The Cartels and Leniency Review: United Kingdom
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).
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 Treaty on the Functioning of the European Union (TFEU).
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, 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, the CMA is 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'.2 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 guidance on competition disqualification orders and prosecution guidance in respect of the cartel offence.3
As a member of the European Union, the United Kingdom was also required under Regulation (EC) No. 1/20034 to apply and enforce Article 101 TFEU in relation to cartel conduct that may affect trade between Member States. However, following the result of the 2016 (Brexit) referendum on membership of the European Union, the United Kingdom left the supranational block on 31 January 2020. The Withdrawal Agreement entered into between the United Kingdom and the European Union provided for a transition period until 31 December 2020, during which time there was no change to the status quo as far as cartel regulation was concerned. EU competition law continued to be directly applicable, and the European Commission and European Court of Justice continued to have jurisdiction over the United Kingdom. Although Regulation (EC) No. 1/2003 ceased to apply in the United Kingdom at the end of the transition period,5 the European Commission continues to be competent for competition cases in the UK that it had initiated before 31 December 2020 (referred to as Continued Competence Cases).6
Cooperation with other jurisdictions
The United Kingdom is party to mutual assistance arrangements relating to competition law enforcement with several countries, including the United States, Australia, Canada, China and New Zealand. Until recently, the CMA cooperated extensively with the European Commission and the national competition authorities of the EU Member States through the European Competition Network (ECN) (see the European Union chapter for further details). The CMA is no longer a member of the ECN following Brexit.
The CMA's guidance on leniency and cartels 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. Prior to Brexit, an exception to this general provision applied to disclosures by the CMA within the ECN in accordance with the provisions and safeguards set out in the European Commission's Network Notice.7
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.
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
To date, the UK competition authorities and courts have followed 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.8
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 hardcore 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 satisfied that there are exceptional and compelling public policy reasons for exclusion.
The CMA is the single first port of call for all applications, including those in the regulated sectors.9 The CMA's leniency programme10 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.11 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 (anything up to 100 per cent), 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. The applicant must therefore provide evidence which adds significant value to the CMA's investigation.
- 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, though a recent addendum to the leniency programme has stated that the CMA would not generally expect to grant immunity or discounts on any financial penalty of more than 50 per cent to Type B applicants in cases of resale price maintenance.12 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 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;13
- 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.
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. 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.
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 undertaking14 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.15 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 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). As these provisions were implemented into UK law,16 they will continue to apply post-Brexit unless subsequently amended or repealed.17 They 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.18
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. However, the fines imposed upon several parties were quashed following an appeal on liability to the Competition Appeal Tribunal (CAT);
- 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;
- 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; and
- in October 2019, the CMA imposed total fines of £36.9 million on three suppliers of pre-cast concrete drainage products.
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.19
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.20
ii Sanctions applying to individuals
If convicted in a magistrate's court, any individual found guilty of committing a criminal cartel offence under the Enterprise Act may be imprisoned for up to six months and receive a fine of up to £5,000 for offences committed before 12 March 2015 and an unlimited fine for offences committed on or after 12 March 2015. If convicted in the Crown Court, an individual 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.
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 2014.21
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);22
- 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.23
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.24
The formal settlement procedure has been available since 1 April 2014 for all new and ongoing Competition Act cases, and it has been used regularly since, including in the recent cases of Solid Fuel Products (2018), Heathrow Airport Parking (2018) and Concrete Drainage Products (2019).
'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.25
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;
- arranging for the provision of appropriate IT support to secure data, provide access to equipment and allow the officials to conduct their investigation;
- 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).
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.
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. In 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 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.26 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
Where there exists a prior finding by a UK competition authority 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. Claims can be brought on a similar basis in respect of infringement decisions by the European Commission reached before 31 December 2020, as well as decisions by the European Commission in respect of Continued Competence Cases (as defined under Article 92 of the Withdrawal Agreement).27
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).28 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.
In March 2017, the Competition Act was amended to reflect the Damages Directive's provisions.29 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;30
- 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 were made, including:
- implementing the Damages Directive's requirements concerning disclosure (see Section IV.iii for further details);
- the assessment of contributions between those jointly liable for an infringement; and
- allowing final infringement decisions of EU 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. As the provisions of the Damages Directive were implemented into UK law, they will continue to apply post-Brexit unless subsequently amended or repealed.31
iv Indirect purchasers
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). 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
In 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 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; and 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.
Several applications to commence collective actions have been made under the regime. The first application was adjourned and subsequently withdrawn by the applicant.32 The second, concerning follow-on actions arising from the European Commission's decision regarding interchange fees charged by Mastercard, was rejected by the CAT. However, the CAT's decision was set aside by the Court of Appeal33 and then appealed to the Supreme Court. On 11 December 2020, the Supreme Court delivered its judgment and largely upheld the Court of Appeal's earlier decision, thus lowering the threshold that a proposed class representative needs to overcome when seeking certification of a collective proceedings order. The judgment represents a significant development for the UK's collective proceedings regime although the longer term impact will depend on how the Court's findings are implemented by the CAT. Further clarification on the regime should come as a result of the collective action applications that are currently pending in relation to the European Commission's Trucks and Foreign Exchange cartel decisions and stand-alone claims in respect of rail tickets.
vi Private litigation funding rules
A number of firms are authorised by the Financial Conduct Authority to provide third-party funding services (in which businesses offer litigation funding in return for a percentage of the damages), and an increasing number of cases are now funded in this way. However, the Consumer Rights Act prohibits the use of 'damages based agreements' in relation to opt-out collective actions.
On 11 March 2020, the World Health Organisation declared the covid-19 coronavirus outbreak to be a global pandemic, which resulted in many countries entering into a national lockdown and shutting businesses in order to prevent the spread of the covid-19 virus. In response to the pandemic, the Secretary of State for the Department for Business, Energy and Industrial Strategy introduced five 'public policy exclusion orders' to temporarily relax the Chapter I prohibition for certain types of agreements relevant to the pandemic response.34 The orders related to: groceries; dairy produce; Solent maritime crossings; health services for patients in England; and health services for patients in Wales. In order to qualify for the exclusion under one of the orders, the agreement had to be notified to the Secretary of State. The orders relating to groceries and to dairy produce have been subsequently revoked by the Secretary of State.
In response to the pandemic, the CMA launched a coronavirus task force to identify, monitor and respond to competition and consumer problems arising out of the pandemic, and to ensure that the relaxation of competition rules was not being abused. The CMA has also issued guidance providing comfort that any coordination between competing businesses that is undertaken solely to address concerns arising from the crisis, which does not go further or last longer than what is necessary, will not be punished by the CMA.35 This coordination must be in the public interest and must contribute to the benefit or wellbeing of consumers. The CMA did, however, stress that it will not tolerate exploitation of these provisions through non-essential collusion.
On 14 September 2020, the UK government announced that John Penrose MP was to lead a review to explore how to bolster the UK's competition policy in the context of both the covid-19 pandemic and Brexit.36 The purpose is to assess 'how the UK's competition regime can further evolve to meet the government's policy aims of promoting a dynamic, innovation-driven economy which delivers for consumers and businesses across all regions and nations of the UK'.
The UK government is also due to respond to various proposals to change the UK competition regime that were made by the CMA in February 2019. The proposed changes include strengthening the current whistle-blowing regime and raising the compensation cap for cartel whistle-blowers. The CMA has also suggested that responsibility for cartel prosecutions may sit more naturally with an agency that routinely brings criminal prosecution, such as the Serious Fraud Office, as the CMA does not maintain the scale of expertise usually possessed by an agency with powers of prosecution.
After many months of negotiations, the EU and UK negotiators announced on 24 December 2020 that they had reached 'agreement in principle' on the EU–UK's future relationship. The EU–UK Trade and Co-operation Agreement (TCA) came into provisional effect at 11pm on 31 December 2020. The TCA is implemented in the UK by the European (Future Relationship) Act 2020, which received Royal Assent on 31 December 2020. The EU's implementation process for the TCA had to be curtailed due to lack of time. It is currently anticipated that the formal approval of the European Parliament and the Council will be completed by the end of February. The TCA contains a section on 'level playing field for open and fair competition and sustainable development', which is designed to prevent trade distortions created by anticompetitive practices, discriminatory and abusive conduct and subsidies. The TCA includes commitments for each party to maintain effective competition regimes and provides a basis for cooperation on competition law matters, including the option to enter into separate agreements on cooperation and coordination.
1 Philippe Chappatte is a partner at Slaughter and May and Paul Walter is a business development consultant. The authors would like to thank Jake Dark, a Slaughter and May associate, for his help in preparing this chapter.
2 CMA guidance as to the appropriate amount of a penalty, April 2018.
3 CMA guidance on competition disqualification orders, February 2019; and CMA cartel offence prosecution guidance, March 2014.
4 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.
5 Section 1 of the European Union (Withdrawal) Act 2018. Section 60A of the Competition Act 1998, which was introduced by the Competition (Amendment etc.) (EU Exit) Regulations 2019 (SI 2019/93), requires the UK regulators and courts to ensure that UK competition law is interpreted consistently with EU competition law as at 31 December 2020 but allows a departure from these principles where appropriate to do so based on specific factors.
6 Article 92 of the Withdrawal Agreement.
7 See Paragraphs 40 and 41 of the Commission Notice on cooperation within the Network of Competition Authorities and Paragraph 4.27 of the CMA's 'Guidance on the functions of the CMA after the end of the Transition Period', 1 December 2020.
8 See, for example, case C-97/08 P, Akzo Nobel NV and others v. Commission, judgment of 10 September 2009.
9 CMA information note, 'Arrangements for the Handling of Leniency Applications in the Regulated Sectors', November 2017.
10 OFT publication, 'Applications for leniency and no-action in cartel cases', July 2013 (adopted by the CMA), and the addendum to this publication, 'Addendum to OFT1495' dated 24 September 2020, which applies to new leniency applications made on or after this date.
11 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.
12 'Addendum to OFT1495', dated 24 September 2020, which applies to new leniency applications made on or after this date.
13 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, except 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).
14 Prior to the end of the Transition Period, parties applying for leniency to the European Commission were able to obtain a marker on a 'no names' basis from the CMA pending the Commission's confirmation that immunity was available under the Commission's leniency policy. Following the end of the Transition Period, these cases will no longer receive special treatment, and therefore markers on a 'no names' basis will only be given where there are strong justifications, which the CMA expects to be rare. See paragraph 4.26 of the CMA's 'Guidance on the functions of the CMA after the end of the Transition Period', 1 December 2020.
15 See OFT publication, 'Applications for leniency and no-action in cartel cases', July 2013 (adopted by the CMA).
16 The provisions of the Damages Directive were implemented into UK law by the Claims in respect of Loss or Damage arising from Competition Infringements (Competition Act 1998 and Other Enactments (Amendment)) Regulations 2017.
17 Section 2 of the European Union (Withdrawal) Act 2018.
18 Section 36 of the Competition Act.
19 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.
20 CMA guidance as to the appropriate amount of a penalty, April 2018. The CMA's 'Guidance on the functions of the CMA after the end of the Transition Period' (1 December 2020) states at paragraph 4.37 that certain changes will need to be made to this penalty guidance in light of Brexit, and such amendments will be consulted upon and published at a later date. Until such changes are published, the CMA will interpret the guidance within the appropriate context of the United Kingdom having left the European Union.
21 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.
22 The pre-existing exclusion relating to the notification of bid rigging arrangements was retained.
23 CMA cartel offence prosecution guidance, March 2014.
24 Competition Act 1998: Guidance on the CMA's investigation procedures in Competition Act 1998 cases, November 2020.
25 CMA officials are also able to inspect business premises without a warrant in certain circumstances.
26 Competition law redress – A guide to taking action for breaches of competition law, May 2016.
27 Paragraph 14 of Schedule 4 of the Competition (Amendment etc.) (EU Exit) Regulations 2019 (as amended by Regulation 39 of the Competition (Amendment etc.) (EU Exit) Regulations 2020).
28 Case C-557/12, Kone AG and others v. OBB-Infrastruktur AG, judgment of 5 June 2014.
29 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.
30 Previously exemplary damages were available, in theory, in limited circumstances and at the court's discretion.
31 Section 2 of the European Union (Withdrawal) Act 2018.
32 Case 1257/7/7/16, Dorothy Gibson v. Pride Mobility Products Limited.
33 Case 1266/7/7/16, Walter Hugh Merricks CBE v. Mastercard Incorporated and Others.
35 'CMA approach to business cooperation in response to COVID-19', 25 March 2020, CMA118.
36 See https://www.gov.uk/government/news/john-penrose-mp-to-lead-review-exploring-how-to-bolster-uk-competition-policy">https://www.gov.uk/government/news/john-penrose-mp-to-lead-review-exploring-how-to-bolster-uk-
competition-policy. See also the corresponding policy paper https://www.gov.uk/government/publications/terms-of-reference-for-john-penrose-mp-report-on-competition-policy/terms-of-reference-john-penrose-