On 23 May 2012, the Department for Business, Innovation and Skills (BIS) published the Enterprise and Regulatory Reform Bill (the Bill), which was introduced into Parliament on the same day. The Bill implements expected reforms to the UK competition regime, alongside reforms relevant to many other areas of business practice, including employment law, green investment, copyright law and executive pay.

Here, we concentrate on the competition reforms, which are found in Parts Three and Four of the Bill. The reforms involve extensive and detailed changes to all competition law enforcement procedures.  We set out the main aspects below.

Previously, on 15 March 2012, BIS had confirmed its intention to overhaul the UK competition rules. Please see  here for our Law-Now on the March announcement, which the current Bill largely reflects.

The main reform: the creation of the Competition and Markets Authority

A new Competition and Markets Authority (the CMA) is established by Part Three of the Bill, which also sets out the provisions relating to the governance and decision-making powers of the CMA. In addition, the Office of Fair Trading (the OFT) and the Competition Commission are abolished under Part Three. The provisions of Part Three also transfer to the CMA the functions of the Competition Commission and the competition functions of the OFT.

Antitrust

In relation to antitrust investigations, Part Four contains a number of provisions that will reinforce the enforcement and investigation powers of the CMA in practical terms when it comes to investigating anti-competitive agreements or the abuse of market power.  However, the overall structure of investigations is essentially unchanged.

For certain regulated sectors, the regulator has concurrent powers with the competition authorities to enforce the antitrust rules.  These powers will be unchanged, but various provisions in the Bill will result in the priority application of the antitrust rules to these sectors in preference to rules under specific sectoral regulation and will result in an enhanced power for the CMA to decide whether to exercise its Competition Act 1998 powers in respect of a case rather than the sectoral regulator.

Mergers and markets

For merger control, the most significant point is that there will be no move to a mandatory notification regime, which was debated in the first consultation phase which led to these reforms. The changes to the merger control regime are therefore procedural only, the most significant of them being the imposition of stricter time limits on the CMA.

The Bill strengthens the CMA's conduct of market investigations by introducing new powers to:

(i) include more than one market in the same investigation; and

(ii) investigate public interest issues (which, at least initially, denotes issues where national security is at stake) alongside competition issues at the request of the Secretary of State.

Cartel offence

A significant change to competition enforcement is to the criminal law cartel offence. This offence currently requires a finding of "dishonesty". This requirement will be removed and will be replaced by the introduction of new circumstances in which the offence is not committed, namely where affected parties are notified of "relevant information" or if that information is published in a prescribed manner.

To date, enforcement of these rules has been problematic. Removal of the dishonesty requirement may mean that a greater number of criminal prosecutions are successfully pursued. It remains to be seen whether the "relevant information" provisions can be applied with clarity.

Conclusion

The reforms of the competition regime are motivated above all by considerations of efficiency and resource allocation. There are few major surprises or radical changes in the new regime, although a large number of procedural changes have been introduced by the Bill which will be of practical importance in all forms of investigation.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 28/05/2012.