The Dominance and Monopolies Review: United Kingdom
On 31 January 2020, the United Kingdom ceased to be an EU Member State and withdrew from the EEA. European competition law, including the provisions of Article 102 of the Treaty on the Functioning of the European Union (TFEU), will continue to apply in the UK only until the end of an implementation period, which is currently expected to end on 31 December 2020. From that date, EU competition law will no longer apply in the UK, although conduct that took place before that date may still be investigated and subject to private claims under EU law. Most pre-existing EU competition law will nevertheless continue to have binding effect under UK domestic law as 'retained EU law' and will do so unless and until specific provisions are overturned by the Supreme Court or repealed by other legislation.
Domestic UK competition law on abuse of dominance substantially mirrors the provisions of Article 102 TFEU. The UK provisions are set out 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. From the end of the implementation period, this principle will be limited to ensuring consistency with retained EU law (i.e., EU law that was in force on 31 December 2020 and that has not since been overturned or repealed in the UK).
Public enforcement of UK and EU competition law is carried out primarily by the Competition and Markets Authority (CMA). In addition to the CMA, the following sectoral regulators have the power to enforce competition law in their sectors:
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.2 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'.3 The CMA also has regard to its own substantive and procedural guidance (including previous OFT guidance that the CMA has formally adopted).4 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.
Year in review
i Levels of public enforcement
The CMA and its predecessor have investigated relatively few dominance cases, albeit with a modest increase in activity since 2016. Two main reasons are usually cited to explain this relative lack of enforcement: (1) 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 now that the United Kingdom has left the EU); and (2) 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, 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 2019, however, the CMA opened only one new dominance case, the number of ongoing dominance cases has fallen, and three of its four ongoing investigations are in the pharmaceutical sector. This relative lack of activity likely reflects: (1) a focus on resolving cases opened during the flurry of activity immediately after the NAO report; and (2) the diversion of CMA resources to deal with planning for the UK's withdrawal from the EU and proposals for reform discussed in more detail in Section VIII below. Although the CMA states in its 2020 Annual Plan that its enforcement caseload is 'at a record level,' the majority of these cases relate to enforcement of the Chapter 1 prohibition (cartels and anticompetitive agreements) rather than Chapter 2. Moreover, the 2020 Concurrency Report shows that three of the ongoing nine investigations in the regulated sectors are being pursued by the CMA, rather than the concurrent regulators (although none of these relates to suspected abuse of dominance).
ii Major developments in public enforcement
The CMA and sectoral regulators issued statements of objections in two dominance cases, accepted commitments in two cases, and closed two cases in 2019 and early 2020. There were no infringement decisions in dominance cases in 2019. There were also developments in three appeals of CMA and regulator decisions: the CAT upheld an abuse of dominance decision by Ofcom against Royal Mail; the European Court of Justice (ECJ) issued a judgment on a Preliminary Reference made by the CAT in the context of CMA's infringement decision against GSK and others; and the Court of Appeal upheld the CAT's judgment quashing the CMA's infringement decision against Pfizer and Flynn Pharma.
Infringement decisions, statements of objections and commitments decisions
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 reduced the period under investigation to around eight years (two years shorter than in the statement of objections issued in November 2017) and reduced the allegation of price increase from 6,000 per cent to 1,605 per cent. These amendments reflect the judgment issued by the CAT in June 2018 in the Pfizer/Flynn case, which found that the CMA had misapplied the legal test for determining excessive prices.
In June 2019, the High Court dismissed Advanz Pharma's application for a judicial review of the CMA's decision not to suspend its investigation. Advanz Pharma argued that the CMA's refusal to suspend its investigation was procedurally unfair as Advanz Pharma would have to address two different legal tests in its submissions to the CMA, pending further appeal of CAT's judgment in Pfizer/Flynn to the Court of Appeal. In dismissing the application, the High Court found that the public interest in continuing to investigate unfair prices outweighed any prejudice that may be caused to Advanz Pharma.
EPEX Spot SE
In June 2019, Ofgem announced that it had accepted commitments from EPEX Spot and its parent company, EPEX. EPEX is a power exchange. It operates a number of markets in Great Britain (GB) that allow trading parties to buy and sell electricity the day prior to (or on the day of) delivery. It is one of (currently) two nominated electricity market operators (NEMOs) in GB that are designated to perform day-ahead and intraday coupling with other European electricity markets. Ofgem's investigation examined whether EPEX Spot was abusing a dominant position in the provision of cross-border intraday electricity trading platforms and related services concerning the trading of electricity between GB and Ireland.
EPEX Spot was the sole provider of intraday auction trading platform services at the relevant time. Ofgem suspected that EPEX Spot, therefore, held a dominant position in this market. Ofgem suspected EPEX Spot of abusing this dominant position by failing to take steps that were necessary to allow potential competitors access to the intraday auctions via its trading platform, foreclosing competition from the market. Ofgem accepted commitments from EPEX Spot under which EPEX Spot undertook an agreed programme of actions designed to allow other NEMOs access to its trading platform.
Fludrocortisone acetate tablets
In October 2019, the CMA accepted commitments from Aspen relating to the supply of fludrocortisone acetate tablets in the UK. Aspen is the sole UK supplier of these tablets, a prescription-only medicine used to treat Addison's Disease.
In November 2015, Tiofarma obtained authorisation to supply an 'ambient storage' version of the tablets as an alternative to Aspen's 'cold storage' tablets. The CMA found that the two versions were substitutable and that Tiofarma represented 'a significant competitive threat to Aspen'. In October 2016, Aspen acquired the worldwide rights over Tiofarma's product and withdrew its 'cold storage' product from the market. The CMA provisionally concluded that the acquisition constituted an abuse of dominance, removing the only threat to Aspen's position and preventing (or considerably delaying) the emergence of a rival. The CMA found that the acquisition 'left Aspen free to price above competitive levels'.
To address the CMA's concerns, Aspen committed to divest UK rights over 'ambient storage' fludrocortisone tablets to an independent third party and reintroduce its own 'cold storage' version of the product. Aspen also agreed to pay the NHS £8 million in compensation as well as ensuring that there will be at least two suppliers of fludrocortisone in the UK in the future. This is the first time the CMA has accepted commitments to pay compensation to victims of the suspected anticompetitive conduct.
The CMA's related investigation under the Chapter 1 prohibition and Article 101 TFEU, concerning allegations that Aspen unlawfully agreed to pay two other firms, Amilco and Tiofarma, to stay out of the UK market for fludrocortisone acetate tablets, is ongoing.
In February 2020, the CMA issued a supplementary statement of objections in relation to its hydrocortisone investigations. Hydrocortisone tablets are the primary treatment for people suffering from Addison's Disease. The CMA had been conducting three separate investigations into alleged excessive and unfair pricing, anticompetitive agreements and abusive conduct in relation to the supply of hydrocortisone tablets, and had issued statements of objections in all three cases.
The supplemental statement of objections combined these investigations and revised certain aspects of the CMA's allegations, taking into account the further evidence it had subsequently obtained. The CMA continues to allege that Auden Mckenzie charged excessive and unfair prices for 10mg and 20mg hydrocortisone tablets between October 2008 and July 2018. In addition, the CMA alleges that Auden Mckenzie entered into an anticompetitive agreement with Waymade from 2011 to 2015 under which Auden Mckenzie made monthly payments to Waymade to stay out of the market for 20mg hydrocortisone tablets. Thirdly, the CMA alleges that Auden Mckenzie entered into similar agreements with Waymade and Advanz Pharma relating to 10mg hydrocortisone tablets. The CMA has provisionally found that these payments constitute an abuse of a dominant position by Auden Mckenzie.
Conclusion of cases without adopting infringement or commitments decisions
In March 2019, the CMA closed its investigation of a volume-based discount scheme 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 discount scheme, introduced following the expiry of its patent for Remicade in early 2015, was unlikely to impede competition from biosimilar infliximab products.
Generic Pharmaceutical Product (Case 50780)
In November 2019, the CMA closed its investigation relating to alleged anticompetitive agreements, concerted practices and suspected abuse of dominance in relation to a generic pharmaceutical product. The CMA decided to close this investigation on administrative priority grounds having considered its prioritisation principles and information available at the time. The case was initially opened in October 2017.
Pfizer and Flynn
In 2016, the CMA imposed record fines on Pfizer and Flynn for charging excessive prices for phenytoin sodium capsules, an anti-epileptic drug. In July 2018, that decision was quashed by the CAT on the basis that the CMA had applied the wrong legal test and had failed to consider appropriately the economic value of the product. The CMA (and, on one ground, Flynn) appealed the CAT's judgment to the Court of Appeal. In March 2020, the Court of Appeal upheld the CAT's judgment that the case should be remitted to the CMA, though it agreed with the CMA on some issues (which will affect the remitted investigation) and the CMA welcomed the judgment as a 'good result'.
The CMA's first ground of appeal related to the legal test for establishing excessive prices established by the European Court in United Brands. The CMA had submitted that the need to show that prices were 'unfair', one limb of the test, provided the competition authority with two alternative methods of assessment: either the price was 'unfair in itself' or the price was 'unfair when compared to competing products'. The CAT and Court of Appeal rejected this approach, holding that the CMA could not ignore prima facie relevant evidence that the price was fair based upon the approach not used by the authority. While the competition authority enjoys a margin of discretion, it is under a duty to evaluate such evidence. The Court of Appeal accepted, however, that there is no general duty to perform a 'full' investigation (a term the CAT had used inconsistently in its judgment) in all cases; the extent of the duty will be affected by the nature, extent and quality of the evidence adduced by the company under investigation.
Secondly, the CMA argued that the CAT had erred in requiring the CMA to use a hypothetical benchmark price or range of prices as part of its evaluation of whether an actual price is excessive. The Court of Appeal agreed with the CMA, holding that 'the choice of benchmark is for the competition authority to choose and can be based upon the costs of the undertaking being investigated or it can be based upon comparables such as the prices charged by the same or different undertakings in the same or different geographical markets or indeed any other benchmark or combinations thereof capable of providing a 'sufficient' indication that the prices charged are excessive and unfair.'
The CMA's third ground of appeal concerned the limits on the CAT's jurisdiction to reject findings or conclusions that amounted to 'judgment calls' of the authority. The Court of Appeal rejected the CMA's arguments, holding that while the CMA has a margin of discretion, the CAT 'has a merits jurisdiction as to both law and fact and upon the basis of established case law it is not bound to defer to the judgment call of a competition authority. It is empowered under the legislation to come to its own conclusions on issues of disputed fact and law and can hear fresh evidence, not placed before the CMA, to enable it to do so.'
Fourthly, the CMA argued that the CAT was wrong to find that the CMA had attributed a nil value to patient benefit in it assessment. The Court of Appeal rejected this ground as it amounted to the challenge of a finding of fact (which could not therefore be appealed), although Green LJ disagreed with the CAT's view that assessing the 'economic value' of the product was a discrete requirement of the United Brands test. The CMA could determine how it factored this assessment into its analysis.
Finally, Flynn appealed certain of the CAT's findings out of concern (according to the Court) that the CMA in its remitted investigation would treat various ostensible findings by the CAT as definitive and binding. The Court of Appeal rejected Flynn's arguments because the entire issue of abuse had been remitted to the CMA.
In November 2019, the CAT upheld Ofcom's August 2018 decision to fine 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 the customer did not have its own delivery operations. Companies using Royal Mail to deliver mail to only 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.
Royal Mail appealed this decision arguing that: (1) Ofcom was wrong to conclude that Royal Mail's new prices fell within Article 102(c) TFEU; (2) Ofcom was wrong to conclude that the price differential could amount to undue or improper discrimination; (3) Ofcom was wrong to conclude that the price differential resulted in a competitive disadvantage under the 'as efficient competitor' test; (4) Ofcom should anyway have concluded that the price differential was objectively justified; (5) that Ofcom had committed a fundamental procedural error by withholding parts of its analysis during the administrative procedure that it later relied on in its decision; and (6) the fine imposed was anyway disproportionate and should be reduced.
The CAT rejected Royal Mail's appeal on all grounds and, in January 2020, refused Royal Mail permission to appeal to the Court of Appeal.
GlaxoSmithKline (GSK), Generics (UK) and others
In January 2020, the ECJ issued its judgment in response to the CAT's request for a preliminary ruling in GSK's appeal of the CMA's February 2016 decision to impose a £45 million fine on GSK and other pharmaceutical manufacturers.
GSK was the patent holder for paroxetine, an antidepressant. The CMA found that, between 2001 and 2004, GSK paid generic pharmaceutical manufacturers to delay their entry into the market. The CMA found this conduct infringed both Articles 101 and 102, as well as the Chapter 1 Prohibition. GSK and the generic manufacturers appealed this decision to the CAT in April 2016. In March 2018, the CAT issued an intermediate judgment and also requested a preliminary ruling from the ECJ. On matters related to the infringement of Article 102, the CAT asked the ECJ: (1) how to define the relevant product market; (2) whether entry into these agreements constituted an abuse; and (3) whether the benefit brought about through price reductions could outweigh any anti-competitive effects.
In response to question (1), the ECJ found that the appropriate product market encompassed suppliers not already in the market provided they had a firm intention and inherent ability to enter. The ECJ also found that patents did not present an 'insurmountable barrier' to entry. In response to question (2), the ECJ found that entering into these agreements could constitute an abuse of dominance if the dominant entity's conduct damaged the competitive structure of the market beyond the effects of the specific agreements. In response to question (3), the ECJ found that this conduct could in principle be justifiable and that the beneficial effects on competition must be taken into consideration regardless of the dominant's firm's objectives. The case will now be considered further by the CAT in light of the ECJ's judgment.
iii Current abuse of dominance investigations
The CMA and sectoral regulators are currently investigating five suspected abuse of dominance cases, summarised in the table below.
|Sector||Investigating authority||Conduct||Case opened*|
|Entertainment and recreation services||CMA||Alleged anti-competitive agreements and suspected abuse of dominance in the entertainment and recreation services sector||August 2019|
|Water||Ofwat||Suspected abuse of dominant position by Thames Water Utilities Limited as a result of the approach that Thames Water has taken when installing digital smart meters and the impact that this has had on providers of data logging services and their customers||June 2019|
|Energy||Ofgem||Suspected 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 abuses of dominance by Auden McKenzie and Actavis UK (inducement to delay entry and excessive pricing) in relation to hydrocortisone tablets, as well as suspected anticompetitive agreements between Concordia and Actavis UK||March 2016|
|Pharmaceuticals||CMA||Remitted investigation into alleged excessive pricing in the supply of phenytoin sodium capsules||May 2013|
|* 'Case opened' refers to the date on which the authority opened its investigation (where known) or announced that it had opened an investigation.|
iv Major developments in private actions in 2019
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 have abused their positions of dominance. Both applications were made on a standalone basis; they do not benefit from a prior infringement decision by a competition authority.
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 that the rail companies failed to make boundary fares sufficiently available for sale and/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 and Stagecoach South Western Trains Limited, and London and South Eastern Railway Limited.
In June 2019, the CAT granted the defendants' application for a stay of the main hearing pending the appeal to the Supreme Court in Merricks v. Mastercard Inc, which concerns the certification of collective proceedings.
Unlockd v. Google
In May 2019, the CAT issued a ruling which consented to the withdrawal of a claim by Unlockd. The claim had alleged that Google held a dominant position in the markets for: (1) licensable operating systems for mobile devices; (2) distribution of apps for use on Android devices; and (3) supply of advertisements for use by app developers on Android devices. Unlockd claimed that Google's decision to withdraw Google Admob services from Unlockd's app and to remove the app from the Google Play Store constituted an abuse of dominance. The case had originally been lodged in the High Court, which imposed an interim injunction on Google before the proceedings were transferred to the CAT In 2018. The claim was withdrawn by consent in 2019 and the CAT awarded costs to Google.
Achilles Information Limited v. Network Rail Infrastructure Limited
In July 2019, the CAT ruled that Network Rail's requirement that those persons seeking to access its infrastructure must obtain supplier assurance exclusively through the Railway Industry Supplier Qualification Scheme (RISQS) constituted a breach of the Chapter 1 and Chapter 2 Prohibitions. Network Rail is the owner and operator of most of the mainline rail infrastructure in Great Britain. Achilles provides supplier assurance services in the UK. Achilles argued that the 'RISQS-only' assurance process was abusive because it obliged all suppliers who needed access to Network Rail infrastructure to use RISQS, even if they are not working on the infrastructure itself (for example, contractors who merely require trackside access).
The CAT's judgment was premised on the assumption that Network Rail holds a dominant position in the market for the operation and provision of access to national rail infrastructure in Great Britain. The CAT concluded that the 'RISQS-only' rule causes significant foreclosure of demand in a significant segment of the market for supplier assurance services (a related market). The CAT dismissed Network Rail's arguments that a tender process held 2016 was evidence of sufficient competition and that its conduct was consistent with normal conditions of competition as evidenced in the European rail industry. The CAT also rejected Network Rail's argument that its conduct was objectively justified. The CAT was unconvinced that the safety purposes of the 'RISQS-only' rule could not be met by less restrictive requirements or that the rule generated sufficient cost efficiencies to offset any loss of competition.
Network Rail appealed the CAT's judgment to the Court of Appeal. Network Rail argued that CAT erred in law in finding that there was an abuse of dominance, in particular, because: (1) the CAT's anticompetitive effects analysis was flawed; (2) the evidence was contrary to its conclusion in relation to the effects of the periodical tender process; (3) it erred in law in finding that a dominant company need not benefit commercially from the conduct complained of for it to be found to be abusive; and (4) it erred in law in finding that the conduct was an abuse without finding that Network Rail's taking supplier assurance from Achilles was indispensable or essential to enable Achilles to be active in supplier assurance in the GB rail sector or safety-critical industries in the United Kingdom.
In March 2020, the Court of Appeal rejected Network Rail's appeal on all six grounds. Only one ground of appeal, comprising four separate arguments, related to the Chapter 2 Prohibition (abuse of dominance) findings.
- First, Network Rail argued that the CAT's anticompetitive effects analysis was flawed. Consistent with its approach to Network Rail's appeal of the Chapter 1 infringement decision, the Court of Appeal held that 'the CAT was clearly entitled . . . to come to the conclusion it did on the basis of the evidence'.
- Second, Network Rail contended that the evidence was contrary to the CAT's conclusion in relation to the effects of the periodical tender process. The Court of Appeal held that Network Rail had failed to show that 'there was no evidence capable of sustaining the conclusion reached, or that the conclusion is plainly wrong, in the sense that it is one that no reasonable judge or tribunal could have reached'.
- Third, Network Rail argued that the CAT erred in law in finding that a dominant company need not benefit commercially from the conduct complained of for it to be found to be abusive. The Court upheld the CAT's application the principles in Aeroports de Paris and Arriva the Shires and rejected Network Rail's argument that 'a person on a separate market from that of the dominant supplier can only complain of abuse of that dominant position if it is in a situation of economic dependence on the supplier'.
- Finally, Network Rail argued that the CAT had erred in law by failing to recognise that the present case was one of refusal by Network Rail to supply a new customer, as opposed to a refusal to contract with an existing customer (meaning that a higher legal test should apply). The Court of Appeal cursorily rejected this argument as it was 'completely unrealistic to treat Achilles as if it were a wholly new customer of Network Rail's. . . . What Achilles now wishes to do, in substance, is to resume its long-standing position as a substantial supplier of such services to companies requiring access to Network Rail's infrastructure, which it is currently prevented from doing by the existence of the RISQS-only rule.'
Secretary of State for Health and others v. Servier Laboratories Ltd and others
In May 2011, the Secretary of State for Health brought an action in the High Court against Servier for damages for breach of Articles 101 and 102. Servier successfully applied for a stay of those proceedings as the European Commission (EC) had initiated an investigation in 2009 relating to a similar breach of competition law. In July 2014, the EC found that Servier had infringed both Articles 101 and 102 by paying generic pharmaceutical manufacturers to delay their entry into the market for the supply of perindopril. On appeal, the General Court found in December 2018 that the EC had erred in finding an abuse of dominance as it had not established the relevant product market. The General Court found that the EC wrongly considered that perindopril differed from other ACE inhibitors and that the EC had erred in defining a market limited to the perindopril molecule alone.
Trial on the preliminary issues in the High Court case was due to be heard in October 2019. In advance of this trial, Servier sought to rely on the findings and statements in the General Court's judgment which it argued were binding on the High Court as res judicata. In Servier's submission, adducing evidence and arguments that were inconsistent with these findings would constitute an abuse of process. The High Court held that findings of fact made by the General Court that were inseparable from the operative part of its judgment were binding as res judicata. As such, the finding that the relevant product market cannot be limited to the perindopril molecule alone was binding. Other findings of fact which Servier sought to rely on, however, were not binding; it is therefore not an abuse of process to adduce evidence inconsistent with these findings. Servier appealed the High Court's judgment to the Court of Appeal which dismissed the appeal in its entirety.
In July 2019, Servier was granted permission to appeal to the Supreme Court.
Vestel v HEVC Advance and Philips
In October 2019, the High Court ruled that it did not have jurisdiction to hear a claim brought by Vestel against HEVC Advance and Philips.
Vestel is a television manufacturer based in Turkey. HEVC Advance is a company that manages standard essential patents (SEPs) relating to High Efficiency Video Coding, a technology that is essential for televisions which are made to display high definition broadcasts. Philips is one of the participating patentees. Vestel alleged that HEVC Advance and Philips were dominant in the worldwide market for licences under their SEPs and that they had abused their dominant positions by failing to offer licences on fair, reasonable, and non-discriminatory (FRAND) terms and, further, by threatening to seek injunctions against Vestel. Although Vestel manufactures televisions in Turkey, Vestel argues that it would suffer damage in the UK as a result of the alleged abuse as it sells televisions in the UK through its UK subsidiary. Any cost increase due to an increase in royalties from non-FRAND terms would be passed down the chain to this UK subsidiary.
With regards to Philips, the High Court found that none of the evidence filed disclosed any credible basis on which to conclude that Vestel's UK subsidiary had suffered or would suffer damage and that there was no other basis for jurisdiction in the English courts.
Strident Publishing Limited v Creative Scotland
In April 2020, the CAT handed down its judgment on jurisdiction in a claim for damages under Section 47A of the Competition Act 1998. Strident Publishing Limited, a book publisher, claimed that Creative Scotland had abused its dominant position by providing 'investment finance' to three publishers as part of its mandate to support artistic projects.
The CAT found that the Creative Scotland's provision of grants to the publishers in exercise of its statutory function did not amount to an economic activity carried on by an undertaking and the CAT, therefore, did not have jurisdiction. First, the CAT was not convinced that Creative Scotland had engaged in an activity that was different from its activity of awarding grants to other applicants. The CAT found that the function of providing public funding to the arts involved the exercise of powers which are typically those of a public authority, suggesting that the activity was not an economic activity carried on by an undertaking. In addition, the CAT found that that the defendant did not operate for profit and that no private entity could carry out the same function. Finally, the CAT found that the defendant's power derived directly from legislation and it was accountable to, and under the control of, Scottish Ministers.
Other cases before the CAT and the High Court
|UKRS Training Limited v. NSAR Limited||Alleged abuse of dominance on 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.|
|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|
|Sportradar and others v. Football DataCo and others||Alleged abuse of dominance by Football DataCo, 'sole supplier' of live data relating to high-level football matches, by granting Betgenius five-year exclusive rights to use live match data for supply of 'sports data and sports betting services'||Pending: claimed launched in March 2020|
|Infederation Ltd v Google Inc and others||Alleged abuse of dominance on the market for the provision of internet search services and/or the market for the provision of online search advertising services.||Pending: claim issued In 2012|
Market definition and market power
The substantive assessment of market definition and market power in the United Kingdom is consistent with EU law. The 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 obligation will be more limited after the implementation period for the UK's withdrawal from the EU). There is no exhaustive list of abuses under Section 18 of the Act (the equivalent of Article 102).5 Any conduct by a dominant undertaking that excludes competitors or exploits customers is potentially abusive,6 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'.7
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 UK National Health Service (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.
In Remicade the CMA considered whether a volume-based discount scheme had exclusionary effects on the market for infliximab (a class of biologic pharmaceutical products). The CMA considered whether the pricing model prevented manufacturers of biosimilar products from entering the market after MSD's patent protection on Remicade expired. The CMA carried out an analysis of the impact of the pricing model on competition and new entry, and concluded that the scheme was unlikely to result in anticompetitive effects.
The focus on exclusionary conduct is borne out by a number of other investigations, including the following.
- In December 2015, the 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 2019, the ORR reviewed these commitments. It found them to have been effective and concluded there was no reason to reopen its investigation into Freightliner.
- In September 2014, the CMA closed an investigation into a 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, and also demonstrate a focus on analysing economic effects, at least in public enforcement cases by the competition authorities. 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, 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 Ofwat in 2015 in Bristol Water and Anglian Water, and by Ofcom in 2018 in Royal Mail (discussed above). 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.
The English courts have adopted a less economic approach to the analysis of discrimination cases.
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.8 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 justified9. 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 at the time overlapped with questions being considered by the European Commission.
The Court went further in ATS v. London Luton Airport Operations. 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.10 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 European Court of Justice 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.11
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 (OFT decision of 2001), Thames Water Utilities Ltd/Bath House and Albion Yard (Ofwat decision of 2003), and Albion Water v. Ofwat (Ofwat decision appealed to the CAT, judgment of 2006). These cases have all considered the potential exclusionary effect of pricing behaviour.
The Court of Appeal grappled with the concept of excessive pricing in 2007 in Attheraces Limited v. British Horseracing Board Limited.12 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.
More recently, the CMA has pursued a series of cases concerning excessive pricing in the pharmaceutical sector. In December 2016, the CMA fined Pfizer £84.2 million and Flynn £5.2 million for imposing unfair prices for phenytoin sodium capsules in the UK. As described above, however, the CAT quashed the decision in June 2018, remitting the case to the CMA, and the CAT's judgment was largely upheld by the Court of Appeal in March 2020. The CMA is currently investigating allegations of excessive pricing in two other cases, also mentioned above, concerning liothyronine tablets and hydrocortisone tablets.
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.13 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).14 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.15
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.16 The OFT published new guidance in September 2012, following a series of successful appeals against its fining decisions before the CAT.17 The guidance, which was updated by the CMA in April 2018,18 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 and/or approval of a voluntary redress scheme.
The CMA's guidance states that it will generally apply a starting point percentage 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.19
The CMA and regulators also have the power to impose interim measures.20 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 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.21
The CMA is yet to impose interim measures. It considered and rejected an application by Worldpay to impose interim measures against Visa UK Limited in 2014.22 The CMA came close to imposing interim measures in its investigation of ATG Media's supply of live online bidding services to auction houses. In that case, the CMA received an application for interim measures relating to allegedly exclusionary practices 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 6 months.'23
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.'24 Lord Tyrie, Chair 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'.25
iii Structural remedies
It is unclear whether the CMA and regulators would have the power to impose structural remedies following a finding of abuse of dominance, and this has never been attempted. It is possible for a dominance investigation to be closed on the basis of structural, and quasi-structural, commitments. This has happened on four occasions.
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 (mentioned above), Ofwat and Ofgem (respectively) accepted quasi-structural commitments under which the suppliers agreed to introduce functional separation between their upstream and downstream businesses.
In Fludrocortisone acetate tablets (discussed above), the CMA accepted structural commitments from Aspen that involved the divestment of its rights over 'ambient storage' fludrocortisone tablets to an independent third party and the reintroduction of its own 'cold storage' product.
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 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.26 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.27 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.28
- 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.29 '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.
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).30 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).31 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 aimed to reverse this trend, and has arguably done so. 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.32 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 pre-dating 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 and 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.33 Following a 2010 Court of Appeal judgment,34 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,35 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 2017.36 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: (1) address the burden of proof with respect to the passing-on defence; (2) suspend the limitation period while competition authority investigations or consensual dispute resolution processes are ongoing; (3) 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;37 (4) exempt small and medium-sized enterprises, as well as defendants that settle with the claimant, from the principle of joint and several liability; and (5) amend rules on disclosure.38
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). Secondly, 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 but, in collective proceedings, the representative claimant's lawyers and/or funder may be allowed a share of any unclaimed damages.
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. CMA enforcement activity increased following criticism by the National Audit Office in February 2016, but the last two years have 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 now that the UK has left the EU.
i Competition in the digital sector
Over the last two years the CMA, like many competition authorities around the world, has set out plans to focus its enforcement activities on digital markets. Its 2020 Annual Plan states that its priorities for 2020 will include using 'competition law powers to tackle abuses' in digital markets. This focus will not be confined to the CMA. The annual report on concurrency emphasises 'the importance of close collaboration between the CMA and other sector and cross-sector regulators (and international partners) to respond to both the opportunities and challenges that digital markets present'.
In a 2019 letter to the Secretary of State for Business, Energy and Industrial Strategy, Lord Tyrie (the CMA Chair) urged government reform of competition policy, seeing it as an 'opportunity to help shape the response to the challenges that many jurisdictions now face.' Several of the proposals could impact on 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.' 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. 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 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.' 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 co-ordinate 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 were 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.' 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.' 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,' the report first recommends greater use of interim measures. To facilitate this, the report proposes streamlining the CMA's processes such that access to file in interim measures cases would be limited to documents that are 'clearly relevant' 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.'
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.' 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.
In July 2019, the CMA launched its Digital Markets Strategy. This was a response to what the CMA sees as 'profound changes being brought about by the digital economy,' requiring competition authorities to 'develop a path that protects consumers while ensuring robust competitive and innovative digital markets.' The CMA sought to tackle questions around companies' use of data, whether certain platforms have market power or 'gatekeeper' status, the use of increasingly sophisticated technology to target advertising, and the risk of 'killer acquisitions'. The CMA set out several priority areas, including: (1) a market study on online platforms and digital advertising (also launched in July 2019, with its interim report published in December 2019 and the final Report due by 2 July 2020); (2) a review of the CMA's approach to reviewing digital mergers; (3) policy work to consider a possible 'digital markets unit', (4) proposals to reform interim measures and other enforcement tools to enable swifter action, and (5) cooperation with international agencies.
In March 2020, the government announced that it had accepted the strategic recommendations included in the Furman Report and commissioned the CMA to lead a cross-regulator Digital Markets Taskforce to advise on the potential design and implementation of pro-competitive measures for digital platform markets. The Taskforce will be housed in the CMA and draw on the expertise of Ofcom and the Information Commissioner's Office. The Taskforce is focusing on the design and scope of the Code of Conduct, and plans to report back to the government in September 2020. This follows the CMA's Interim Report into digital advertising, which also endorsed the idea of an enforceable ex ante code for platforms with 'Strategic Market Status'.
ii Implications of Brexit
On 31 January 2020, the United Kingdom ceased to be an EU Member State and withdrew from the EEA. European competition law, including the provisions of Article 102 of the Treaty on the Functioning of the European Union (TFEU), will continue to apply in the UK only until the end of an implementation period, which is currently expected to be on 31 December 2020.
Once the implementation period ends, EU competition law will no longer apply in the UK, although conduct that took place before that date may still be investigated and subject to private claims under EU law. Most pre-existing EU competition law will nevertheless continue to have binding effect under UK domestic law as 'retained EU law' and will do so unless and until specific provisions are overturned by the Supreme Court or repealed by other legislation.
In January 2020, the CMA issued guidance on the application of the Withdrawal Agreement to competition law. Under Regulation 1/2003, the competition authorities of EU Member States cannot investigate agreements or conduct already being investigated by the European Commission. This will continue to be the case during the transition period. The Commission will also retain exclusive jurisdiction over UK aspects of antitrust investigations that are ongoing at the end of the transition period, provided it has already opened formal proceedings before that date – however long those proceedings take to complete. The Commission will also retain the power to enforce remedies in these cases, unless it explicitly agrees to transfer responsibility to the CMA or a concurrent UK competition authority. The UK authorities will have the power to investigate the UK aspects of abuse of dominance cases begun after this date, even if the same conduct is being investigated at EU level, and so will likely carry out abuse of dominance (and other) investigations in parallel with the European Commission.
Cooperation between the CMA (or concurrent regulators) and the competition authorities of EU Member States will largely continue as before during the transition period, although participation and attendance of the CMA or UK concurrent regulators in European Competition Network meetings, oral hearings and Advisory Committee meetings during the transition period will be by invitation only.
The CMA leadership has spent much of 2019 and 2020 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 has, however, acknowledged in its 2020 Annual Plan that the UK's withdrawal from the EU is likely to result to result in a significant increase in its workload, including an increase of around 50 per cent in the number of merger cases, and that it 'may therefore have limited opportunities to launch many major new discretionary projects [i.e., including Chapter 2 investigations] over the coming year'. It nevertheless asserts its confidence that it will be able to 'launch some selected new 'domestic' work'.
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 colleagues, Laura Hellwig and Rohan Mandumula.
2 Section 46 of the Act.
3 2009/C 45/02.
4 The investigation procedures followed by the sectoral regulators differ in some respects from the CMA's procedures.
5 This point was underlined by the High Court in Purple Parking Limited v. Heathrow Airport Limited  EWHC 987 (Ch).
6 In Strident Publishing Limited v Creative Scotland  CAT 11, the CAT found that the defendant, a public authority exercising powers derived directly from legislation and under the control of the Scottish government, was not carrying out an economic activity as an undertaking when providing grants to publishers.
7 National Grid plc v. GEMA,  EWCA Civ 114.
8 Purple Parking Limited v. Heathrow Airport Limited  EWHC 987 (Ch).
10 Sel-Imperial Ltd v. The British Standards Institution  EWHC 854 (Ch).
11 Case C-525/16, MEO/GDA.
12  EWCA Civ 38.
13 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).
14 Napp Pharmaceutical Holdings Limited and Subsidiaries v. Director General of Fair Trading  CAT 1, paragraph 457.
15 Section 40 of the Act.
16 Section 38(8) of the Act.
17 In connection with the OFT's infringement decisions concerning: (1) bid-rigging arrangements in the construction sector; and (2) cartel behaviour by recruitment agencies.
18 CMA's guidance as to the appropriate amount of a penalty, CMA73.
19 Sections 33 and 34 of the Act.
20 Section 35 of the Act.
21 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 (above). By contrast, interim relief was refused by the High Court in Bruce Baker v. The British Boxing Board of Control  EWHC 2074 (QB).
22 See CMA press release of 27 March 2015.
23 'UK competition enforcement – where next?', 29 November 2017, available at https://www.gov.uk/government/speeches/uk-competition-enforcement-where-next.
24 Report of the Digital Competition Expert Panel, Unlocking digital competition, 13 March 2019, page 14.
25 Letter from Andrew Tyrie of 21 February 2019, page 8.
26 Section 25 of the Act.
27 CMA16, April 2014.
28 R (ex p. Cityhook) v. OFT  EWHC 57.
29 In the past, settlement was formally referred to as 'early resolution'.
30 As clarified in The Secretary of State for Health and others v Servier Laboratories Limited and others  EWCA Civ 1096, factual findings made by the General Court that are not integral to the General Court's judgment are not binding as res judicata on UK courts.
31 Before October 2015, the CAT did not have jurisdiction to hear stand-alone actions.
32 See, for example, Socrates Training Limited v. The Law Society of England and Wales  CAT 10, judgment (costs capping) of 21 June 2016.
33 Civil Procedure Rule 19.6.
34 Emerald Supplies Ltd v. British Airways plc  EWCA Civ. 1284.
35 Devenish Nutrition Ltd v. Sanofi-Aventis SA (France) & Ors  EWCA Civ. 1086.
36 The Claims in respect of Loss or Damage arising from Competition Infringements (Competition Act 1998 and Other Enactments (Amendment)) Regulations 2017 (No. 385).
37 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.
38 For further detail and analysis, see The UK implements the EU Antitrust Damages Directive, Cleary Gottlieb Alert Memorandum, 10 January 2017, available at: https://www.clearygottlieb.com/news-and-insights/publication-listing/the-uk-implements-the-eu-antitrust-damages-directive.
39 Consumer Green Paper: Modernising Consumer Markets, 11 April 2018.
40 Letter from Andrew Tyrie of February 21, 2019, page 3, available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment
41 '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
42 Report of the Digital Competition Expert Panel, Unlocking digital competition, March 13, 2019, p. 16, available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/
43 On 23 January 2020, the UK Parliament ratified the European Union (Withdrawal Agreement) Act 2020 which sets out the terms of the UK's departure from the EU. The Withdrawal Agreement preserves 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.
44 European Union (Withdrawal) Act 2018, Section 2. Retained EU law may be modified by secondary legislation to the extent necessary to take into account its new domestic context (Section 8).
46 See, for example, 'UK Competition Law enforcement: the post-Brexit future', 11 June 2019 where Dr Michael Grenfell states 'The CMA was prepared and ready to take on its new expanded post-Brexit functions . . .To get to this position, the CMA has spent the period since the referendum in planning for its expanded role, recruiting additional staff, setting up systems, drafting guidance and assisting the Government in the development of policy and legislation.'