Advanced tech, defence and critical infrastructure sectors targeted by foreign direct investment screening programmes in the USA and Europe
Governmental controls on M&A and investments on national security grounds have moved up the political agenda across the world, with many jurisdictions strengthening or introducing regimes for the first time.
In the UK, recent changes mean that any deal with a target in the advanced tech, military/dual-use or quantum computing sectors with a UK turnover above £1million will be within the scope of a national security review. At the EU level, a new process for screening foreign direct investment into the EU will apply from October 2020. National security reviews are a live concern for cross-border deals. Expert and experienced advice at an early stage is essential to minimise transaction risk and to successfully navigate a review process.
Increased consumer protection in the UK? CMA proposes reforms
In February 2019, the Competition and Markets Authority (CMA) published a series of proposed reforms designed to address its concerns with its abilities under the current legal framework to adequately protect consumers. The proposals to the Department of Business, Energy and Industrial Strategy (BEIS) are intended to “put consumers at the heart of the UK competition regime” by deconstructing the current “analogue” system of competition and consumer law.
The reforms represent a potentially significant increase In the CMA’s reach. Businesses should expect an increasing crackdown by the CMA on practices that are considered to be causing consumer detriment.
Furman Review recommends shake-up of UK competition rules for the digital age
In March 2019, an independent panel of experts published its recommendations for the government following its review of competition policy in the UK. The panel was instructed to examine the impact of digital markets on competition and consumers, and to consider whether competition law policy and enforcement tools in the UK require reform.
The panel found that UK competition law and policy did need reform in order to adequately manage the challenges and opportunities posed by digital markets.
CMA launches digital market study
On 3 July 2019, the CMA launched a market study into online platforms and the digital advertising market in the UK. The CMA is assessing the extent of online platforms’ market power in user-facing markets and what impact this has on consumers. The CMA is also looking at whether consumers are able and willing to control how data about them is used and collected by online platforms, and whether competition in the digital advertising market may be distorted by any market power held by platforms.
In Focus | Regulatory powers and trends
Who are the regulators?
The principal competition regulator in the UK is the CMA.
In addition, a number of sectoral regulators (such as the Payment Systems Regulator and the Financial Conduct Authority in relation to financial services, Ofgem in relation to energy and Ofcom in relation to broadcasting, amongst others) have powers to enforce competition law in relation to their sector, under the Competition Act.
Do they have powers to compel businesses to hand over documents?
Yes. The regulators are empowered to send detailed requests for information to companies and require them to provide information and documentation within strict time-frames, with potential criminal penalties for the provision of false or misleading information or documentation.
Do they conduct dawn raids?
Yes. Dawn raids are an established part of the investigatory toolkit for competition regulators.
Are they able to bring criminal prosecutions (and do they do so)?
The CMA has powers to bring proceedings against individuals in relation to the criminal cartel offence, alongside the SFO.
The sectoral regulators do not have the powers to bring criminal proceedings in relation to competition law. However, those regulators, like the CMA, do have the power to make a disqualification order for directors. In practice, this is the approach more typically taken by the CMA in respect of directors involved in cartels, due to the procedural and evidential difficulties in bringing criminal proceedings.
Do they bring prosecutions against individuals?
Yes, the CMA does bring proceedings against directors (see the question above).
Is there a self-reporting / leniency regime?
The CMA and the sectoral regulators have whistleblowing procedures in place which can offer immunity to companies reporting involvement in anti-competitive behaviour in certain circumstances. In addition, the CMA and the regulators offer reductions for fines in return for cooperation and settlement.
Are there any plans to introduce new powers (or use existing powers differently)?
The CMA has proposed a significant shake up to its powers in a submission to the BEIS, aimed at addressing current concerns within the CMA that the scope and use of its powers are not sufficient to tackle consumer harm effectively.
Linked to this, the findings of the CMA-commissioned Furman review into digital markets recommended that reform to UK competition law and policy are required.
In its digital strategy paper, the CMA has committed to implement the findings, and steps are already being taken to do so with the launch of the CMA’s digital market study in July 2019.
Are there any areas of new technology that are a particular focus of regulatory attention?
The e-commerce sector remains under the close scrutiny of regulators, as it has for several years. As the importance of this sector continues to grow, so too does the focus on ensuring that competition law is able to address new forms of vertical restrictions, such as restricting the ability of distributors to bid on ad-words.
How has digital transformation affected the regulators’ own behaviours?
In addition to the CMA’s proposed reforms discussed above, there has been a notable shift back to a focus by the regulator on vertical restraints, reflecting the concerns that, in the digital transformation, such restraints are causing direct consumer harm and are being overlooked.
Dates for the diary
30 July 2019 Deadline for responses to invitation to comment on digital market study.
31 October 2019 End of five year term of EU Competition Commissioner Margrethe Vestager.
2 July 2020 Deadline for publication of CMA’s report on digital market study.