.

Serious refusals to cooperate with the CMA (including knowingly or recklessly providing false information) may also be a criminal offence.

Infringement notification

Is there a duty to notify the regulator of competition infringements?

There is no general duty to notify authorities of breaches of competition law, and the privilege against self-incrimination protects companies from being compelled to confess infringements (see question 36).

Firms that are regulated by the FCA - a concurrent competition enforcer - are required to notify it if they have or may have committed a ‘significant infringement of any applicable competition law’ (FCA Handbook).

Limitation period

What are the limitation periods for competition infringements?

Competition enforcers are free to investigate historic conduct without any particular time limit. There are limitation periods, though, for bringing private ‘follow-on’ actions of six years in England, Wales and Northern Ireland, and five years in Scotland. The European Damages Directive and UK Implementing Regulations provide for suspensions of the limitation periods during investigations by competition enforcers.