Investigation

Commencement of investigation

How is an investigation into a suspected breach of competition law started?

The Competition and Markets Authority (CMA) will start an investigation after becoming aware of a suspected breach of competition law, which may be brought to its attention in a variety of ways.

The CMA may deem it necessary to commence an investigation after receiving a complaint. A complaint can be made by any person who suspects that an agreement or conduct may be in breach of competition law.

Alternatively, the CMA may start an investigation after receiving notification of a proposed agreement that would likely amount to a breach of competition law. The relevant parties may opt to notify the CMA of the proposed arrangement via a request for an opinion as to the application of Chapter 1 of the Competition Act 1998 to the arrangement. (Chapter 1 prohibits agreements, decisions and concerted practices between or among undertakings or associations of undertakings that have as their object or effect the restriction, distortion or prevention of competition within the UK and that affect trade within the UK.)

Thirdly, the CMA may commence an investigation after learning of a suspected breach via informal means such as press articles, tip-offs from cartel members and its own market research and intelligence.

Limitation period

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

An investigating officer entering premises must, upon request, allow a reasonable time for the occupier of a premise’s legal adviser to arrive before continuing the investigation, although only if the officer considers it is reasonable to do so and where the officer is satisfied that any conditions he or she considers it appropriate to impose are being, or will be, complied with (conditions may include sealing filing cabinets, suspending external emails or calls and allowing the CMA to enter offices of its choosing).

Within the context of an investigation, a company has the right to withhold from disclosure any privileged communications. In the event of a dispute over privilege, the CMA may request that documents are placed in a sealed envelope pending resolution of the dispute.

A business also has the right to privilege against self-incrimination; in other words, the CMA cannot force a business representative to provide answers that would require an admission that the company has infringed the law.

What are the limitation periods for investigation of competition infringements?

There are no limitation periods for public enforcement of competition law.

Limitation periods for private enforcement of competition law infringements are generally six years (although there are exceptions). Under the national legislation that had implemented the European Union’s Damages Directive, the limitation period for a competition claim begins from the later of:

  • the day on which the infringement ceases; and
  • the claimant’s day of knowledge (the day the claimant first knows or could reasonably be expected to know of the infringer’s behaviour) that:
    • the behaviour constitutes an infringement;
    • that the claimant has suffered loss or damage arising from that infringement; and
    • the identity of the infringer.

 

The limitation period may be suspended in certain circumstances, including during an investigation by a competition authority.

Information-gathering powers

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

Implementation or amendment of a compliance programme is not a precondition for settlement. In general, evidence of a company taking ‘adequate steps’ to improve compliance may lead to a discount in fine of up to 10 per cent.

What powers does the competition authority have to gather information?

Once an investigation has been commenced by the CMA, it has various formal information-gathering powers at its disposal. Specifically, the CMA may:

  • require the production of specified documents or information; and
  • require connected individuals to answer questions relevant to its investigation.

 

The CMA can require the production of specified documents or information through a formal request (also referred to as a ‘section 26 notice’). A section 26 notice can be imposed on a variety of different parties, such as the business under investigation, its competitors, suppliers or customers, and complainants. The notice will specify the documents that are sought and will provide details as to where and when the documents are to be provided. If an individual fails, without reasonable excuse, to comply with a section 26 notice, the CMA has the power to impose a fine. The fine may either be a fixed or daily penalty, or a combination of the two. Further, it is a criminal offence to provide the CMA with false or misleading information or to destroy, falsify or conceal documents.

In addition, as set out above, the CMA can require connected individuals to answer questions on any matter it deems relevant to its investigation. The CMA will approach any such individuals via a formal notice, which will explain that the CMA intends to ask them questions under formal powers, and will set out the subject of the investigation. Similarly to the above, if an individual fails, without reasonable excuse, to comply with a formal notice to answer the CMA’s questions, the CMA may impose a fine. A non-compliant individual may also face criminal sanctions if they have knowingly or recklessly provided the CMA with false or misleading information in connection with the investigation.

Although the CMA’s information-gathering powers are wide-reaching in their remit, they are not entirely without limit. For instance, the CMA is not permitted to use its powers to require the production or disclosure of privileged communications, and it cannot force a business to provide answers that would require an admission of an infringement of the law.

Dawn raids

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

The CMA has the ability to, and in practice does, carry out dawn raids to obtain information. The CMA can enter business premises with or without a warrant but requires a warrant to enter domestic premises.

When the CMA enters premises without a warrant, it must usually do so having given notice. It may require persons to:

  • provide relevant documents (including those stored electronically);
  • provide an explanation of produced documents; and
  • inform the CMA about a relevant document’s location.

 

When the CMA enters premises with a warrant (mostly used for suspected cartels), the CMA may (in addition to the above):

  • enter using reasonably necessary force if prevented from entering;
  • search the premises for documents covered by the warrant (including those stored electronically); and
  • seize documents (or copies) and take copies of electronic devices. 
Dawn raids – rights and obligations

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

An investigating officer entering premises must, upon request, allow a reasonable time for the legal adviser of the premise’s occupier to arrive before continuing the investigation, if the officer considers it is reasonable to do so and where the officer is satisfied that any conditions he or she considers it appropriate to impose are being, or will be, complied with (eg, sealing filing cabinets, suspending external emails or calls, and allowing the CMA to enter offices of its choosing).

Within the context of an investigation, a company has the right to withhold any privileged communications from disclosure. In the event of a dispute over privilege, the CMA may request that documents are placed in a sealed envelope pending resolution of the dispute.

A business also has the right to privilege against self-incrimination. In other words, the CMA cannot force a business representative to provide answers that would require an admission that the company has infringed the law.

Refusal to cooperate

What are the penalties and other consequences for refusing to cooperate with the authorities during an investigation?

The CMA has various powers to impose penalties for failure to comply under both the Enterprise Act (in relation to markets or mergers investigations) and under the Competition Act 1998, including failures to attend an interview or provide documents. The CMA may impose administrative penalties as it considers appropriate (subject to statutory maxima, which depend on the nature of the failure to comply).

In addition, certain acts may also give rise to the risk of committing a criminal offence either in the context of merger investigations or in Competition Act investigations (eg, where a person intentionally alters, suppresses or destroys requested documents or knowingly or recklessly provides false or misleading information).

Confidentiality protection

What confidentiality protection is afforded to the company or individual, or both, involved in competition investigations?

The CMA says that it ‘aims to be reasonable when requesting and handling information, and to protect confidential information in a manner that is appropriate in the circumstances of the case’. In addition, the CMA is subject to the statutory obligations of the Enterprise Act 2002 to protect confidential information that comes to it in connection with the exercise of its statutory functions. However, the Act allows for the disclosure of specified information in certain circumstances.

In practice, those who participate in a CMA case will usually be given an opportunity to identify confidential information in documents before their disclosure into the public domain.

Refusal to cooperate

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

The CMA has various powers to impose penalties for failure to comply under both the Enterprise Act  (in relation to markets or mergers investigations) and under the Competition Act, including failures to attend interview or provide documents. The CMA may impose administrative penalties as it considers appropriate (subject to statutory maxima, which depend on the nature of the failure to comply).

In addition, certain acts may also give rise to the risk of committing a criminal offence either in the context of merger investigations or in Competition Act investigations (eg, where a person intentionally alters, suppresses or destroys requested documents or knowingly or recklessly provides false or misleading information).

Infringement notification

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

There is no general duty imposed on companies to notify of competition infringements. By way of exception, there may be specific obligations to do so within certain sectors (under rules laid out in the Financial Conduct Authority’s Handbook).

Limitation period

What are the limitation periods for competition infringements?

There are no limitation periods for public enforcement of competition law.

Limitation periods for private enforcement of competition law infringements are generally six years (although there are exceptions). In line with the Damages Directive, the limitation period for a competition claim begins with the later of:

  • the day on which the infringement ceases; and
  • the claimant’s day of knowledge – which is the day the claimant first knows or could reasonably be expected to know of the infringer’s behaviour – that the behaviour constitutes an infringement; that the claimant has suffered loss or damage arising from that infringement; and of the identity of the infringer.

 

The limitation period may be suspended in certain circumstances, including during an investigation by a competition authority.