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Investigations

Initiating an investigation

Who can initiate an investigation of potential cartel conduct?

An investigation may be initiated as a result of:

  • the Competition and Markets Authority’s (CMA) research and market intelligence functions;
  • other sources of information open to the CMA, such as its merger or markets functions, use of its surveillance powers under the Regulation of Investigatory Powers Act 2000 or information received via the European Competition Network or the European Commission;
  • whistleblowing by cartelists; and
  • complaints.

If an investigation is initiated by complainants or third parties, what rights (if any) do they have?

The CMA will grant formal complainant status to a complainant who requests such status and whose interests are, or are likely to be, materially affected by the subject matter of the complaint. The CMA may involve a formal complainant at certain stages of an investigation. For example, it may offer formal complainants access to the same information available to undertakings under investigation at the beginning of an investigation. Where the CMA is minded to close an investigation on grounds of administrative priorities or on the basis that there are no grounds for action, formal complainants are given an opportunity to comment in advance of the CMA taking its final decision. Where the CMA issues a statement of objections, it will invite formal complainants who may be able materially to assist its assessment of a case to submit written representations on receipt of a non-confidential version.

What obligations does a company have on learning that an investigation has commenced?

A company must cooperate with the CMA when it exercises its statutory powers as part of its investigation. There are civil and criminal sanctions for individuals who fail to cooperate and other frustrating actions as described in detail below.

What obligations does a company have if it believes that an investigation is likely?

A company does not have specific obligations before an investigation commences. However, a company may wish to conduct an immediate internal investigation in such circumstances to establish the likely degree of its exposure if an investigation is launched and to consider applying for immunity or leniency. Firms regulated by the Financial Conduct Authority (FCA) must report significant actual or potential contraventions of competition law to the FCA.

What are the potential consequences of failing to act or delaying action?

As companies do not have any specific obligations before an investigation commences, there are no formal consequences of failing to act or delaying action.

Formal stages of investigation

What are the formal stages of and approximate timeframe for investigations?

The CMA will open an investigation if there are reasonable grounds to suspect a breach of competition law and the case falls within its enforcement priorities. After opening an investigation, the CMA will:

  • allocate the case team;
  • send the undertakings concerned a case initiation letter with details of the conduct under investigation, the relevant legislation, the case-specific timetable and relevant contacts; and
  • generally publish a notice of investigation on its website.

During the investigation, the CMA will inform the parties of its progress, either by telephone or in writing. Parties will also be able to meet with the case team at ‘state of play’ meetings to receive updates on progress.

The CMA may conclude an investigation by:

  • closing it on grounds of administrative priorities;
  • issuing a no grounds for action decision on the basis that there is insufficient evidence of an infringement;
  • accepting commitments from an undertaking as to its future conduct; or
  • issuing a statement of objections.

Where its provisional view is that the conduct under investigation amounts to an infringement, after issuing a statement of objections and allowing the parties to make representations, the CMA may issue a final infringement decision where the legal test to establish an infringement is met and impose fines or directions to bring the infringing conduct to an end.

In the CMA’s most recent cases, the typical timeframe from opening an investigation to issuing an infringement decision is one to two years, but some cases have taken much longer to resolve.

Investigative powers

What investigative powers do the authorities have?

Powers to request information and ask questions

Where the CMA has reasonable grounds to suspect that an agreement or concerted practice is in breach of Chapter I or Article 101, it may require any person to provide specified documents or information relevant to its investigation. In addition, the CMA may require an individual connected with an undertaking under investigation to attend an interview and answer questions.

Where the CMA has reasonable grounds to suspect that the criminal cartel offence has been committed, it may require the individual under investigation or any other person with relevant information to answer questions or otherwise provide information relevant to its investigation. In addition, it may require the individual under investigation or any other person with relevant information to produce specified documents and other documents relevant to its investigation, and require an explanation of a document from the person producing it or a statement of where such a document may be found.

On-site investigations This section details the circumstances in which the CMA is authorised to search business or personal premises under the Competition Act 1998 in respect of suspected breaches of Chapter I or Article 101 and under the Enterprise Act 2002 in respect of the criminal cartel offence.

Surveillance and access to communications data The CMA can conduct directed surveillance (monitoring the movements of individuals) and use covert human intelligence sources (informants) in civil and criminal investigations. In addition, it may authorise intrusive covert surveillance in respect of personal premises and private vehicles, including entering private property in order to install surveillance devices to investigate the criminal cartel offence. It may also access communications data (eg, details of the times, duration and recipients of communications such as telephone calls).

What is the geographic reach of public enforcement actions?

The CMA can exercise its investigatory powers only in the United Kingdom. 

When is court approval required to invoke these powers?

In the following circumstances, the CMA must apply to the Competition Appeal Tribunal or a judge of the High Court (or of the Court of Session in Scotland) to enter business or personal premises in exercising its powers under the Competition Act 1998:

  • There are reasonable grounds to suspect that there are documents which have not been produced as required;
  • There are reasonable grounds to suspect that there are documents which the CMA has powers to require but which, if the CMA did require them, would be:
    • concealed;
    • removed;
    • tampered with; or
    • destroyed; or
  • An officer was unable to enter and there are reasonable grounds to suspect that there are documents which the CMA has powers to require – this does not apply to personal premises.

The CMA (or the procurator fiscal in Scotland) must apply to the Competition Appeal Tribunal or the High Court (or the sheriff in Scotland) to enter premises in exercise of powers under the Enterprise Act 2002 if there are reasonable grounds to believe that there are documents on the premises whose production the CMA has powers to require and one of the following applies:

  • The documents have not been produced as required;
  • It is not practicable to serve a notice in relation to them; or
  • The service of such a notice might seriously prejudice the investigation.

To conduct directed surveillance, use covert human intelligence sources or access communications data, the CMA must obtain approval from a justice of the peace in England and Wales, a sheriff in Scotland or a district judge in Northern Ireland. To interfere with property (eg, in order to install surveillance devices), the CMA must obtain approval from a commissioner in circumstances where the property is used wholly or mainly as a dwelling or as a bedroom in a hotel or constitutes office premises or where the interference is likely to result in any person acquiring knowledge of matters subject to privilege, confidential personal information or confidential journalistic material.

Are searches of business and personal premises authorised? If so, which bodies carry out searches and will they wait for legal advisers to arrive?

The CMA can enter any business premises without a warrant in order to:

  • require any person to produce any document or information relevant to its investigation, including information stored in electronic form and accessible from the premises in question;
  • require any person to explain any such document;
  • require a person to state, to the best of his or her knowledge and belief, where any such document is to be found; and
  • make copies of, or take extracts from, any such document.

Where certain conditions are met, the CMA may obtain a warrant to enter business and personal premises in order to search for and obtain documents of a kind in respect of which the warrant was granted. In such circumstances, reasonable force may be used to obtain entry and officers may, in addition to exercising the powers available in raids without a warrant as set out above, take away documents and retain them for three months if such action appears necessary to preserve or prevent interference with the documents or it is not reasonably practicable to make copies of the documents on the premises in question. Officers can take any other steps necessary to preserve or prevent interference with documents.

An investigating officer is not required to wait for legal advisers to arrive in order to commence a raid. However, upon request – and if the officer considers it reasonable in the circumstances and is satisfied that the occupier will comply with any conditions of granting its request (eg, sealing cabinets, suspending external emails and allowing the officer to enter and remain in occupation of selected offices) – he or she must allow a reasonable time for the occupier’s legal advisers to arrive. However, any delay must be kept to a strict minimum and if an in-house legal adviser is present on the premises or if the occupier was given notice of the raid, the officer need not wait for an external legal adviser to arrive.

In respect of the criminal cartel offence, the CMA must obtain a warrant to enter any premises in order to search for and obtain documents of a kind in respect of which the warrant was granted. Reasonable force may be used to obtain entry and officers may:

  • take any documents of the relevant kind;
  • take any other steps necessary to preserve or prevent interference with relevant documents;
  • require any person to provide an explanation of any relevant document or a statement of where such a document may be found;
  • require the production of any relevant information stored in electronic form and accessible from the premises in a visible and legible form in which it can be taken away; and
  • seize and remove material in certain circumstances.

What level of cooperation with the authorities is required and what are the consequences for failing to cooperate?

Under the Competition Act 1998 and the Enterprise Act 2002, there are civil and criminal sanctions respectively for failure to cooperate with the CMA without reasonable excuse (eg, refusing to provide an explanation of a relevant document). In addition, it is a criminal offence to:

  • intentionally obstruct an officer exercising powers to enter premises;
  • destroy or falsify documents; or
  • provide false or misleading information.

The sanctions for such offences are fines and in some cases imprisonment.

Is in-house legal advice or attorney work product protected by the law of privilege? Does this extend to the advice of in-house counsel?

In exercising its investigatory powers, the CMA cannot require a person to produce communications protected by legal professional privilege. These include communications with in-house lawyers. Where the CMA is assisting the European Commission in carrying out an on-site investigation, the EU privilege rules will apply, in accordance with which a communication with an in-house lawyer or a communication with an external non-European Economic Area qualified lawyer is not privileged.

Are any other limitations imposed on investigatory powers in order to safeguard the rights of those under investigation?

The privilege against self-incrimination means that the CMA cannot force an individual to answer questions or surrender information that would amount to admitting an infringement of the law. However, it can ask questions about, or require the production of, documents already in existence or information relating to facts such as whether a given employee attended a particular meeting.

What is the process for objecting to an authority’s exercise of its claimed powers?

There is no statutory procedure for challenging an exercise of the CMA’s investigatory powers or statutory right of appeal to the Competition Appeal Tribunal. A party may raise any concerns with the senior responsible officer (SRO) on its case and refer the matter to the procedural officer if the SRO cannot resolve it. Alternatively, parties can challenge an exercise of power by the CMA by way of judicial review.

Publicity and confidentiality

What information about investigations will be made publicly available and at which stage(s) of the process?

At the beginning of an investigation, the CMA generally publishes a notice of investigation on its website, setting out basic details of the case and a case-specific administrative timetable. The CMA would generally not expect to publish the names of the undertakings under investigation except in exceptional circumstances.

After the analysis and review stage of an investigation, the CMA will announce the outcome of its investigation. Where it closes its investigation on grounds of administrative priorities, it will issue a statement to explain its reasons for closing the case. Where there is insufficient evidence of an infringement, it may publish a reasoned no grounds for action decision. Where it accepts commitments from a business as to its future conduct, it will publish the commitments on its website. Where its provisional view is that the conduct amounts to an infringement, it will issue a statement of objections (SO) to each responsible undertaking and announce the issuing of the SO on its website, generally including the identities of its addressees. The SO will set out the facts and the CMA’s legal and economic assessment of them which has led to its provisional view that an infringement has occurred. Where the CMA concludes that there has been an infringement, it will publish a non-confidential version of its final decision and a summary on its website. Otherwise, it will publish a reasoned no grounds for action decision.

Is any information automatically confidential and is confidentiality available on request?

Any information concerning the affairs of an individual or the business of an undertaking which comes to the CMA in connection with an investigation under Chapter I and Article 101 or into criminal cartel conduct is confidential and may not be disclosed during the lifetime of the individual or while the undertaking continues in existence, except in certain specified circumstances (eg, where the CMA has obtained the necessary consents or where disclosure is to facilitate the exercise by the CMA of its statutory functions). Before disclosing such information, the CMA must consider the need to exclude from disclosure the following:

  • any information whose disclosure would be contrary to the public interest;
  • commercial information whose disclosure may significantly harm the legitimate business interests of the undertaking to which it relates; and
  • information regarding the private affairs of an individual whose disclosure may significantly harm the individual’s interests.

International cooperation

Do the authorities in your jurisdiction cooperate with authorities in other jurisdictions?

The CMA cooperates extensively with the European Commission and national competition authorities of the other EU member states through the European Competition Network. In addition, the United Kingdom has mutual assistance arrangements relating to competition law enforcement with various other countries, including Australia, Canada, New Zealand and the United States.

Do the relevant enforcement authorities request waivers so as to allow for increased cooperation with authorities in other jurisdictions? What are the consequences of declining to grant a waiver?

In cases where an applicant has applied for leniency in other jurisdictions, the CMA would request – and expect to receive – a waiver of confidentiality in order to be able to discuss appropriate matters with such jurisdictions. Generally, a transfer of information is limited to what is necessary to coordinate concerted action such as on-site investigations. Particular sensitivities for an applicant regarding such waivers should be raised promptly with the CMA. Ideally, applicants’ advisers should take instructions on the issue of waivers in advance of making an application, as the CMA may need to coordinate with other jurisdictions with some urgency once an application has been made.

Decisions

How is a cartel investigation resolved? Are settlements, plea bargains or other negotiated resolutions available?

There is an option of settlement. The CMA has a broad discretion to choose whether it wishes to settle a case. Settlement is a voluntary process in which an undertaking must admit its infringement of competition law, cease the infringing conduct immediately and agree to pay a penalty. A settling party must also accept a more streamlined administration of its case (eg, more limited access to file), in order for the CMA to adopt an infringement decision in less time or with less resources than usual). In exchange for settling, parties will receive the following penalty discounts:

  • up to 20% – if the settlement was pre-issuing of the SO; or
  • 10% – if the settlement was post-issuing of the SO.

What is the process for negotiating a settlement, plea bargain or other negotiated resolution? Do such resolutions require court or other approval?

Parties may approach the CMA before or after the SO has been issued to register an interest in settling, but it is the decision of the CMA as to whether to enter into settlement discussions. The Case and Policy Committee must authorise the senior responsible officer (SRO) to engage in settlement discussions; the discussions are then typically led by the SRO. Resolving an investigation by means of settlement does not require court approval.

If a settlement is not reached, what is the procedure for adjudicating a charge of cartel conduct?

If a settlement is not reached, the investigation is resolved in accordance with the usual methods of resolution.

Which party must prove its case? What is the relevant standard of proof?

In respect of investigations under the Competition Act 1998, the burden is on the CMA throughout the proceedings to prove its case in accordance with the normal civil standard (the balance of probabilities). In respect of the criminal cartel offence, the CMA or the Serious Fraud Office must prove its case in accordance with the normal criminal standard (beyond reasonable doubt).

Is there a hearing? If so, what is the process for submitting evidence and testimony?

The CMA will offer all addressees of an SO the opportunity to attend an oral hearing. The addressee will agree an agenda with the case team, with time for the addressee to make oral representations and for the CMA to ask the addressee questions in respect of such representations. As a general rule, the addressee must confine itself to making oral representations on matters already raised in its written representations. The CMA may ask the addressee to clarify information set out in its written representations; the addressee may respond orally or in writing after the hearing.

What are the accused’s procedural rights?

Parties under investigation are entitled to make written representations in response to the SO; the deadline for submissions is usually at least 40 working days from the issue of the SO. Parties are also entitled to inspect copies of the disclosable documents in the CMA’s file; access to the file is typically available for a period of six to eight weeks and excludes confidential information and internal documents of the CMA. Addressees of an SO are entitled to attend an oral hearing and make oral representations on the SO. A procedural officer who has not been involved in the relevant investigation chairs the hearing and is required after it to confirm that the addressees’ right to be heard has been respected.

Appeal process

What is the appeal process?

Any party to an agreement or concerted practice in respect of which the CMA or a sectoral regulator has made a decision or any other applicant with a sufficient interest may appeal to the Competition Appeal Tribunal under the Competition Act 1998 within two months of receiving notice of the decision. Judgments of the Competition Appeal Tribunal on a point of law or as to the amount of any fine can be appealed to the Court of Appeal. Judgments of the Court of Appeal on a point of law which is of general public importance can be appealed to the Supreme Court. Criminal cartel convictions may be appealed to the higher courts following the usual procedure which governs criminal cases.

To what extent can the appeal body review the agency’s findings of fact, legal assessment and penalties?

The Competition Appeal Tribunal hears full merits appeals on the findings of fact or law and on the amount of any fine.

Penalties

Penalties for companies

What are the potential penalties for companies involved in a cartel?

Companies found to have breached Chapter I and Article 101 may face fines up to a maximum of 10% of their worldwide turnover in their last business year.

Are there guidelines in place for penalties? If not, how are penalties normally calculated?

The Competition and Markets Authority’s (CMA) guidance on penalties sets out that any penalty imposed in respect of a Chapter I and Article 101 infringement will be calculated in six steps:

  • Step 1 – calculation of the starting point with regard to the seriousness of the infringement and the relevant turnover of the undertaking.
  • Step 2 – adjustment for duration.
  • Step 3 – adjustment for aggravating or mitigating factors.
  • Step 4 – adjustment for specific deterrence and proportionality.
  • Step 5 – adjustment to prevent the penalty exceeding the maximum amount of 10% of worldwide turnover in the previous business year and to avoid double jeopardy.
  • Step 6 – adjustment for leniency or settlement discounts.

The sentencing limits in respect of the criminal cartel offence are set out in the Enterprise Act 2002. The general sentencing guidelines of the UK courts apply to the criminal cartel offence.

Do the authorities take into account any penalties imposed in other jurisdictions?

If a fine has been imposed by the European Commission, or by a court or other body in another member state in respect of the same agreement or conduct, this will be taken into account by the CMA.

How can a company mitigate its exposure to fines?

Cessation of cartel conduct is essential. To receive the maximum reduction in fines, a company may want to consider whistleblowing and making an immunity application to the CMA. Whether or not it wishes to apply for immunity or leniency, a company should conduct an internal investigation in order to establish the likely degree of its exposure by identifying relevant documents and taking statements from relevant employees. A company may also consider introducing a comprehensive compliance programme for relevant employees to demonstrate its intention to avoid any future breaches of competition law.

Penalties for individuals

What are the potential penalties for individuals involved in a cartel?

An individual convicted of the criminal cartel offence is liable on summary conviction to imprisonment for up to six months and/or a fine not exceeding the statutory maximum – up to £5,000 for offences committed before March 12 2015 and unlimited for offences committed after that date – and on conviction on indictment to imprisonment for up to five years and/or an unlimited fine. In addition, a director of a company found to have breached Chapter I and Article 101 may be disqualified from serving as a director for up to 15 years under the Company Directors Disqualification Act 1986. 

Do the authorities take into account any penalties imposed in other jurisdictions?

No rules require the CMA to take into account any penalties imposed on individuals in other jurisdictions.

Is a company permitted to pay a penalty imposed on its employee?

Companies can pay a penalty imposed on an employee. However, provisions of company law may prevent such payments in certain circumstances.

Is a company permitted to continue to employ an employee involved in cartel conduct?

The CMA has no specific statutory powers to require the dismissal of an employee – although it can disqualify a director – involved in cartel conduct; a company may wish to consider whether dismissal would be appropriate of its own accord.

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