I ENFORCEMENT POLICIES AND GUIDANCE
The two principal pieces of national legislation regarding cartel activity in the United Kingdom are the Competition Act 1998 and the Enterprise Act 2002 (both as amended by the Enterprise and Regulatory Reform Act 2013). In addition, Regulation (EC) No. 1/20032 requires the UK competition authorities and courts to apply and enforce Article 101 of the Treaty on the Functioning of the European Union (TFEU) in relation to cartel conduct that may affect trade between Member States.
The Competition Act prohibits agreements between undertakings, decisions by associations of undertakings or concerted practices that may affect trade within the United Kingdom and have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom. This prohibition (known as the Chapter I prohibition) is modelled on Article 101 of the TFEU and is intended to be interpreted consistently with the corresponding EU rules.3 On 23 June 2016, the UK electorate voted to leave the European Union. The leave vote, or Brexit, as it is commonly known, has caused much political, economic and legal uncertainty. It is likely to result in changes to cartel regulation within the United Kingdom. However, at the time of writing, there is a degree of uncertainty surrounding the terms on which the United Kingdom will leave the European Union and the future trading relationship between the parties, meaning it is difficult to predict how and when the legal framework may change.
Under the Enterprise Act, it is a criminal offence for an individual to agree with one or more other persons to make or implement, or to cause to be made or implemented, arrangements relating to at least two undertakings involving the following prohibited cartel activities: price-fixing, market sharing, limitation of production or supply, and bid rigging.
The principal enforcement agency in the United Kingdom is the Competition and Markets Authority (CMA). The sectoral regulators for communications matters, electricity and gas, water and sewerage, civil aviation, health, railway services and financial services have concurrent competition powers. The sectoral regulators are required to consider whether the use of these powers would be more appropriate than their sector-specific powers to promote competition. Nonetheless, cartel investigations have tended to be handled by the CMA, given that it is the only competition regulator with the power to investigate criminal cartels under the Enterprise Act. In November 2017, the CMA published new guidance establishing that the CMA is now the single first port of call for all leniency applications in the United Kingdom, including those in the regulated sectors.
The CMA's guidelines state that cartel activities 'are among the most serious infringements of competition law'.4 However, the CMA is prepared to offer lenient treatment to businesses and individuals that come forward with information about a cartel in which they are involved. The framework principles for the leniency policy are set out in the publications 'Applications for leniency and no-action in cartel cases' and 'Guidance as to the appropriate amount of a penalty'. The CMA has also published prosecution guidance in respect of the cartel offence.5
II COOPERATION WITH OTHER JURISDICTIONS
The CMA currently cooperates extensively with the European Commission and with the national competition authorities in the other Member States through the European Competition Network (ECN) (see the European Union chapter for further details). These arrangements may be expected to change post-Brexit. In addition, the United Kingdom is party to mutual assistance arrangements relating to competition law enforcement with a number of other non-EU countries, including the United States, Australia, Canada, China and New Zealand.
The CMA's current guidance states that information supplied as part of an application for leniency will not be passed on to an overseas agency without the consent of the provider except in one situation: the information may be disclosed within the ECN in accordance with the provisions and safeguards set out in the European Commission's Network Notice.6
If leniency has been applied for in other jurisdictions, the CMA generally expects the leniency applicant to provide a waiver of confidentiality to allow the CMA to discuss matters with those other jurisdictions. Normally, any transfer of information in these circumstances is limited to that which is necessary to coordinate planned concerted action, such as on-site investigations.
Where the United Kingdom has extradition relations with another territory, individuals may be extradited for prosecution for participation in a cartel.
III JURISDICTIONAL LIMITATIONS, AFFIRMATIVE DEFENCES AND EXEMPTIONS
The Chapter I prohibition can apply to agreements between undertakings located outside the United Kingdom if they may affect competition within the country. The Chapter I prohibition applies wherever the agreement, decision or practice is, or is intended to be, implemented in the United Kingdom. Similarly, the criminal offence under the Enterprise Act will apply to an agreement outside the United Kingdom if it is, or is intended to be, implemented in whole or in part in the United Kingdom.
ii Parent company liability
The UK competition authorities and courts follow the principles established by the Court of Justice of the European Union (CJEU) on the issue of parent company liability (see the European Union chapter for further details). Accordingly, the conduct of a subsidiary (and, in certain circumstances, a minority interest holding) may be imputed to a parent company where, having regard to the economic, organisational and legal links between those two entities, the subsidiary does not decide independently upon its own conduct on the market but carries out in all material respects the instructions given to it by the parent company. Where a parent company has a 100 per cent shareholding in a subsidiary, there is a rebuttable presumption that the parent company exercises a decisive influence over its subsidiary and, therefore, the two entities form a single undertaking.
Shareholdings below 100 per cent may also give rise to a position of a single undertaking, depending on the level of the shareholding and the nature of the links between the companies.7
iii Affirmative defences and exemptions
Although exemptions are available for conduct that falls within the Chapter I prohibition or Article 101 of the TFEU, it is highly unlikely that a hard-core cartel agreement could qualify for such an exemption.
The Competition Act does, however, exclude certain agreements from the scope of the Chapter I prohibition relating to the production of, or trade in, agricultural products. Certain types of public transport ticketing schemes are also exempt. The Secretary of State may exclude further categories of agreement if he or she is satisfied that there are exceptional and compelling public policy reasons for exclusion.
IV LENIENCY PROGRAMMES
As stated above, the CMA has published guidance on leniency applications, with the effect that it is now the single first port of call for all applications, including those in the regulated sectors.8 The CMA's leniency programme9 provides different types of protection to an applicant depending on its order in the queue and whether an investigation has already commenced:
- Type A immunity – available where the undertaking is the first to apply and there is no pre-existing civil or criminal investigation (or both) into the activity. Type A immunity provides automatic immunity from civil fines for an undertaking, and criminal immunity for all current and former employees and directors who cooperate with the CMA.10 Cooperating individuals should also avoid disqualification as a director.
- Type B immunity – available where the undertaking is the first to apply but there is already a pre-existing civil or criminal investigation (or both) into the activity. In these circumstances, the CMA retains discretion as to whether to provide civil immunity to the undertaking, and criminal immunity to current and former employees and directors who cooperate with the CMA. Cooperating individuals should also avoid disqualification as a director. Type B immunity will no longer be available when the CMA has sufficient information to establish an infringement, where another undertaking has been granted Type B immunity or when the CMA already has, or is in the course of gathering, sufficient information to bring a successful criminal prosecution.
- Type B leniency – where the CMA decides not to grant Type B immunity to an undertaking, it may still provide a reduction from any financial penalty imposed under the Competition Act. There is no limit to the level of reduction that may be granted under Type B leniency. The CMA will consider whether it is in the public interest to grant immunity on a blanket or individual basis. Cooperating individuals should also avoid disqualification as a director.
- Type C leniency – available to undertakings that are not the first to apply but provide evidence of cartel activity before a statement of objections is issued (provided such evidence genuinely advances the investigation). Recipients of Type C leniency may be granted a reduction of up to 50 per cent of the level of a financial penalty imposed under the Competition Act. The CMA may exercise its discretion to award immunity from criminal prosecution for specific individuals. Cooperating individuals should also avoid disqualification as a director.
In addition to fulfilling the above criteria, an undertaking must fulfil the following conditions in order to be granted Type A or Type B immunity or leniency:
- accept that it participated in cartel activity in breach of the law;
- provide the CMA with all information, documents and evidence available to it regarding the cartel activity;11
- maintain continuous and complete cooperation throughout the investigation and until the conclusion of any action by the CMA arising as a result of the investigation;
- refrain from further participation in the cartel activity from the time of disclosure of the cartel activity to the CMA (except as may be directed by the CMA); and
- not have taken steps to coerce another undertaking to take part in the cartel activity.
In order to be granted Type C leniency, an undertaking must also fulfil each of the above conditions, except condition e, which does not apply.
An initial approach to the CMA may be made by an undertaking's legal advisers on a hypothetical 'no names' basis to secure a preliminary marker protecting the applicant's place in the queue. In order to do so, the adviser must have instructions to apply for Type A immunity if the CMA confirms that it is available. Before contacting the CMA, the adviser must therefore ensure that there is a 'concrete basis' for a suspicion of cartel activity and be able to confirm that the undertaking has a 'genuine intention to confess' – that is, acceptance that the available information suggests that it has been engaged in cartel conduct in breach of the Chapter I prohibition or Article 101 of the TFEU, or both.
In order to confirm the availability of a preliminary marker, the CMA must be provided with sufficient details to allow it to determine whether there is a pre-existing civil or criminal investigation or a pre-existing applicant. If the CMA confirms that Type A immunity is available, the adviser must identify the undertaking and apply for immunity by providing an application package with details of the suspected infringement and the evidence uncovered at that stage. A discussion of the timing and process for confirming the marker would then follow.
A similar approach may be made to obtain a preliminary marker for Type B immunity – although in Type B cases it is possible to ask the CMA whether immunity is available without a requirement to make an immediate application if the CMA confirms that it is available.
An applicant may also apply for a preliminary marker in respect of Type B and Type C leniency. To confirm the marker, the applicant must provide in the application package all relevant information available to it in relation to the cartel, and that information must, as a minimum, add significant value to the CMA's investigation.
ii Duties of cooperation
A senior representative of the applicant will be asked to sign a letter indicating that the applicant understands the conditions for the grant of leniency, and in particular that it is committed to continuous and complete cooperation throughout the CMA's investigation and subsequent enforcement action. The CMA notes in its guidance that the requirement to maintain continuous and complete cooperation implies that the overall approach to the leniency process must be a constructive one designed genuinely to assist the CMA in efficiently and effectively detecting, investigating and taking enforcement action against cartel conduct.12 If, at any time, the CMA has concerns that the applicant is not adopting such a constructive approach, or that there are unreasonable delays in providing information or otherwise cooperating with CMA requirements, the matter will be raised with the applicant by the case team.
iii Access of private litigants to leniency materials
In March 2017, the United Kingdom implemented the provisions of the EU's Directive of December 2014 on rules governing actions for damages under national law for breach of the EU antitrust rules and those of Member States (the Damages Directive – see the European Union chapter and Section VII for further details).13 The new provisions include a number of safeguards in relation to leniency programmes. These ensure that leniency corporate statements and settlement submissions (except those that have been withdrawn) have absolute protection from disclosure or use as evidence, and that documents specifically prepared in the context of the public enforcement proceedings by the parties (e.g., replies to authorities' requests for information) or the competition authorities (e.g., a statement of objections) have temporary protection (i.e., for the duration of the relevant competition authority's investigation).
iv Representation by counsel of the corporate entity and its employees
In the absence of a conflict of interest, there is no absolute legal restriction preventing a law firm from representing both employees and the undertaking under investigation, provided that this is compatible with the law firm's own professional conduct obligations. In practice, however, it is possible that the undertaking may wish to distance itself from the conduct of individual employees and to argue that the employee was acting without authority. In addition, separate representation is likely to be appropriate if individual employees face possible criminal prosecution under the Enterprise Act, given the real possibility of conflicts of interest between the corporate entity and the employee.
The principal sanction that may be imposed for a breach of the Chapter I prohibition or Article 101 of the TFEU is a civil fine of up to 10 per cent of the infringing undertaking's worldwide turnover in its previous business year.14
The UK competition authorities have imposed severe financial penalties in respect of cartel activities, including:
- in April 2010, the Office of Fair Trading (OFT) announced fines totalling £225 million after finding that two tobacco manufacturers and 10 retailers had engaged in unlawful practices in relation to retail prices for tobacco products in the United Kingdom. The highest individual fine was £112 million, imposed upon Imperial Tobacco. However, the fines imposed upon Imperial Tobacco and a number of the retailers were quashed following an appeal on liability to the Competition Appeal Tribunal (CAT). The Court of Appeal also ordered the CMA to repay the penalties paid by two other infringers under early resolution agreements entered into with the OFT on grounds of procedural fairness;15
- in April 2012, the OFT imposed a fine of £58.5 million on British Airways for its role in an alleged fuel surcharge price-fixing agreement with Virgin Atlantic; and
- in August 2011, the OFT announced total fines of £49.51 million in respect of its finding that four supermarkets and five dairy processors had been involved in a number of infringements covering the dairy market.
i Factors taken into account when setting the penalty
A financial penalty imposed by the CMA under the Competition Act will be calculated following a six-step approach:
- The starting point is calculated with regard to the seriousness of the infringement and the relevant turnover of the undertaking. The relevant turnover is that of the undertaking in the relevant product and geographical markets affected by the infringement in the last financial year before the infringement ended. The starting point will not exceed 30 per cent of the relevant turnover. The CMA will in general use a starting point of between 21 and 30 per cent for cartel activities.
- Adjustment for duration. The starting point may then be multiplied by a figure up to a maximum of the number of years the infringement lasted. Part years may be treated as full years for these purposes. Any duration of less than a year will normally be treated as a full year although, exceptionally, the starting point may be decreased where the duration is less than a year.
- Adjustment for aggravating and mitigating factors.
- Adjustment for specific deterrence and proportionality. The penalty may be increased to ensure that the infringing undertaking will be deterred from breaching competition law again, having regard to its size and financial position, and any other relevant circumstances. The penalty figure may also be increased to take account of any gain made by the undertaking from the infringement. The CMA will then assess whether, in its view, the overall penalty proposed is proportionate and appropriate in the round.
- Adjustment to prevent the maximum penalty being exceeded and to avoid double jeopardy.
- Adjustment for leniency or settlement discounts, or approval of a voluntary redress scheme, or both.16
In exceptional circumstances, the CMA may reduce a penalty if the undertaking is unable to pay because of its financial position. However, the guidance emphasises that such financial hardship adjustments will be exceptional, and there can be no expectation that a penalty will be adjusted on this basis.17
ii Sanctions applying to individuals
Any individual found guilty of committing a criminal cartel offence under the Enterprise Act may be imprisoned for up to five years and receive an unlimited fine. In addition, an application may be made for the disqualification of a company director in certain circumstances.18
In an attempt to facilitate convictions, the government amended the Enterprise Act to remove a dishonesty element from the cartel offence pursuant to the Enterprise and Regulatory Reform Act. The only mental elements that the prosecution has to prove are the intention to enter into an agreement and the intention as to the agreement's effect. The new-look offence only applies to arrangements entered into on or after 1 April 2014.19
A number of additional amendments were introduced by the Enterprise and Regulatory Reform Act, including:
- two new exclusions from the cartel offence: the notification exclusion (whereby customers are provided with relevant information before the arrangements are made) and the publication exclusion (whereby the relevant information is publicised in the manner specified);20
- a provision that an individual will not commit the offence if the agreement is made to comply with a legal requirement; and
- three new defences to the cartel offence: (1) where there is no intention to conceal the nature of the arrangements from customers; (2) where there is no intention to conceal the nature of the arrangements from the CMA; and (3) where the defendant took reasonable steps to ensure that the nature of the arrangements would be disclosed to professional legal advisers for the purposes of obtaining advice about them before their making or (as the case may be) their implementation.
The CMA has published prosecution guidance in an attempt to bring further transparency to the exercise of its prosecutorial discretion.21
Three individuals were tried for the cartel offence in 2015, following an investigation into suspected cartel activity within the supply of galvanised steel tanks for water storage. Two of the individuals were acquitted as the jury was not persuaded that they had acted dishonestly. The third individual had pleaded guilty and received a six-month suspended sentence with an order to complete 120 hours of community service. The CMA's Senior Director for Cartels noted that the trial experience in the Galvanised Steel Water Storage Tank case 'would tend to suggest that the challenge of establishing dishonesty and bringing a successful prosecution for pre-April 2014 cartels may be greater than even the CMA or OFT had anticipated'.22
iii Early resolutions and settlement procedures
The CMA's formal settlement procedure includes the following key features:
- a reduced penalty where an undertaking is prepared to admit that it has breached competition law and accepts that a streamlined administrative procedure will govern the remainder of the investigation;
- the CMA will retain broad discretion in determining which cases to settle. Businesses will not have a right to settle in a given case, but are also not under any obligation to settle or enter into any settlement discussions where these are offered by the CMA. Settlement discussions can be initiated either before or after the statement of objections is issued;
- at a minimum, the CMA will require a settling undertaking to make a clear and unequivocal admission of liability in relation to the nature, scope and duration of the infringement, cease the infringing behaviour and confirm that it will pay a penalty set at a maximum amount;
- the streamlined administrative procedure will normally include streamlined access to file arrangements; no written representations on the statement of objections (except in relation to manifest factual inaccuracies); no oral hearings; no separate draft penalty statement after settlement has been reached; and no case decision group will be appointed;
- settlement discounts will be capped at a level of 20 per cent. The actual discount awarded will take account of the resource savings achieved in settling a particular case at that particular stage in the investigation. The discount available for settlement before the statement of objections is issued will be up to 20 per cent, and the discount available for settlement after the statement of objections is issued will be up to 10 per cent; and
- the leniency policy and the use of settlements are not mutually exclusive – it is possible for a leniency applicant to settle a case and benefit from both leniency and settlement discounts.23
To date, the CMA has used the formal settlement procedure in eight cases: Property Advertising (2015), Consultant Eye Surgeon Partnership (2015), Galvanised Steel Water Storage Tank (2016), Bathroom Fittings (2016), Commercial Refrigeration (2016), Online Sales of Posters and Frames (2016), Furniture Industry (2017) and Light Fittings (2017).
VI 'DAY ONE' RESPONSE
CMA officials may carry out announced or unannounced inspections anywhere in the United Kingdom to investigate possible cartel activities. If the CMA has obtained a warrant, officials may enter and search both business and domestic premises, and may:
- examine books and other business records;
- take copies or originals of books and records (including from electronic devices);
- require on-the-spot oral explanations of documents; and
- seal any business premises and books or records for the time necessary for the investigation.24
It is a criminal offence to obstruct an inspection by the CMA, to provide false or misleading information or to destroy, falsify or conceal evidence. It is a civil offence not to comply with a formal information request without a lawful excuse and the CMA may impose fines for failure to provide documents or answer questions. It is therefore essential to develop a coordinated strategy for dealing with an inspection, which should cover issues such as:
- arranging for each official to be assisted or shadowed by a member of staff or lawyer;
- briefing relevant employees that they should not obstruct the investigation (e.g., by destroying or deleting records) while also noting that anything they say to the officials may be recorded as evidence;
- establishing a process for identifying documents that may be covered by legal privilege before officials are allowed to see or copy them;
- maintaining a record of what officials ask for and inspect, and keeping copies of documents copied by the officials; and
- ensuring that the fact that the inspection is taking place is not leaked outside the company.
In addition to carrying out inspections, the CMA may issue information requests under the Competition Act as a means of obtaining information from undertakings. The CMA also has powers to require any individual who has a connection with a business under investigation to answer questions on any matter relevant to the investigation. The CMA may also require the individual to provide information that may be relevant to the investigation. As noted above, the CMA has the power to fine any person who fails, without reasonable excuse, to comply with a formal notice to answer the CMA's questions.
In light of the significant penalties that may be imposed for a breach of the Chapter I prohibition or Article 101 of the TFEU, a tailored strategy should be developed to deal with the fallout from an unannounced inspection or receipt of an information request covering alleged cartel activities. Active consideration should be given to whether it is appropriate to be making applications for leniency. The strategy should be developed with senior management and the legal department in view of the surrounding facts and the different issues and risks raised in all potentially relevant jurisdictions. Delay in the implementation of a strategy could have serious consequences (e.g., in terms of priority of leniency applications), as could the implementation of a policy that does not take due account of identifiable risks (e.g., in terms of potential civil actions and follow-on investigations in other jurisdictions).
VII PRIVATE ENFORCEMENT
i Private actions
Private actions brought before the English courts claiming damages or other relief for breaches of competition law are generally framed as tortious actions for breach of statutory duty. In practice, claims relating to anticompetitive agreements are often based on both the relevant EU and UK provisions.
A claimant may bring a competition claim either before the High Court or the CAT. The High Court has jurisdiction over England and Wales; the jurisdiction of the CAT extends to the whole of the United Kingdom. On 1 October 2015, the Consumer Rights Act 2015 introduced a number of reforms in this area, including:
- extending the CAT's jurisdiction to hear stand-alone as well as follow-on cases (while permitting the transfer of cases between the High Court and the CAT);
- harmonising the limitation periods for the CAT with those of the High Court;
- enabling the CAT to grant injunctions in order to bring anticompetitive behaviour to a halt; and
- introducing a fast-track procedure for simpler competition claims in the CAT.
In May 2016, the CMA published guidance for consumers and businesses on obtaining redress for competition law breaches.25 The guidance reflects the changes in the law as a result of the Consumer Rights Act and takes account of the Damages Directive.
ii Interplay between government investigations and private litigation
Currently, where there exists a prior finding by a UK competition authority or the European Commission of an infringement, and where the redress sought is limited to a claim for damages, a claimant may bring an action for damages as a follow-on claim. In such a follow-on action, the claimant can rely on the decision to establish that the defendant has infringed the relevant competition law, and thus only needs to prove causation and loss. The decisions by the national competition authorities of other EU Member States regarding the infringement of EU competition law do not have the same standing but are treated as prima facie evidence that an infringement of competition law has occurred.
Post-Brexit, the decisions of the European Commission will no longer have the same binding force on the UK courts. However, the UK government has published a draft statutory instrument, which envisages that claimants will still be able to bring claims for alleged breaches of EU competition law on a stand-alone basis (meaning that the claimant will need to prove the defendant has infringed competition law) based on anticompetitive conduct that occurred while the United Kingdom was a Member State.
Compensatory damages are available in the United Kingdom for breaches of competition law, and those damages ought to be calculated by reference to what is necessary to restore the victim to the position he or she would have been in had the infringement not occurred. A defence or a reduction in the damages otherwise payable is available where the defendant can show that the claimant has avoided or mitigated its loss by passing on the loss (e.g., in a chain of purchasers in which prices have been increased down the chain).
In 2014, the CJEU ruled that another species of damages, known as umbrella damages, must also be available if a cartel has inflated the price of a good or service and, in light of this, a non-cartelist has raised its prices as well (under the protection of the cartel's umbrella, as it were).26 In those circumstances, a party that has paid a non-cartelist an inflated price can claim umbrella damages from the cartelists. The amount of the umbrella damages will be the difference between the inflated price and the competitive price of the good or service in question.
On 9 March 2017, the Competition Act was amended to reflect the Damages Directive's provisions.27 The updated regime applies equally to breaches of EU and domestic competition law. Its major substantive provisions include:
- introducing a rebuttable presumption that cartels cause harm;
- clarifying that the burden of proving that an overcharge has been passed on rests with the defendant;
- prohibiting the award of exemplary damages;28
- stating what an indirect purchaser must show to establish a claim for damages;
- implementing the Damages Directive's requirements in relation to the effect of consensual settlements on a competition claim and any contribution claims; and
- creating a specific limitation period regime of six years beginning from the later of the day on which the infringement that is the subject of the claim ceases or the day on which the claimant first knows (or could reasonably be expected to know) of the infringement.
In addition, certain key procedural changes have been made, including:
- implementing the Damages Directive's requirements concerning disclosure (see Section IV.iii for further details);
- introducing legislation in relation to the assessment of contributions between those jointly liable for an infringement; and
- allowing final infringement decisions of other Member States' competition authorities or courts to be presented as prima facie evidence of an infringement.
The new substantive provisions apply only to claims in respect of loss suffered as a result of an infringement that commenced on or after 9 March 2017; the procedural provisions apply to all proceedings brought on or after 9 March 2017, regardless of when the infringing conduct occurred.
iv Indirect purchasers
Recent jurisprudence of the English courts has confirmed that damages for breach of competition law are available not just to direct purchasers of cartelised goods or services, but also to indirect purchasers (i.e., those further down the distribution chain).29 The implementation of the Damages Directive has confirmed that such indirect purchasers may bring a claim provided they can prove that the defendant infringed competition law resulting in an overcharge to its direct purchasers, and that the claimant purchased cartelised goods or services.
v Collective actions
On 1 October 2015, the Competition Act and the Enterprise Act were amended by virtue of the Consumer Rights Act with a view to facilitating actions for damages under a more liberal collective actions regime. The previous regime was criticised as ill-equipped to maximise the economies of scale of collective actions.
Under the new regime, any person authorised by the CAT may act as the representative of the claimants. The new regime applies to both follow-on and stand-alone cases, and is available to both consumer and business complainants. The CAT will now allow opt-out (as well as opt-in) collective proceedings. The opt-out aspect of a claim applies only to UK-domiciled claimants but non-UK claimants are able to opt in to a claim if desired.
The regime establishes a range of safeguards to protect against frivolous or unmeritorious cases being brought. In particular, the CAT is prohibited from awarding exemplary damages; the use of contingency fees that are determined by reference to the amount of damages awarded is also prohibited in opt-out collective actions. Moreover, the CAT, in its gatekeeper role, will only authorise a representative to bring a claim if it considers that it is just and reasonable for it to do so. It will also only allow collective actions where it considers that claims raise the same, similar or related issues of fact or law and are suitable to be brought in collective proceedings. These measures, along with a strong process of judicial certification and the maintenance of the loser-pays rule, are designed to guard against a US-style culture of class actions.
A number of applications to commence collective actions have been made under the new regime. The first application was adjourned and subsequently withdrawn by the applicant.30 The second, concerning follow-on actions arising from the European Commission's decision regarding interchange fees charged by Mastercard, was rejected,31 indicating that the CAT will closely scrutinise applications to commence collective proceedings. At the time of writing, two separate collective action applications have been made to the CAT relating to the European Commission's Trucks cartel decision.
vi Private litigation funding rules
In the private sector, interest in third-party funding (in which businesses offer litigation funding in return for a percentage of the damages) has been fuelled by predictions of a surge in private actions before the English courts based on competition law. A number of firms are authorised by the Financial Conduct Authority to provide these services, and an increasing number of cases are now funded in this way. However, as noted in Section VII.v, this type of funding is prohibited by the CAT in relation to opt-out collective actions.
VIII CURRENT DEVELOPMENTS
On 23 June 2016, the UK electorate voted to leave the European Union. On 29 March 2017, the British Prime Minister, Theresa May, triggered Article 50 of the Treaty on European Union, formally starting the two-year withdrawal process. On 25 November 2018, the European Council endorsed a draft Withdrawal Agreement, setting out the proposed terms on which the United Kingdom will leave the European Union, and a Political Declaration, setting out a vision for the future relationship between the United Kingdom and the European Union. However, at the time of writing, it is unclear whether the UK Parliament will ratify the texts.
The draft Withdrawal Agreement provides for a transition period until 31 December 2020, which may be extended by mutual agreement. During the transition period, there will be no change to the status quo in the United Kingdom as far as cartel regulation is concerned. EU competition law will continue to be directly applicable in the United Kingdom and the CJEU and European institutions, including the European Commission, will continue to have jurisdiction over the United Kingdom.
The draft Withdrawal Agreement and Political Declaration envisage that the United Kingdom will withdraw from both the European Union and the European Economic Area, which may have a significant impact on cartel regulation. In particular, there is a risk that businesses could face parallel investigations in the United Kingdom and the European Union, as the European Commission would no longer have jurisdiction over the UK aspects of anticompetitive arrangements. This could lead to a number of challenges for businesses under investigation, including an increased regulatory burden and a risk of inconsistent outcomes. Leniency applicants would also need to consider lodging applications with both regulators, as an application to the European Commission would no longer cover conduct in the United Kingdom.
In the meantime, the CMA is increasing its focus on cartel enforcement, following the award of £2.8 million in additional funds from the UK government. This follows a 30 per cent increase in the number of tip-offs received by the CMA in 2017 and the launch of a new digital tool to combat bid rigging in December 2017. In February 2018, the CMA also launched a new campaign to encourage more people to come forward with information regarding illegal cartels.
1 Philippe Chappatte is a partner and Paul Walter is a special adviser at Slaughter and May. The authors would like to thank Robert Walmsley, a trainee solicitor at Slaughter and May, for his help in preparing this chapter.
2 Council Regulation (EC) No. 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the EC Treaty.
3 Section 60 of the Competition Act 1998. The UK government has published a draft of the Competition (Amendment etc.) (EU Exit) Regulations 2019, which are intended to make certain changes to the UK's competition regime after exit from the European Union. The Regulations envisage that Section 60 will be replaced by Section 60A, which provides that competition regulators and UK courts will continue to be bound by an obligation to ensure no inconsistency with the pre-exit EU competition case law when interpreting UK competition law, but that they may also depart from such pre-exit EU case law where it is considered appropriate in the light of particular circumstances.
4 CMA guidance as to the appropriate amount of a penalty, April 2018.
5 CMA Cartel Offence Prosecution Guidance, March 2014.
6 See Paragraphs 40 and 41 of the Commission Notice on cooperation within the Network of Competition Authorities and Paragraph 7.31 of the Office of Fair Trading (OFT) publication 'Applications for leniency and no-action in cartel cases', July 2013 (adopted by the CMA).
7 See, for example, Case C-97/08 P, Akzo Nobel NV and others v. Commission, judgment of 10 September 2009.
8 CMA information note, 'Arrangements for the Handling of Leniency Applications in the Regulated Sectors', November 2017.
9 OFT publication, 'Applications for leniency and no-action in cartel cases', July 2013 (adopted by the CMA).
10 Immunity from criminal prosecution is granted in the form of a no-action letter issued by the CMA. A no-action letter will prevent a prosecution being brought against an individual in England, Wales and Northern Ireland. Guarantees of immunity from prosecution cannot be given in relation to Scotland, but cooperation with the CMA will be reported to the Lord Advocate, who will give such cooperation serious weight when considering whether to prosecute the individual in question and may give an early decision as to whether that individual remains liable to be prosecuted.
11 The CMA should not as a condition of leniency require waivers of legal professional privilege (LPP) over any relevant information in either civil or criminal investigations. However, save where the position is uncontroversial and clear to the CMA's satisfaction, the CMA will ordinarily require a review of any relevant information in respect of which LPP is claimed by an independent counsel selected, instructed and funded on a case-by-case basis by the CMA. See OFT publication, 'Applications for leniency and no-action in cartel cases', July 2013 (adopted by the CMA).
12 See OFT publication, 'Applications for leniency and no-action in cartel cases', July 2013 (adopted by the CMA).
13 The provisions of the Damages Directive were implemented into UK law by the The Claims in respect of Loss or Damage arising from Competition Infringements (Competition Act 1998 and Other Enactments (Amendment)) Regulations 2017.
14 Section 36 of the Competition Act.
15 See Gallaher Group Ltd & Anor & Anor v. Competition and Markets Authority  EWCA Civ 719 (15 July 2016). The CMA has subsequently sought permission from the Supreme Court to appeal the Court of Appeal's judgment.
16 The Consumer Rights Act permits the CMA to approve voluntary redress schemes, that is to say, binding commitments entered into by infringers to provide compensation (whether monetary or otherwise) to consumers.
17 OFT guidance as to the appropriate amount of a penalty, September 2012. The CMA is currently considering some limited revisions to this guidance based on recent decisional practice.
18 In December 2016, the CMA announced that, for the first time, it had used its power to accept an undertaking from a director of a company that had breached competition law not to act as a director of any UK company for five years, pursuant to a cartel investigation (Online sales of posters and frames (2016)). In September 2017, the CMA disqualified another individual from acting as a company director for seven years (Supply of pre-cast concrete drainage products (2017)). At the time of writing, the CMA is analysing feedback from a consultation on proposed revisions to its guidance on director disqualification orders.
19 In September 2017, an individual was given a two-year suspended prison sentence and made the subject of a six-month curfew order in criminal cartel proceedings brought by the CMA in relation to the supply of pre-cast concrete drainage products to the construction industry. As the relevant conduct took place prior to 1 April 2014, it fell under the old cartel offence.
20 The pre-existing exclusion relating to the notification of bid-rigging arrangements is retained.
21 CMA Cartel Offence Prosecution Guidance, March 2014.
22 Stephen Blake, Senior Director – Cartels and Criminal Group, 'The UK steel tanks criminal cartel trial: implications for criminalisation and leniency', 13 November 2015.
23 Competition Act 1998: Guidance on the CMA's investigation procedures in Competition Act 1998 cases, March 2014. On 21 June 2018, the CMA published a consultation on proposed updated guidance on Competition Act investigation procedures. The proposed changes in relation to the settlement procedure are mainly cosmetic in nature.
24 CMA officials are also able to inspect businesses premises without a warrant in certain circumstances.
25 Competition law redress – A guide to taking action for breaches of competition law, May 2016.
26 Case C-557/12, Kone AG and others v. OBB-Infrastruktur AG, judgment of 5 June 2014.
27 The Competition Act was amended by the Claims in respect of Loss or Damage arising from Competition Infringements (Competition Act 1998 and Other Enactments (Amendment)) Regulations 2017.
28 Previously exemplary damages were available, in theory, in limited circumstances and at the court's discretion.
29 Sainsbury's Supermarkets Ltd v. Mastercard Incorporated and Others  CAT 11.
30 Case 1257/7/7/16, Dorothy Gibson v. Pride Mobility Products Limited.
31 Case 1266/7/7/16, Walter Hugh Merricks CBE v. Mastercard Incorporated and Others. The CAT found the claims not 'suitable to be brought by collective proceedings' based on the absence of key issues in common among potential class members relating principally to the quantum of loss, and the difficulty of appropriately calculating an aggregate damages award and individual payments to class members on a reasonable compensatory basis. On 28 September 2017, the CAT refused permission to appeal its collective proceedings order (CPO) decision, finding in particular that there was no statutory right to appeal to the Court of Appeal. However, on 13 November 2018, the Court of Appeal held that there is a right of appeal from the ruling of the CAT refusing the application for a CPO.