In many ways, it is business as usual
New senior team
Single authority, but separate case teams for Phase 1 and Phase 2 investigations
Separate case teams introduced for competition law cases
Stronger powers of investigation for alleged competition law infringements
Easier to bring prosecutions under criminal cartel offence
Stronger powers to order interim measures
Short-form opinions for both horizontal and vertical agreements
Stronger 'hold separate' powers in completed merger cases
Initial Phase 1 merger assessment will take 40 working days
On April 1 2014 the United Kingdom's new competition authority, the Competition and Markets Authority (CMA), officially took over from the two competition authorities in charge until then: the Office of Fair Trading (OFT) and the Competition Commission. This update identifies 10 key things to know about the new authority.
Similar to its predecessors, the CMA will:
- investigate mergers which may restrict competition;
- study markets where there may be competition and consumer problems;
- monitor for and investigate possible infringements of UK and/or EU competition law;
- prosecute individuals suspected of committing the criminal cartel offence;
- enforce consumer protection legislation;
- cooperate with the various economic sector regulators, encouraging them to use their concurrent competition law powers; and
- consider regulatory references and appeals.
A new CMA board and senior executive team has been appointed. The CMA's new chairman is Lord David Currie, previously the founding chairman of the UK regulator for the communications sector, Ofcom. Alex Chisholm, formerly chairman and commissioner of Ireland's communications regulator, ComReg, has been appointed as the CMA's chief executive. The CMA's executive director for enforcement is Sonya Branch, the former executive director for enforcement and mergers at the OFT; Andrea Coscelli, previously director of economic analysis for the competition group at Ofcom, is the new executive director for markets and mergers.
Before April 1 2014, the OFT carried out the initial (Phase 1) assessment of a transaction under the UK merger control rules and/or a market under the market investigations regime, with a possible further in-depth (Phase 2) investigation being conducted by the Competition Commission.
From now on, as a result of a single authority replacing the two existing bodies, both stages of any merger or market investigation will be conducted by the CMA. However, to address possible concerns about confirmation bias, separate CMA officials will be responsible for Phase 1 and Phase 2 decisions. Similar to the Competition Commission's procedures, any Phase 2 decision will be made by a panel of independent individuals with backgrounds in business, law, economics and accountancy.
Separation between case teams has also been introduced for investigations under the competition law prohibitions on anti-competitive agreements(1) and abuse of dominance.(2) The investigatory phase up to the CMA reaching the provisional view that an infringement has occurred (ie, the statement of objections) will now be conducted by a group of CMA officials who are wholly separate from those taking the final decision. This is intended to provide a procedural safeguard to address previous concerns that the same team of OFT officials constituted the investigator, prosecutor, judge and jury in competition law investigations.
The CMA has been given stronger powers of investigation where it suspects an infringement of the competition law prohibitions. These will include a new power to require individuals connected to a business under investigation (eg, directors or employees) to answer questions.
The cartel offence is committed when an individual (eg, an employee or director of a company) is involved directly in arrangements concerning price fixing, market sharing, output reductions or bid rigging. Previously, an individual could be convicted of the offence only if it was proven that he or she had acted dishonestly. It was argued that this statutory requirement made it too difficult to bring prosecutions. As of April 1 2014, the dishonesty requirement has been removed and mere participation in anti-competitive practices is sufficient to commit the offence.
However, to provide some protection against the tougher offence catching conduct that does not have an anti-competitive intent, there are now a number of exclusions from, and defences against, the offence. Broadly speaking, only secret anti-competitive agreements will give rise to criminal prosecutions. No offence is committed if the agreement in question was disclosed in advance to (potential) customers or the CMA, or was otherwise published.
The CMA will now be able to order interim measures – that is, measures requiring a company under investigation for breach of either competition law prohibition to terminate certain specified commercial practices pending the outcome of the investigation – where continuance of the conduct would cause "significant damage" (eg, financial, operational or reputational damage) to another business (eg, a competitor or supplier). Previously, interim measures could be ordered only if there was a risk of "serious, irreparable damage", which was a higher standard essentially requiring that the other business would otherwise exit the market.
The CMA will continue its trial scheme for considering requests to issue guidance (ie, short-form opinions) on the application of competition law to prospective (but not hypothetical) agreements or other forms of cooperation which raise novel or unresolved questions and where the CMA considers that the guidance would benefit a wider audience. Whereas the OFT previously issued short-form opinions only in respect of horizontal agreements between competitors, the CMA will also consider novel and unresolved questions in relation to vertical agreements between companies operating at different levels of the supply chain.
The CMA has been granted stronger 'hold separate' powers for mergers which are being examined by it but where a clearance decision has not yet been issued. The CMA may order a reversal of any integration between the businesses of the merging parties that has already occurred.
The initial Phase 1 assessment of a merger is now subject to a statutory timetable of a maximum 40 working days (ie, eight weeks plus public holidays), which is longer than the time period for a Phase 1 investigation under the EU merger control regime and many other jurisdictions. This replaces the previous choice between a statutory timetable of 20 (maximum 35) working days where a prescribed statutory notification form was used and a non-binding 40 working-day timetable for informal merger submissions.
In practice, however, the CMA may reach decisions more quickly than the prescribed timetable. For example, it may take account of restraints imposed on the merging parties by other regulatory processes, such as the City Code governing public takeovers or other jurisdictions' merger control regimes, provided that the facts and issues of the particular case and the CMA's existing caseload allow it to do so.
For further information on this topic please contact Joosje Hamilton at Norton Rose Fulbright by telephone (+44 20 7283 6000), fax (+44 20 7283 6500) or email (firstname.lastname@example.org). The Norton Rose Fulbright website can be accessed at www.nortonrosefulbright.com.
(1) UK Chapter I prohibition under the Competition Act 1998 and Article 101 of the Treaty on the Functioning of the European Union.
(2) UK Chapter II prohibition under the Competition Act 1998 and Article 102 of the Treaty on the Functioning of the European Union.