For so long as the United Kingdom remains an EU Member State, and possibly for a transitional period after its withdrawal from the EU, the provisions of Article 102 of the Treaty on the Functioning on the European Union (Article 102) will continue to apply in the United Kingdom.2
The United Kingdom has also implemented national legislation that substantially mirrors the provisions of Article 102, contained in Chapter 2 of the Competition Act 1998 (the Act). Section 18 of the Act provides that, subject to limited exclusions: 'any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in a market is prohibited if it may affect trade within the United Kingdom' (the Chapter 2 prohibition). The UK competition authorities and courts are required to interpret the relevant provisions of the Act consistently with EU competition law wherever possible, and to have regard to relevant decisions and statements of the European Commission.3
Public enforcement of UK and EU competition law is carried out primarily by the Competition and Markets Authority (CMA).4 In addition to the CMA, the following sectoral regulators have the power to enforce competition law in their sectors.
|Civil Aviation Authority||Air traffic services and airport operation services in the UK|
|Financial Conduct Authority (FCA)||Financial services in the UK|
|Monitor (part of National Health Service (NHS) Improvement)*||Healthcare services in England|
|Northern Ireland Authority for Utility Regulation||Gas, electricity, water and sewerage services in Northern Ireland|
|Office of Communications (Ofcom)||Electronic communications, broadcasting and postal services in the UK†|
|Office of Gas and Electricity Markets (Ofgem)||Gas and electricity in Great Britain|
|Office of Rail and Road (ORR)||Railway services in Great Britain|
|Payment Systems Regulator (PSR)‡||Payment systems in the UK|
|Water Services Regulation Authority||Water and sewerage in England and Wales|
* NHS Improvement, established in April 2016, is the operational name for the organisation that combines Monitor with several other NHS bodies. Monitor remains the statutory body for competition law purposes.
† In the telecommunications sector, Ofcom also has the power to oversee the BBC (from 3 April 2017, including its impact on fair and effective competition) and impose regulatory conditions on undertakings found to have 'significant market power'. Significant market power is equivalent to the concept of dominance under EU and UK competition law.
‡ The PSR has been established as a separate body under the FCA, with its own managing director, board and budget.
The United Kingdom has also established a specialist competition court, the Competition Appeal Tribunal (CAT). Any person who is found to have infringed Article 102 or the Chapter 2 prohibition by the CMA or a regulator has a right of appeal to the CAT.5 The CAT can also hear follow-on damages claims in competition cases and, since October 2015, has had the power to hear stand-alone claims for damages or injunctive relief, or both. The civil courts can also hear competition claims, but may transfer cases to the CAT.
When enforcing Article 102 and the Chapter 2 prohibition, the CMA and regulators have regard to the European Commission's 'Guidance on the Commission's enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings'.6 The CMA also has regard to its own substantive and procedural guidance (including previous Office of Fair Trading (OFT) guidance that the CMA has formally adopted).7 These include:
- 'Abuse of a dominant position', December 2004;
- 'Assessment of market power', December 2004; and
- 'Guidance on the CMA's investigation procedures in Competition Act 1998 cases', January 2019.
Separately, the CMA has the power to investigate markets as a whole, by carrying out market studies. At the end of a market study, the CMA can make recommendations to businesses and government, or initiate enforcement action under other statutory powers (including the Chapter 2 prohibition and Article 102). If the CMA has reasonable grounds for suspecting that a feature of a market is preventing, restricting or distorting competition, it can initiate a full market investigation. A market investigation can also be initiated by any of the concurrent regulators (listed above) or by the Secretary of State. Following a market investigation, the CMA has the power to tackle any features having an adverse effect on competition (including unilateral conduct features) by imposing a wide range of remedies. The identification of anticompetitive features in a market investigation is not a finding that market participants have infringed the law, and remedies are intended to be prospective rather than punitive.
II Year in Review
i Levels of public enforcement
The CMA has investigated relatively few dominance cases, albeit with a modest increase in activity over the past few years. Two main reasons are usually cited to explain the relative lack of enforcement by the CMA:
- cross-border cases affecting the United Kingdom often fall to be investigated by the European Commission, depriving the CMA of jurisdiction to investigate the same conduct in parallel (which is likely to change after the United Kingdom leaves the European Union); and
- cases involving natural monopolies generally fall to be investigated by the concurrent sectoral regulators. In addition to this, the CMA can investigate unilateral behaviour through market studies and investigations, which allow it to address perceived competition concerns in a market without the need for formal enforcement action.
Government reforms have sought to encourage greater use of competition law enforcement by the sectoral regulators in particular. These regulators have a duty to apply ex post competition law in preference to ex ante regulation where possible. The government has placed a responsibility on the CMA to monitor the work of sectoral regulators and, if appropriate, take enforcement action in their sectors. The CMA is also obliged to publish an annual report on the functioning of the concurrency regime as soon as practicable after the end of each financial year,8 and the Secretary of State retains a right to remove concurrent powers from sectoral regulators if they are not used.
In February 2016, the National Audit Office (NAO) published a critical report into the UK competition regime, which strongly encouraged the CMA and the concurrent sectoral regulators to find ways to increase levels of competition enforcement. CMA enforcement activity (in dominance cases and more generally) increased following the publication of the NAO report, including three dominance cases opened in the 12 months after the NAO's report was published. In 2018, however, the CMA opened only one new dominance case, and all of its ongoing investigations are in the pharmaceutical sector This relative lack of activity likely reflects: a focus on resolving cases opened during the flurry of activity immediately after the NAO report, and the diversion of CMA resources to deal with planning for a no-deal exit from the EU and proposals for reform, which are discussed in more detail in Section VIII.
ii Major developments in public enforcement
In 2018 and early 2019, the CMA and sectoral regulators issued one infringement decision and two statements of objection. The CMA also closed one case after finding no grounds for action. In the same period, the CAT overturned one CMA decision, remitting the matter to the CMA for further investigation, and made a Preliminary Reference to the Court of Justice of the European Union (CJEU) in the appeal of another CMA decision.
Infringement decisions, statements of objections and commitments decisions
In August 2018, the Office of Communications (Ofcom) fined Royal Mail £50 million for unlawful discrimination against postal operators competing with Royal Mail in delivery services. Whistl (formerly TNT Post), the UK's largest active bulk mail operator, used Royal Mail for final sorting and delivery of business mail to the parts of the UK where it did not have its own delivery operations. Whistl complained to Ofcom about contract changes notices (CCNs) issued by Royal Mail that outlined variations to its wholesale customers' contracts that would come into effect in March 2014. Ofcom opened an investigation in April 2014, at which point Royal Mail suspended the CCNs.
In its decision, Ofcom found that Royal Mail's planned price changes discriminated against wholesale customers for whom Royal Mail delivered only to areas in which they did not have their own delivery operations. Companies using Royal Mail to deliver mail to only some parts of the UK had to pay Royal Mail 0.25p more per letter than companies engaging Royal Mail to deliver to the whole of the UK.
Ofcom found that Royal Mail was not legitimately justified in such discrimination and that Royal Mail's internal documents suggested that the CCNs were designed to limit delivery competition from its first and only significant competitor, Whistl. The price differential was found to have a material impact on the profitability of an end-to-end entrant, and to make entry and expansion in bulk mail delivery more difficult. It therefore constituted an abuse of Royal Mail's position as a dominant provider of delivery services.
In October 2018, Royal Mail appealed Ofcom's decision to the CAT. The main hearing has been listed for five weeks in June/July 2019.
In January 2019, the CMA issued a supplementary statement of objections in relation to alleged excessive pricing by Advanz Pharma (formerly Concordia) of liothyronine tablets in the UK. The supplementary statement reduces the scope of the investigation to around eight years (two years shorter than in the statement of objections issued in November 2017) and reduces the allegation of price increase from 6,000 per cent to 1,605 per cent.
Auden Mckenzie and Waymade
In February 2019, the CMA issued a statement of objections to Auden Mckenzie and Waymade relating to the supply of hydrocortisone tablets in the UK. The CMA alleges that the parties entered into anticompetitive supply agreements from 2011 to 2015, and that Auden Mckenzie abused its dominant position by making monthly payments to Waymade not to enter the market during that period. The CMA is concerned that the UK National Health Service (NHS) was denied a choice of suppliers, and potential savings from the increased competition. Hydrocortisone tablets are the primary treatment for people suffering from Addison's disease.
Conclusion of cases without adopting infringement or commitments decisions
Merck Sharp & Dohme Ltd
In March 2019, the CMA closed its investigation of a discount scheme developed by Merck Sharp & Dohme Ltd (MSD) for its biologic infliximab drug, Remicade, finding no grounds for action. The CMA had opened its investigation in December 2015 and issued a statement of objections in May 2017. The CMA concluded that MSD's volume-based discount scheme, introduced following the expiry of its patent for Remicade in early 2015, was not likely to limit competition from biosimilar infliximab products.
On 12 February 2016, the CMA found that a group of pharmaceutical companies, including GlaxoSmithKline (GSK), Alpharma Limited (Alpharma) and Generics (UK) Limited (GUK), had infringed the Chapter 1 prohibition and Article 101 of the Treaty on the Functioning of the European Union by entering into a series of agreements to delay generic entry of the drug paroxetine (a prescription-only anti-depressant) in the UK. The CMA also found that GSK's conduct constituted an abuse of its dominant position in breach of the Chapter 2 prohibition. The CMA imposed fines totalling £44.9 million (£37.6 million on GSK, £5.8 million on GUK and its former parent, and £1.5 million on Alpharma and its successor companies).
GSK appealed the CMA's decision on various grounds, including that the relevant market ought to have been the broader market for all selective serotonin reuptake inhibitors (SSRIs), rather than the narrower paroxetine molecule market. In March 2018, the CAT handed down an intermediate judgment, provisionally dismissing GSK's argument that the CMA was wrong to conclude that GSK held a dominant position. The CAT nevertheless made a Preliminary Reference to the CJEU on this point and on the question of whether GSK abused its dominant position by entering into agreements of the type in question. In its Preliminary Reference application, the CMA accepts that GSK would not have held a dominant position if the relevant market comprised all SSRIs. The CAT proceedings have been stayed pending the CJEU's preliminary ruling.
Pfizer and Flynn
In December 2016, Pfizer and Flynn were each found to have infringed the Chapter 2 prohibition and Article 102. The CMA concluded that Pfizer's supply prices to Flynn, and Flynn's selling prices, for phenytoin sodium capsules (an anti-epilepsy drug) were excessive and unfair.
Pfizer and Flynn appealed separately to the CAT, and both appeals were heard together in November 2017. Judgment was handed down in June 2018. The CAT upheld the CMA's findings on market definition and dominance, but set aside the CMA's conclusions on abuse. The CAT held that:
- the CMA erred in its reliance on a cost-plus approach, by which the CMA found that Pfizer's and Flynn's prices were excessive because they materially exceeded their respective costs and a reasonable rate of return;
- the CMA failed to properly assess the impact of meaningful comparators; and
- the CMA was mistaken in finding that there were no non-cost related factors that would increase the value of the drug beyond the level identified by the CMA's cost-plus approach.
The CAT rejected Pfizer's argument that, because of the vertical nature of its relationship with Flynn and its distance from Flynn's pricing, it could not be in breach of Article 102 in any event.9
In December 2018, the parties were given permission to appeal the CAT's judgment to the Court of Appeal.
iii Current abuse of dominance investigations
The CMA and sectoral regulators are currently investigating eight suspected abuse of dominance cases, summarised in the table below.
|Sector||Investigating authority||Conduct||Case opened|
|Energy||Ofgem||Suspected abuse of a dominant position by EPEX and its parent EEX in relation to wholesale trading activities, by failing to take steps required to enable rival, Nord Pool, to participate in certain electricity trading auctions between the UK and Irish energy markets. Ofgem announced on 2 May 2019 that it was consulting on commitments offered by EPEX||December 2018|
|Pharmaceuticals||CMA||Suspected abuse of dominant position by Auden Mckenzie in relation to the supply of generic pharmaceuticals||October 2018|
|Pharmaceuticals||CMA||Suspected anticompetitive agreements and abuse of dominance in relation to the supply of generic pharmaceuticals||October 2017|
|Pharmaceuticals||CMA||Suspected anticompetitive agreements and abuse of dominance in relation to the supply of generic pharmaceuticals||October 2017|
|Energy||Ofgem||Potential abuse of a dominant position by a company providing services to the energy industry||August 2017|
|Pharmaceuticals||CMA||Suspected unfair pricing in the supply of liothyronine tablets by Concordia.||October 2016|
|Pharmaceuticals||CMA||Suspected abuse of dominance (inducement to delay entry) by Actavis UK in relation to hydrocortisone tablets, as well as suspected anticompetitive agreements between Concordia and Actavis UK||April 2016|
|Pharmaceuticals||CMA||Suspected abuse of dominance (excessive pricing) by Actavis UK in relation to hydrocortisone tablets||March 2016|
iv Major developments in private actions in 2018
Unwired Planet v. Huawei
In April 2017, the High Court found that Unwired Planet had not abused its dominant position by seeking an injunction against Huawei for infringing its standard-essential patents (SEPs). Unwired Planet owns a portfolio of SEPs relating to mobile telephone technology; Huawei is a manufacturer of mobile telephones. The SEPs were subject to commitments given to the European Telecommunications Standards Institute to license on fair, reasonable, and non-discriminatory (FRAND) terms. Huawei appealed on three grounds:
- the imposition of a global licence on terms set by a national court based on a national finding of infringement could not be FRAND;
- Huawei ought to have been offered different rates for its licence owing to the non-discrimination (ND) limb of FRAND (SEPs were licensed to another mobile telephone manufacturer for a lower price); and
- Unwired Planet's application for an injunction against Huawei without giving any notice of the infringement, providing reasons for the infringement or making any licensing offer, amounted to abuse of a dominant position. This abuse, Huawei argued, ought to have constituted a defence to the injunction brought by Unwired Planet.
In October 2018, the Court of Appeal dismissed the appeal. First, on global licensing, the Court of Appeal found that the judge at first instance, Birss J, was entitled to find that, in all the circumstances, only a global license would be FRAND. The Court of Appeal found that Birss J had erred in concluding that there was one FRAND rate for any given set of circumstances, as 'the reality is that a number of sets of terms may all be fair and reasonable in a given set of circumstances', but that this error had no material effect on the outcome. Second, the Court upheld Birss J's approach with regard to the ND limb of FRAND, by which 'a benchmark [FRAND] royalty is decided on which is then available to all-comers who are similarly situated' and any discrimination could be addressed separately by competition law. The Court of Appeal did not accept Huawei's argument that the ND limb of FRAND was a separately enforceable obligation with no need to show distortion of competition (the 'hard-edged non-discrimination rule'). Third, the Court of Appeal agreed with Birss J that the CJEU had not laid down mandatory conditions in Huawei v. ZTE10 that must be satisfied before proceedings seeking injunctive relief could be issued, noting that the requirement under EU law to take account of all the circumstances 'does not sit comfortably with the notion that the CJEU has laid down a set of prescriptive rules'.
The UK Supreme Court has granted Huawei permission to appeal the Court of Appeal's judgment. The hearing is expected to take place in late 2019.
Transport for London Travelcards
In March 2019, the CAT announced that it had received two applications to commence collective proceedings on behalf of affected rail passengers holding Transport for London (TfL) zonal tickets (Travelcards). The applications allege that three UK train operators abused their positions of dominance. Both applications were made on a stand-alone basis; they do not benefit from a prior infringement decision binding the court.
The proceedings arise out of 'boundary fares', which are fares for travel to and from the outer boundaries of TfL's rail zones, and allegations were that the rail companies failed to make boundary fares sufficiently available for sale or failed to ensure customers avoided paying for parts of their journeys twice. The proposed class of claimants consists of rail passengers who were effectively compelled to pay twice for the parts of their rail journeys that overlapped with the validity of their Travelcards. They are collectively represented by the applicant, Mr Justin Gutmann. The respondent rail companies are First MTR South Western Trains Limited, Stagecoach South Western Trains Limited and London and South Eastern Railway Limited. Case management conferences took place in April 2019.
Other cases before the CAT and the High Court are summarised below.
|Achilles Information Limited v. Network Rail Infrastructure Limited (NRIL)||Alleged abuse of dominance; stand-alone damages claim and injunction application relating to supplier assurance schemes in the rail industry in the United Kingdom||Pending. In October 2018, an expedited trial was ordered, to be heard on the assumption that NRIL holds a dominant position. Trial took place in February and March 2019. Awaiting judgment|
|Unlockd Ltd and Unlockd Media Technology Ltd v. Google Ireland Ltd, Google Commerce Ltd and Google LLC||Alleged abuse of dominance by refusing or suspending services used by Unlockd's software application||Pending. In May 2018, an interim injunction was granted to prevent the withdrawal or suspension of services used by the software application and permission given to serve the claim on Google LLC out of the jurisdiction. Claim stayed October 2018 to enable Unlockd Ltd to procure funding|
|UKRS Training Limited v. NSAR Limited||Alleged abuse of dominance in the market for accreditation services to providers of training to work on Network Rail infrastructure||Pending. Claim stayed in October 2017 pending the conclusion of the appeal of a decision of Network Rail to suspend UKRS from providing accredited training|
|Labinvesta Limited v. Dako Denmark||Alleged abuse of dominance by Dako Denmark in the market for the supply of reagents for immunohistochemistry tests for conducting cancer diagnostics in Belarus||Withdrawn in June 2017. Amended claim launched in January 2017. Defendant's cost application refused in February 2018|
|NVIDIA Corporation and others v. Qualcomm Inc and others||Predatory pricing and loyalty-inducing rebates. The same allegations are also being investigated by the European Commission, which issued two Statements of Objections in December 2015||Pending. Claim launched in December 2015|
|Secretary of State for Health and others v. Servier Laboratories Ltd and others||Follow-on damages claim relating to the European Commission's 'pay for delay' infringement decision against Servier and others concerning the supply of perindopril||Pending. Claims launched in December 2011 and suspended during the Commission's investigation. Servier granted permission in October 2016 to plead that the claimants failed to take reasonable steps to encourage switching from perindopril to cheaper generic alternatives. In April 2019, the High Court held that the claims could proceed even though elements of the Commission's infringement decision had been overturned by the EU General Court|
III Market Definition and Market Power
The assessment of market definition and market power in the United Kingdom is consistent with EU law. The UK competition authorities and courts are required to interpret the provisions of the Act consistently with EU competition law wherever possible, and to have regard to relevant decisions and statements of the European Commission.
One difference between EU and UK law is that under the Chapter 2 prohibition there is no need to show a cross-border effect, and no minimum market size threshold: a 'dominant position' refers to a dominant position in the United Kingdom or any part of the United Kingdom. This means that dominant positions can be found even for small suppliers in small markets.
The assessment of abuse in the United Kingdom is consistent with EU law. The UK competition authorities and courts are required to interpret the provisions of the Act consistently with EU competition law wherever possible and to have regard to relevant decisions and statements of the European Commission (although this is likely to change after the United Kingdom leaves the EU). There is no exhaustive list of abuses under Section 18 of the Act (the equivalent of Article 102).11 Any conduct by a dominant undertaking that excludes competitors or exploits customers is potentially abusive, unless that conduct is objectively justified. Moreover, the High Court has held that conduct should be looked at 'in the round', rather than seeking to identify on a narrow basis whether conduct departs from 'competition on the merits'.12
ii Exclusionary abuses
Enforcement action in the United Kingdom has generally focused primarily on exclusionary abuses (although, more recently, the CMA has pursued a number of exploitative abuse cases relating to suspected excessive pricing).
The OFT decision in Gaviscon is notable in that it demonstrates the OFT's (and, by extension, the CMA's) willingness to grapple with novel abuses. The case concerned abusive behaviour by Reckitt Benckiser, which held a dominant position in the market for alginates and antacids. Reckitt Benckiser withdrew its Gaviscon Original product from sale to the NHS when the product no longer benefited from patent protection, even though it remained on sale 'over the counter'. Reckitt Benckiser replaced Gaviscon Original with a similar product, Gaviscon Advance, which continued to benefit from patent protection. Because of the way the NHS computer system operated, the withdrawal of Gaviscon Original made it more difficult for doctors to prescribe alternative generic products as opposed to Gaviscon Advance. The OFT concluded that this action was expected to 'hinder the development of generic competition' to Gaviscon, thereby excluding competition from the market. Reckitt Benckiser entered into a settlement agreement with the OFT, agreeing not to challenge its decision and to pay a fine of £10.2 million.
In Cardiff Bus, the OFT investigated exclusionary behaviour preventing a competing bus company, 2 Travel, from establishing a rival service to the dominant incumbent. The case concerned both price and non-price predation. Cardiff Bus reacted to the launch of a rival 'no-frills' service by introducing its own no-frills service on the same routes, without a valid business case and running at a loss. In both Cardiff Bus and Gaviscon, the OFT uncovered evidence of anticompetitive intent.
The focus on exclusionary conduct is borne out by other recent investigations. For example, in addition to the cases mentioned in Section II:
- In December 2015, the Office of Rail and Road (ORR) closed an investigation into Freightliner on the basis of binding commitments. The ORR had investigated the terms of Freightliner's agreements with customers for the provision of rail freight services between deep-sea container ports and inland destinations. The terms included exclusive purchasing obligations, minimum volume commitments and suspected loyalty-inducing rebates. Certain customers were also prevented from reselling capacity purchased under the contracts. Freightliner committed to remove or amend the provisions in its contracts to address the ORR's concerns.
- In June 2015, the CMA closed an investigation into suspected loyalty-inducing rebates in the pharmaceutical sector, on the grounds of administrative priorities. The case was closed before any statement of objections was issued. The CMA nonetheless sent a warning letter to the relevant party, identifying potential concerns that may arise in the context of discounts and rebates.
- In October 2014, Ofcom closed an investigation into a suspected margin squeeze by BT in relation to superfast broadband services, following a complaint by TalkTalk Telecom Group plc.
- In September 2014, the CMA closed an investigation into suspected abuse of dominance by Epyx concerning the market for vehicle service, maintenance and repair platforms on the basis of binding commitments. The CMA had investigated whether Epyx's contracts prevented customers from switching to competing suppliers.
- In June 2014, the CMA closed an investigation into suspected abuse of dominance by Certas Energy UK Limited (previously GB Oils Limited) concerning the wholesale supply of road fuels in the Western Isles of Scotland on the basis of binding commitments. GB Oils had entered five-year exclusive contracts with filling stations, preventing them from sourcing fuel from other suppliers.
- In 2011, the OFT issued a reasoned 'no grounds for action' decision in relation to Idexx Laboratories Limited, a supplier of in-clinic companion-animal diagnostic testing equipment. The OFT investigated whether Idexx had engaged in anticompetitive bundling and predatory pricing, concluding that there was insufficient evidence that Idexx's conduct was likely to restrict or impair effective competition in the relevant markets.
- In 2010, the OFT issued a similar 'no grounds for action' decision following an investigation of Flybe. The investigation followed a complaint that Flybe had engaged in predatory conduct that excluded a rival airline, Air Southwest, from certain routes. It was clear that Flybe had priced below its average avoidable costs of entry, but the OFT found that Flybe was itself a new entrant and that it was normal commercial practice for an airline in this position to operate at a loss. The situation could therefore be distinguished from the position of a dominant incumbent reacting to new entry.
Discrimination cases in the United Kingdom have also tended to focus on exclusionary conduct. For example, in 2006 the ORR found that English, Welsh and Scottish Railway (EWS) had engaged in abusive discriminatory conduct through the prices it charged for access to its coal haulage services. The ORR found that EWS had discriminated against Enron Coal and Steel Limited (ECSL), offering prices that excluded ECSL from bidding effectively for coal haulage contracts. More recently, in SSE, the Office of Gas and Electricity Markets (Ofgem) accepted binding commitments to address the provisional concern that an upstream supplier was offering discriminatory terms that favoured its own downstream business over those of competitors.
Similar concerns were considered by the Water Services Regulation Authority (Ofwat) in 2015 in Bristol Water and Anglian Water, and by Ofcom in 2018 in Royal Mail. In March 2015, Ofwat closed an investigation into Bristol Water on the basis of binding commitments. Bristol Water holds a local monopoly in the upstream market for the supply and maintenance of water infrastructure. Bristol Water is also active as a 'self-lay' contractor in a contestable downstream market, installing pipes that connect to the mains supply. Bristol Water was suspected of abusing its position in the upstream market by offering discriminatory terms to other self-lay contractors. The commitments require Bristol Water to ensure functional separation between its upstream and downstream services, and to ensure that its upstream business offers equivalent price and non-price terms to third-party contractors as offered to its own downstream business.
In December 2015, Ofwat closed an investigation into Anglian Water, finding no grounds for action. This followed a statement of objections issued in December 2011 and a supplementary statement of objections in April 2014. Anglian Water has a statutory monopoly for the provision of water and sewerage services in its region. Ofwat provisionally found that Anglian Water had implemented an illegal margin squeeze when pricing its upstream services to a rival, Independent Water Networks Limited (IWN), which was competing with Anglian Water for the contract to supply a new site with water and sewerage services. Ofwat eventually concluded that, as the site developer evaluated bids for water and sewerage services on a combined basis, it was unlikely that a margin squeeze applied to sewerage services alone would have made it materially more difficult for IWN to compete for the contract.
In August 2018, Ofcom fined Royal Mail £50 million for abusing its dominant position on the delivery services market. Ofcom found that Royal Mail's proposed changes to prices charged for bulk mail delivery services – charging more to operators who used Royal Mail only for delivery to the areas in which they did not have their own delivery capabilities – amounted to unlawful price discrimination. The price difference was found to discourage entry into the downstream delivery market and to increase barriers to expansion for postal operators seeking to compete with Royal Mail.
In Purple Parking, the High Court found that Heathrow Airport had abused a dominant position by offering discriminatory terms of access to providers of valet parking services.13 Heathrow permitted its own valet parking service access to its forecourts at Terminals 1 and 3, while requiring rival service providers (including Purple Parking) to relocate from the forecourts to the car parks. The High Court held that the forced relocation of rival providers placed them at a competitive disadvantage, and that this was sufficient to demonstrate abuse. The case is unusual in that there was no requirement to show that access to the forecourts was an essential facility or that competition would be eliminated entirely.
Similarly, in Streetmap, the High Court proceeded on the assumption that, at least in principle, a dominant undertaking might commit an abuse by promoting its own products or services in a separate market over those of a rival, provided the conduct had an appreciable effect on competition in the second (non-dominated) market and was not objectively justified.14 The Court did not specifically consider whether a dominant undertaking that was not an essential facility could be required to provide access to downstream rivals on equivalent terms to those offered to its own downstream business. This question was not necessary to decide the case on the facts, and arguably overlaps with questions currently being considered by the European Commission.
The Court went further in ATS v. London Luton Airport Operations.15 In this case, the Court concluded that a concession agreement granted to National Express by London Luton Airport Operations, that carved out easyBus from the exclusivity provisions, was discriminatory against other bus operators even though Luton Airport Operations (the upstream supplier) was not active in the downstream bus market. The Luton Airport case clarifies a question previously considered in SEL-Imperial Ltd v. British Standards Institution.16 In this case, the High Court considered an action for strike out by the British Standards Institution of an abuse of dominance claim concerning the certification of replacement vehicle parts. The High Court refused to strike out the claim because it was insufficiently clear at the time whether decisions affecting a market in which the alleged dominant undertaking was not active could constitute an abuse. The decision by the CJEU in MEO/GDA also confirmed that discrimination can be abusive even where the dominant firm is not active in the downstream market in which the discrimination is felt.17
iv Exploitative abuses
While the focus of UK enforcement action has mostly been on exclusionary conduct, excessive pricing has been considered in a number of cases, including Napp Pharmaceutical Holdings Limited,18 Thames Water Utilities Ltd/Bath House and Albion Yard 19 and Albion Water v. Ofwat.20 These cases have all considered the potential exclusionary effect of pricing behaviour. More recently, as noted above, the CMA fined Pfizer and Flynn Pharma for 'pure' excessive pricing (where there was no exclusionary effect) but now has to reconsider the case after it was remitted by the CAT. The CMA also has two ongoing investigations in suspected excessive pricing, and recently issued a supplementary statement of objections addressed to Advanz Pharma concerning suspected excessive pricing.
The Court of Appeal grappled with the concept of excessive pricing in 2007 in Attheraces Limited v. British Horseracing Board Limited.21 This case concerned the price at which the British Horseracing Board made available pre-race data to Attheraces for sale to overseas bookmakers. Attheraces claimed that the price charged was excessive, as well as discriminatory, amounting to a refusal to supply. Attheraces was successful at first instance, but its claim was overturned by the Court of Appeal. The Court of Appeal accepted that, in principle, prices were excessive if they significantly exceeded the economic value of the product. In assessing economic value, however, it was insufficient merely to show that prices exceeded costs by a reasonable amount, without having regard to the price customers (in this case, the overseas bookmakers) were prepared to pay. The Court also noted that there was little evidence of harm to ultimate consumers (the betting public) from the alleged excessive pricing.
V Remedies and Sanctions
An undertaking that has abused a dominant position may be fined up to 10 per cent of its worldwide turnover in the last business year, calculated according to rules set out by Statutory Instrument.22 An undertaking may be fined only if its conduct was intentional or negligent (i.e., where the undertaking ought to have known that its conduct would result in a restriction or distortion of competition).23 Any undertaking whose turnover does not exceed £50 million benefits from immunity from fines for infringing the Chapter 2 prohibition (but not Article 102), although immunity may be withdrawn on a prospective basis.24
The CMA is obliged to publish guidance as to the appropriate amount of a penalty (which is subject to approval by the Secretary of State). The CMA (as well as concurrent regulators and the CAT) must have regard to that guidance when imposing penalties.25 The OFT published new guidance in September 2012, following a series of successful appeals against its fining decisions before the CAT.26 The guidance, which was updated by the CMA in April 2018,27 sets out a six-step approach to calculating fines:
- calculation of a starting point by multiplying the undertaking's turnover in the relevant market by a percentage of up to 30 per cent depending on the seriousness of the infringement (under its previous guidance, the maximum was 10 per cent);
- adjustment for duration;
- adjustment for aggravating and mitigating factors;
- adjustment to achieve sufficient deterrence and to ensure proportionality;
- adjustment to ensure the statutory cap (10 per cent of worldwide turnover) is not exceeded; and
- adjustment to reflect any leniency or settlement discount or approval of a voluntary redress scheme.
The CMA's guidance states that it will generally apply a starting point percentage of 'between 21 and 30 per cent of relevant turnover' when considering the most serious abuses of a dominant position. Seriousness will be assessed by reference to the nature and extent of the demand for that product, the structure and size of the market, the effect on competitors (and others), the need for deterrence and the damage caused to consumers.
ii Behavioural remedies
On reaching an infringement decision, the CMA (or regulator) may give any person such directions as it considers appropriate to bring the infringement of Article 102 or the Chapter 2 prohibition to an end. Directions may be enforced through the civil courts.28
The CMA and regulators also have the power to impose interim measures.29 Interim measures may be imposed only where the authority has opened a formal investigation (and therefore has 'reasonable suspicion' of an infringement) and considers it necessary to impose interim measures as a matter of urgency for the purposes of preventing significant damage, or to protect the public interest.
The CMA is yet to impose interim measures, although it did consider and reject an application by Worldpay against Visa UK Limited in 2014.30 The OFT imposed interim measures only once (in 2006), and those measures were subsequently withdrawn. The legal threshold for the OFT to impose interim measures was one of 'serious, irreparable damage', whereas the CMA need only show the prospect of 'significant damage'. This change in the legal threshold was intended to make it easier for the CMA to impose interim measures in future. Until now, parties seeking interim relief have generally found it more effective to apply to the courts.31
In its investigation of ATG Media's supply of live online bidding services to auction houses, the CMA received an application under Section 35 of the Act for interim measures relating to allegedly exclusionary practices in respect of such services. The application was made in November 2016. In June 2017, however, shortly before the CMA was due to make a final decision on whether to impose interim measures, the CMA accepted an offer of commitments from ATG Media and closed its investigation. Dr Michael Grenfell, the CMA's executive director for enforcement, referred to this case as 'an example of how, when faced with an interim measures application in a fast-moving market, we were able to resolve the problem within just over six months'.32
There may be greater use of interim measures, particularly in the digital sector, in future. A 2018/19 Digital Competition Expert Panel inquiry into competition law in the digital sector, commissioned by the UK government and chaired by Professor Jason Furman, recommended more frequent and quicker use of interim measures. It identified interim measures as particularly appropriate in digital markets because cases in the digital sector 'are likely to be complex but markets can move fast and tip to a winner before a final decision is reached'.33 Lord Tyrie, chairman of the CMA, also stated in a public letter to the Secretary of State for Business, Energy and Industrial Strategy that increased usage of interim measures 'will be essential if the CMA is to respond to the challenges thrown up by rapidly changing markets, and to do so sufficiently quickly to prevent irreversible harm to consumer trust'.34
iii Structural remedies
The CMA and regulators have no power to impose structural remedies following a finding of abuse of dominance. It is nevertheless possible for a dominance investigation to be closed on the basis of structural commitments. This has happened on one occasion.
In January 2013, Ofwat accepted binding commitments from Severn Trent Water, the first time it had accepted commitments in a competition case. The investigation considered whether Severn Trent Water was cross-subsidising its water analysis business, Severn Trent Laboratories, from its core regulated business. Specifically, Ofwat considered whether (as a result of cross-subsidisation) Severn Trent Laboratories was able to price below cost when competing for contracts with other providers of water analysis services. The commitments included the divestment of Severn Trent Laboratories. The decision to accept commitments in this case is notable not only because it included a structural divestment, but also because the decision to accept commitments departed from the published guidance, which states that commitments will not generally be accepted in serious abuse of dominance cases, such as predatory pricing.
In Bristol Water and SSE (see subsection IV.iii), Ofwat and Ofgem (respectively) accepted quasi-structural commitments under which the suppliers agreed to introduce functional separation between their upstream and downstream businesses.
The CMA also has the power to impose structural measures to address unilateral market power following a market investigation:
- In 2014, following its Private Healthcare market investigation, the CMA decided that HCA should divest private hospitals in central London (although that decision was subsequently quashed by the CAT and, after further investigation, the CMA ultimately concluded in September 2016 that ordering a divestiture would be disproportionate).
- In 2014, following a market investigation into aggregates, cement and ready mix concrete, the Competition Commission (CC) found that Hanson had exclusive rights to produce ground granulated blast-furnace slag (an input into cement) in Great Britain and forced it to divest one of its facilities to create competition.
- In 2010, the CC required BAA plc (the owner of the largest UK airports) to divest two London airports and one Scottish airport, to improve competition in the relevant markets.
The UK enforcement procedure is similar in many respects to the procedure that applies at EU level (under Regulation 1/2003). The CMA (or concurrent regulator) investigates a suspected infringement and reaches an administrative decision in the first instance. That decision is then subject to appeal. The stages of a CMA investigation are as follows:
- Investigations are usually triggered by complaints. This is not always the case, however, and the CMA is able to investigate on its own initiative. The OFT's Gaviscon investigation, for example, began after evidence was submitted by a whistle-blower.
- Before opening a formal investigation the CMA must be satisfied that it has 'reasonable suspicion' of an infringement.35 The CMA has no power to use formal investigation powers unless this legal threshold is met. Therefore, it typically carries out 'informal' information gathering in the first instance (including seeking further information from complainants).
- As well as satisfying the legal threshold, the CMA must decide whether the case is an administrative priority, in accordance with its published Prioritisation Principles.36 The Prioritisation Principles are intended to ensure the CMA makes efficient use of its resources when deciding which cases to pursue. The High Court has upheld the CMA's right to prioritise its cases in this way, and to close investigations on administrative grounds, even after considerable investigation has been carried out.37
- Once it has opened an investigation, the CMA will publish a short notice on its website indicating in broad terms the relevant sector and conduct under investigation. It does not usually name the parties to its investigations before a statement of objections is issued. In exceptional circumstances, the CMA can decide to publish the names of the parties in its initial public notice. Exceptional circumstances include instances where a party's involvement is already in the public domain, or where the CMA considers that the potential harm to consumers or other businesses from non-disclosure is sufficient to justify disclosure.
- Provided the legal threshold for opening a case is met, the CMA has wide powers to require the production of information. It may require the production of specified documents or information, ask individuals oral questions or carry out interviews with individuals. Individuals are required to answer the CMA's questions, subject to their privilege against self-incrimination, and failure to do so can result in civil sanctions. The CMA may also carry out unannounced visits of business or domestic premises (i.e., 'dawn raids'). It may enter premises without a warrant, or it may enter and search premises with a warrant (which it can obtain from the CAT or the High Court).
- If the CMA is minded to reach an infringement decision against an undertaking, it must issue a statement of objections, setting out its case and the evidence it intends to rely on. The decision whether to issue a statement of objections must be taken by the case team's senior responsible officer. The CMA must also allow access to its case file when it issues a statement of objections. The CMA's file must contain all material relevant to the matters in the statement of objections (subject to certain redactions). Any party receiving a statement of objections has the right to submit written representations and to attend an oral hearing. The same process applies in relation to any proposed fine (i.e., the CMA will provide details of its proposed fine and allow the opportunity for written representations and an oral hearing).
- The CMA will consider entering into settlement discussions in any case where it considers that the evidential standard for giving notice of its proposed infringement decision is met.38 'Settlement' is the process whereby a business under investigation is prepared to admit that it has breached competition law and confirms that it accepts that a streamlined administrative procedure will govern the remainder of the CMA's investigation of that business's conduct, in exchange for a reduction in financial penalty. Settlement discussions can be initiated either before or after the statement of objections is issued. The CMA retains broad discretion in determining which cases to settle, and this includes the discretion whether to explore interest in settlement discussions, whether to continue or withdraw from settlement discussions and whether to settle at all. Businesses do not have a right or an obligation to settle in a given case and may withdraw from settlement discussions at any time.
- Parties can offer commitments at any stage of an investigation, although the CMA encourages parties considering commitments to offer them before a statement of objections is issued. The commitments process is similar to the EU process under Article 9 of Regulation 1/2003. There is no obligation on parties to offer commitments. If accepted, the commitments become binding and are enforceable through the courts.
- Following parties' written and oral representations, the CMA must decide whether to issue an infringement decision. This decision is taken on a collective basis by a three-member case decision group (CDG), which may include any senior CMA staff or board member or any member of the CMA panel. The senior responsible officer may not be a member of the CDG, to ensure that the final decision is taken by officials who were not involved in the decision to issue the statement of objections. The CMA may equally decide at this stage to issue a reasoned decision that it has no grounds for action. Final decisions are published (in redacted form) on the CMA's website.
- CMA infringement decisions are subject to full-merits appeal to the CAT, and subsequently to the civil appeal courts on points of law.
CMA investigations vary significantly in duration, and no statutory deadlines apply. Very broadly, a CMA investigation is likely to take around three years (from case-opening until decision), with the statement of objections being issued roughly halfway through that period.
During an investigation, disputes over procedural matters (such as deadlines for responding to information requests, or confidentiality redactions) that cannot be resolved with the case team itself may be referred to the CMA's Procedural Officer. The Procedural Officer will review the party's written application and relevant correspondence, and allow an opportunity for each side to present its views orally (which may be by telephone). The Procedural Officer will then issue a short, reasoned decision (within a target deadline of 10 working days), which is binding on the CMA. CMA procedural decisions are ultimately subject to judicial review by the civil courts.
As explained above, the CMA has the power to impose interim measures to prevent significant damage, or to protect the public interest. If the CMA is minded to impose interim measures, it must first give notice to the party in question and allow them the opportunity to make representations. Interim measures decisions are subject to appeal to the CAT.
The Consumer Rights Act 2015 also gives the CMA the power to certify voluntary compensation schemes following an infringement decision, intended to encourage firms to offer compensation without the need for victims to commence private litigation.
Outside an investigation, the CMA has the power to publish opinions on novel issues of competition law where it considers there is sufficient need for general guidance (e.g., because of their economic importance for consumers). The CMA has never published an opinion in relation to a question of abuse of dominance. The CMA is sometimes prepared to offer private, informal advice on an ad hoc basis, but only in exceptional cases and only where the matter in question would satisfy its case Prioritisation Principles. In contrast, the CMA does encourage potential complainants to approach it with possible complaints for discussion on an informal and confidential basis.
VII Private Enforcement
Two types of private action exist in the United Kingdom: follow-on actions and stand-alone actions.
A follow-on action is a damages action founded on an infringement decision by a UK competition authority or the European Commission. The court is bound by the findings of infringement already made (as well as findings of fact in the infringement decision). The claimant is therefore required only to show loss and causation. In a stand-alone action, the claimant must prove that the defendant infringed competition law, as well as proving that the claimant suffered reasonably foreseeable loss. Since October 2015, stand-alone actions and follow-on actions can be brought before the CAT as well as the civil courts (the High Court of England and Wales, the High Court of Northern Ireland, or the Court of Session or Sheriff Court in Scotland).39 The civil courts and the CAT have wide jurisdiction to award damages and equitable remedies, including injunctive relief, specific performance and declarations of illegality.
In the past, private claims tended to gravitate towards the civil courts, and particularly the High Court of England and Wales, for a variety of reasons. The Consumer Rights Act 2015 aims to reverse this trend. Not only does the CAT now have the power to hear stand-alone actions and grant injunctive relief, it is also the only venue in which claimants can bring opt-out and opt-in collective actions (discussed below). Further, some cases before the CAT will qualify for fast-track review, capping the costs risk for claimants.40 The civil courts also have the power to transfer competition cases to the CAT. The CAT's procedural rules and limitation periods are now generally aligned with those that apply to the civil courts, although some questions remain over how the new rules apply to claims relating to conduct predating October 2015. Taken together, these changes are intended to make the CAT the principal venue for competition cases in the United Kingdom.
There are four forms of collective action in the United Kingdom:
- Collective actions before the CAT: since October 2015, any representative of a class of persons may bring a collective action for damages before the CAT on an opt-out basis or an opt-in basis. In either case, the claimant must obtain permission from the CAT (a 'collective proceedings order') to continue with a claim on this basis, by showing that they are a suitable representative and that the claims in question are sufficiently similar to be brought in collective proceedings.
- Consumer actions by specified bodies: 'specified bodies' can bring follow-on damages actions before the CAT on behalf of consumers, on an opt-in basis. A specified body is a consumer organisation specified by the Secretary of State by statutory order. To date, only the Consumers' Association (also known as 'Which?') has been designated a specified body. Which? has brought only one action under these provisions (concerning replica football kits, which was ultimately settled), and has publicly stated that it will not bring any further actions of this type.
- Group litigation orders: the High Court has the power to make a group litigation order combining claims that raise common or related issues. A group litigation order will also provide for the establishment of a group register of the claims forming the group. Judgments are binding on all parties on the group register.
- Representative actions: it is, in theory, possible for a claimant to bring an action in the High Court on behalf of all claimants with the same interest.41 Following a 2010 Court of Appeal judgment,42 however, it seems unlikely that mass representative actions will be brought in competition cases under these provisions in future, and far more likely that representative claimants will seek to launch collective proceedings before the CAT.
Damages in competition claims are intended to be compensatory: they are intended to place the victim in the position he or she would have been in had the infringement not occurred. In exceptional circumstances, where compensatory damages would otherwise be an inadequate remedy, damages might be awarded on a restitutionary basis (i.e., accounting for the profits earned unjustly by the defendant). While the Court of Appeal has accepted in principle that restitutionary damages may apply,43 they have never been awarded in practice.
UK Regulations implementing the EU Damages Directive (described in more detail in the EU chapter) came into force on 9 March 2017.44 Although many of the provisions of the Damages Directive did not require amendment of the UK regime, and many changes relate primarily to cartel infringements, the Regulations contain several provisions that may have a bearing on UK claims for damages from abuse of dominance. For example, the Regulations:
- address the burden of proof with respect to the passing-on defence;
- suspend the limitation period while competition authority investigations or consensual dispute resolution processes are ongoing;
- exclude the award of exemplary damages reversing the principle established in the Cardiff Bus case that exemplary damages were possible in dominance cases where no administrative fine had been imposed;45
- exempt small and medium-sized enterprises, as well as defendants that settle with the claimant, from the principle of joint and several liability; and
- amend rules on disclosure.46
More generally, the UK has become a popular venue for private actions even where the claimant has a choice of jurisdiction. There are two principal reasons for this. First, the UK rules on disclosure of evidence are favourable to claimants (allowing access to evidence that might not be available in other jurisdictions). Second, costs are generally awarded on a loser-pays basis. A successful claimant is therefore likely to recover a significant proportion of his or her costs from the defendant.
Public funding is generally unavailable for competition law actions. Other funding options are available, however. In particular, parties may enter conditional fee agreements (CFAs) with lawyers. Under a CFA, the lawyer will be paid nothing if the case is lost but will be entitled to a success fee (i.e., an uplift) of up to 100 per cent for winning the case. Competition actions in the United Kingdom may also be funded through 'after-the-event' insurance or by professional funders, although, in most cases, any uplift or after-the-event insurance premium will not be recoverable from an unsuccessful defendant. Since April 2013, claimants have also been able to instruct lawyers in High Court actions under a damages-based agreement (DBA). Under a DBA, the lawyer is entitled to a percentage of the damages awarded to a successful claimant, but receives nothing if the claim is unsuccessful. DBAs are not permitted in opt-out collective proceedings before the CAT; however, in collective proceedings, the representative claimant's lawyers or funder, or both, may be allowed a share of any unclaimed damages.
VIII Future Developments
The public enforcement and private litigation regimes in the United Kingdom have undergone considerable reform in recent years. While these reforms are significant from an institutional and procedural perspective, the substantive rules on dominance are unchanged. The reforms were intended to result in more competition law enforcement cases, especially in the regulated sectors, together with greater use of market investigations to tackle concerns about unilateral conduct and an increase in private litigation. The expected boost to public enforcement and private litigation (and collective actions in particular) has been slow to materialise, although CMA enforcement activity increased significantly following criticism by the National Audit Office in February 2016. There is reason to believe this growth in public enforcement will continue to gain momentum, although the past year has seen a greater focus on proceeding with existing cases and preparing for the UK's withdrawal from the EU rather than opening new cases. Other future developments are likely to involve a greater focus on competition in the digital sector and broader changes to UK competition law enforcement after the UK leaves the EU.
i Competition in the digital sector
The CMA's public statements suggest that it will start to focus more of its enforcement activities on digital markets.47 Its annual report on concurrency similarly refers to issues relating to increasing digitisation of the economy that 'require more rapid, innovative and joined-up intervention from regulators'.48
In his 2019 letter to the Secretary of State for Business, Energy and Industrial Strategy, Lord Tyrie urges government reform of competition policy, seeing it as an 'opportunity to help shape the response to the challenges that many jurisdictions now face'.49 Several of the proposals could impact dominance investigations. To add bite to CMA information requests, for example, Lord Tyrie suggests implementation of a turnover-based fines regime for non-compliance with enforcement investigations. Where these investigations uncover concerns, more frequent use of interim measures 'will be essential if the CMA is to respond to the challenges thrown up by rapidly changing markets'.50 Lord Tyrie also proposes that the standard of review by the CAT (which he describes as 'a more protracted and cumbersome appeal process than was originally intended for, and by, the CAT') be lowered from full merits review, either to judicial review or to a new standard of review.51 This proposal has been met with almost universal opposition among legal practitioners and business. The letter also suggests imposing greater restrictions on the admissibility of new evidence and less emphasis on oral testimony in CAT appeals.
The House of Lords Select Committee on Communications has also published a report calling for rigorous enforcement in facilitating effective regulation of digital markets. The report describes online platforms as 'gatekeepers' for the internet, and states that 'it is appropriate to put special obligations on these companies to ensure they act fairly'.52 There is no discussion of the specific substance of these obligations, however, only that they should be created in accordance with a number of principles and enforced by a regulator. Significantly, the report recommends the establishment of a new Digital Authority that would report directly to the Cabinet Office. This new entity would coordinate regulators in the digital world through a number of functions, including assessing existing regulation, recommending additional enforcement powers where necessary and assisting in the effective implementation of regulation.
Several of these suggestions are echoed in the report of the Digital Competition Expert Panel chaired by Professor Jason Furman. This report frames reform of competition policy as an opportunity for the UK to set an example and 'to lead international action'.53 With respect to antitrust enforcement, two principal changes are proposed, both consistent with Lord Tyrie's proposals: greater use of interim measures and adjustment of appeal standards. The 'goal of the policy changes is not more or less enforcement but better enforcement'.54 The report notes the lengthy duration of abuse of dominance cases and the corresponding risk that companies operating in fast-moving digital markets may go out of business before cases are concluded. Recognising that 'the powers are already sufficient in themselves',55 the report first recommends greater use of interim measures. To facilitate this, the report proposes streamlining the CMA's processes such that access to files in interim measures cases would be limited to documents that are 'clearly relevant'56 to the interim measure. The other recommendation is to change the standard of appeal to the CAT from full merits review to more a limited judicial review. When discussing this recommendation, the report also states that 'significant changes to the appeal standard for antitrust cases would merit a change to the current CMA decision-making process to guarantee sufficient independence'.57
In addition to reform of the current ex post framework, the Furman Report advocates greater emphasis on ex ante regulation. It recommends the creation of a Digital Markets Unit to, among other functions, create a code of conduct applicable to companies that are deemed to hold 'strategic market status'. The code would set out 'acceptable norms of competitive conduct on how firms with strategic market status should act with regard to smaller firms and consumers'.58 The proposal to introduce more ex ante rules is broadly consistent with Lord Tyrie's letter and the House of Lords Select Committee report, and could have a significant impact on the nature of UK competition enforcement in future, particularly in the digital sector.
ii Implications of Brexit
Arguably the most significant future development in UK antitrust enforcement is likely to be the UK's withdrawal from the EU. On 28 February 2018, the European Commission published a draft Withdrawal Agreement between the EU and the UK, setting out arrangements for the UK's withdrawal from the EU, together with a political declaration about the shape of the future relationship between the UK and the EU. The Withdrawal Agreement envisages a transition period until 31 December 2020, during which EU competition law would continue to apply in the UK as it does today. It also commits the UK to maintaining a competition regime broadly in line with EU law under the provisions of the Ireland Protocol to the Withdrawal Agreement (commonly referred to as the 'Northern Ireland backstop') unless and until alternative arrangements are agreed. At the time of writing, the Withdrawal Agreement has not been ratified by the UK Parliament or the European Parliament, and remains subject to negotiation between the EU and the UK.
Although the terms of the UK's post-Brexit relationship with the EU are yet to be agreed,59 likely implications for competition enforcement after any transition period include the following:
- EU competition law will no longer be directly applicable in the UK, although it would still apply to UK companies active in the EU;
- European Commission decisions relating to post-Brexit conduct are unlikely to extend to the UK;
- a European Commission investigation will no longer preclude the CMA from investigating the same conduct;
- the CMA, sectoral regulators, CAT and UK civil courts may have greater freedom to interpret UK competition law differently from equivalent EU competition law;
- the European Commission may no longer have the power to conduct dawn raids in the UK; and
- European Commission infringement decisions adopted post-Brexit will not necessarily be binding on the CAT and UK civil courts, including in follow-on damages claims.
The CMA leadership has spent much of 2017 and 2018 preparing for Brexit and positioning the UK's withdrawal from the EU as an opportunity to step out of the Commission's shadow and establish the CMA as a leading global agency. The CMA's resources have also expanded to meet the demands of its expected post-Brexit responsibilities. The CMA obtained a modest funding increase in the 2017 Autumn Budget, allowing it to expand its presence in Scotland 'with ambitions to grow further'. The UK government also allocated the CMA an additional £20 million funding for the financial year 2019/2020, specifically to facilitate preparation for the UK's exit from the EU.
Any post-Brexit changes to UK competition enforcement will present both challenges and opportunities – for business, for the CMA and sectoral regulators, and for the legal profession. There will inevitably have to be detailed amendments to UK statutes, secondary legislation and guidance, and the UK competition authorities may have to adjust their investigation and enforcement priorities to meet increased demands on their resources.
1 Paul Gilbert is counsel and John Messent is an associate at Cleary Gottlieb Steen & Hamilton LLP. They are grateful for the assistance of their colleague, Chloe Hassard.
2 On 25 November 2018, the UK and the EU concluded a withdrawal agreement setting out the terms of the UK's departure from the EU and a political declaration on the framework for their future relationship, as provided for under Article 50(2) of the Treaty on the Functioning on the European Union (TFEU) (the Withdrawal Agreement). The Withdrawal Agreement would, if ratified, preserve the status quo regarding the application of Article 102 in the UK until at least 31 December 2020. See Section VIII for further details on the possible implications of the UK's withdrawal from the EU.
3 Section 60 of the Act.
4 The CMA was created on 1 October 2013, and acquired its powers and responsibilities on 1 April 2014. It replaced two former public authorities: the Office of Fair Trading (OFT) and the Competition Commission (CC). The OFT had powers to enforce the prohibitions in Articles 101 and 102 of the TFEU and the equivalent UK prohibitions, as well as to carry out Phase I merger reviews and market studies. The CC was a reference body, carrying out Phase II merger reviews, market investigations and certain regulatory appeals. Where relevant, this chapter refers to the former OFT and CC.
5 Section 46 of the Act.
6 2009/C 45/02.
7 The investigation procedures followed by the sectoral regulators differ in some respects from the CMA's procedures.
8 The fifth annual report was published on 10 April 2019. The CMA also published a 'Baseline Report' on concurrency on 1 April 2014.
10 Case C-170/13, Huawei Technologies Co. Ltd v. ZTE Corp. and ZTE Deutschland GmbH (ECLI:EU:C:2015:477).
11 This point was underlined by the High Court in Purple Parking Limited v. Heathrow Airport Limited  EWHC 987 (Ch).
12 National Grid plc v. GEMA,  EWCA Civ 114.
13 Purple Parking Limited v. Heathrow Airport Limited  EWHC 987 (Ch).
14 Streetmap.EU Limited v. Google Inc. and Google Ireland Limited and Google UK Limited  EWHC 253 (Ch).
15 Arriva The Shires Ltd v. London Luton Airport Operations Ltd  EWHC 64 (Ch).
16 SEL-Imperial Ltd v. The British Standards Institution  EWHC 854 (Ch).
17 Case C-525/16, MEO/GDA.
18 Napp Pharmaceuticals (CA98/2/2001), OFT decision of 30 March 2001.
19 Thames Water Utilities Ltd/Bath House and Albion Yard (CA98/01/2003), Ofwat decision of 31 March 2003.
20 Albion Water Limited v. Director General of Water Services  CAT 7.
21 Attheraces Ltd v. British Horseracing Board Ltd  EWCA Civ 38.
22 Section 36 of the Act, and the Competition Act 1998 (Determination of Turnover for Penalties) Order 2000 (SI 2000/309), as amended by the Competition Act 1998 (Determination of Turnover for Penalties) (Amendment) Order 2004 (SI 2004/1259).
23 Napp Pharmaceutical Holdings Limited and Subsidiaries v. Director General of Fair Trading  CAT 1, Paragraph 457.
24 Section 40 of the Act.
25 Section 38(8) of the Act.
26 In connection with the OFT's infringement decisions concerning: (1) bid-rigging arrangements in the construction sector; and (2) cartel behaviour by recruitment agencies.
27 CMA's guidance as to the appropriate amount of a penalty, CMA73.
28 Sections 33 and 34 of the Act.
29 Section 35 of the Act.
30 See CMA press release of 27 March 2015.
31 See, for example, Dahabshiil Transfer Services Limited v. Barclays Bank plc and Harada Limited and Berkeley Credit And Guarantee Limited v. Barclays Bank plc  EWHC 3379 (Ch). This case concerned an alleged abuse of dominance by Barclays, which withdrew certain money-servicing activities from the claimant. The High Court granted an interim injunction, subject to standard cross-undertakings in damages, requiring Barclays to continue providing the services to the claimant pending a full trial. See also Packet Media Ltd v. Telefonica UK Ltd  EWHC 2235 (Ch). By contrast, interim relief was refused by the High Court in Bruce Baker v. The British Boxing Board of Control  EWHC 2074 (QB).
32 'UK competition enforcement – where next?', 29 November 2017, available at www.gov.uk/government/speeches/uk-competition-enforcement-where-next.
33 Report of the Digital Competition Expert Panel, Unlocking digital competition, 13 March 2019, p. 14, available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/785547/unlocking_digital_competition_furman_review_web.pdf.
34 Letter from Andrew Tyrie of 21 February 2019, p. 8, available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/781151/Letter_from_Andrew_Tyrie_to_the_Secretary_of_State_BEIS.pdf.
35 Section 25 of the Act.
36 CMA16, April 2014.
37 R (ex p. Cityhook) v. OFT  EWHC 57.
38 In the past, settlement was formally referred to as 'early resolution'.
39 Before October 2015, the CAT did not have jurisdiction to hear stand-alone actions.
40 See, for example, Socrates Training Limited v. The Law Society of England and Wales  CAT 10, judgment (costs capping) of 21 June 2016.
41 Civil Procedure Rule 19.6.
42 Emerald Supplies Ltd v. British Airways plc  EWCA Civ 1284.
43 Devenish Nutrition Ltd v. Sanofi-Aventis SA (France) & Ors  EWCA Civ 1086.
44 The Claims in respect of Loss or Damage arising from Competition Infringements (Competition Act 1998 and Other Enactments (Amendment)) Regulations 2017 (No. 385).
45 See 2 Travel Group plc (in liquidation) v. Cardiff City Transport Services Limited  CAT 19, judgment of 5 July 2012. In 2008, the OFT issued an infringement decision, finding that Cardiff City Transport Services Limited (trading as Cardiff Bus) had engaged in predatory behaviour in the supply of local bus services in the Cardiff area. No fine was imposed on Cardiff Bus, because its turnover fell below the statutory threshold for immunity from fines. However, a rival bus company, 2 Travel, which had exited the market (and was by now in liquidation), sought follow-on damages in the CAT under several heads. The CAT found that Cardiff Bus was liable for 2 Travel's loss of profit of around £34,000 (plus interest), but that the other claimed losses had not been proven. The CAT nevertheless awarded exemplary damages of £60,000 (almost tripling the total damages awarded), on the basis that Cardiff Bus's abusive conduct had been calculated to make a profit that was likely to exceed the compensation payable to the claimant.
46 For further detail and analysis, see 'The UK implements the EU Antitrust Damages Directive', Cleary Gottlieb Alert Memorandum, 10 January 2017, available at: www.clearygottlieb.com/news-and-insights/publication-listing/the-uk-implements-the-eu-antitrust-damages-directive.
47 Consumer Green Paper: Modernising Consumer Markets, 11 April 2018.
48 CMA Annual Report on Concurrency 2019, p. 7, Paragraph 21, available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/794238/ACR_2019_pdf_a.pdf.
49 See footnote 34, p. 3.
50 ibid. p. 8.
51 ibid. p. 35.
52 'Regulating in a Digital World', 9 March 2019, p. 45, Paragraphs 171–172, available at: https://publications.parliament.uk/pa/ld201719/ldselect/ldcomuni/299/299.pdf.
53 See footnote 33, p. 16.
54 ibid. p. 84.
55 ibid. p. 104.
56 ibid. p. 105.
57 ibid. p. 108.
58 ibid. p. 57.
59 Theresa May stated in March 2018 that there may need to be ongoing consistency between UK and EU competition law:
The next hard fact is this. If we want good access to each other's markets, it has to be on fair terms. As with any trade agreement, we must accept the need for binding commitments – for example, we may choose to commit some areas of our regulations like state aid and competition to remaining in step with the EU's.