1 Legal and enforcement framework
1.1 Which legislative and regulatory provisions apply to cartels in your jurisdiction?
The legal basis of the cartel prohibition in the United Kingdom is set out in:
- Section 2 of the Competition Act 1998, which sets out the civil offence for companies (also known as the ‘Chapter I prohibition'); and
- Section 188 of the Enterprise Act 2002, which sets out the criminal offence for individuals.
The Competition and Markets Authority (CMA) must also apply Article 101 of the Treaty on the Functioning of the European Union (TFEU) when applying the Chapter I prohibition to conduct which may affect trade between EU member states.
The legal basis may change post-Brexit, depending on the manner in which the United Kingdom leaves the European Union. Under the currently negotiated withdrawal agreement, European competition laws will continue to apply for an initial transitional period (originally intended to end on 31 December 2020). In the event that the Irish backstop comes into effect, the CMA will continue to apply provisions mirroring those under the TFEU. As things stand, at the end of the transitional period, the CMA will no longer be required to apply the competition provisions under the TFEU.
In the event of a no-deal Brexit, the CMA (or a concurrent regulator) will no longer apply Article 101 TFEU and will no longer be subject to EU Regulation 1/2003. The legal basis for the CMA (or other concurrent regulator) will be the Chapter I prohibition only, subject to certain transitional rules as set out in the CMA's March 2019 "Guidance on the functions of the CMA after a ‘no deal' exit from the EU".
1.2 Do any special regimes apply to cartels in specific sectors?
The Competition Act excludes certain agreements from the Chapter I prohibition, such as agreements:
- relating to the production and trade of agricultural products; and
- subject to competition regulation under other legislation, including the Financial Services and Markets Act 2000, the Broadcasting Act 1990 and the Communications Act 2003.
The secretary of state may also order that the Chapter I prohibition not apply where there are exceptional and compelling public policy reasons.
No sector-specific exemptions apply to the criminal offence.
1.3 Which authorities are responsible for enforcing the cartel legislation?
The CMA, along with sectoral regulators (eg, the Office of Communications, the Gas and Electricity Markets Authority, the Water Services Regulation Authority, the Civil Aviation Authority, the Payment Systems Regulator and the Financial Conduct Authority (FCA)), enforce the civil prohibition. In February 2019 the FCA published its first decision which found that three asset management firms had breached competition law by sharing information on initial public offerings before share prices had been set. The parties involved received fines totalling over £400,000.
The CMA and the Serious Fraud Office enforce the criminal offence in England, Wales and Northern Ireland; while the Crown Office Procurator Fiscal Service enforces such offence in Scotland.
1.4 How active are the enforcement authorities in investigating and taking action against cartels in your jurisdiction? What are the statistics regarding past and ongoing cartel investigations? What key decisions have the enforcement authorities adopted most recently?
The CMA is increasingly active in investigating and addressing cartel activity in the United Kingdom. In 2017/2018 the CMA opened 10 new investigations, representing a 60% increase over the annual average across the 2010–2015 period, and fined UK businesses nearly £10 million for cartel-related infringements. The CMA's cartel enforcement is limited, however, by the United Kingdom's parallel involvement in the EU competition regime.
The CMA continues to run a national awareness campaign for businesses with a view to increasing awareness of competition law and what is considered anti-competitive behaviour. As part of this process, there has been an increased focus on promoting the CMA's leniency programme – contacts to the CMA's cartel hotline doubled between 2014 and 2018, according to the CMA's figures. The CMA has also flagged that the themes that it will give priority to are:
- protecting vulnerable consumers;
- improving trust in markets;
- promoting better competition in online markets; and
- supporting economic growth and productivity.
During the course of 2018, the CMA opened investigations into potential cartel activity in the building and construction, musical instruments, estate agency and financial services sectors. The most notable CMA infringement decision resulted in a fine for Heathrow Airport Limited (and its parent company, Heathrow Airport Holdings Limited) of £1.6 million in relation to anti-competitive restrictions on the lease of Arora's Sofitel Hotel at Terminal 5. This included a clause restricting how parking prices should be set by Arora for non-hotel guests.
2 Definitions and scope of application
2.1 How is a ‘cartel' defined in the cartel legislation?
Section 2(2) of the Competition Act provides that the cartel prohibition applies, in particular, to:
- directly or indirectly fixing purchase prices or selling prices or any other trading conditions;
- limiting or controlling production, markets, technical development or investment;
- sharing markets or sources of supply;
- applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; or
- making the conclusion of contracts subject to the acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
The Competition and Markets Authority's (CMA) "Guidance on investigation procedures in Competition Act 1998 cases" describes a cartel as an "agreement between businesses not to compete with each other. The agreement can often be verbal. Typically, illegal cartels involve cartel members agreeing on price fixing, bid rigging, output quotas or restrictions, and/or market sharing arrangements. In some cartels, more than one of these elements may be present. For the purposes of the CMA's leniency programme, price-fixing includes resale price maintenance".
For the criminal offence, a cartel is an arrangement between at least two persons that undertakings will engage in price fixing, limiting supply or production, market sharing and/or bid rigging. Dishonesty is no longer a requirement for the offence. The offence is subject to certain exclusions and defences.
2.2 What specific offences are defined in the cartel legislation?
Section 2(1) of the Competition Act prohibits agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade within the United Kingdom and may have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom.
Under Section 188 of the Enterprise Act, an individual will be guilty of an offence if he or she enters into a horizontal agreement with one or more persons that undertakings will engage in cartel activities (ie, reciprocal direct and indirect price fixing, reciprocal limitation of supply or production, market sharing or bid rigging). This applies irrespective of whether the agreement was implemented or whether the individuals had authority to act on behalf of the undertakings at the relevant time. An individual can also be prosecuted for attempting to commit and conspiracy to do so. Dishonesty on the part of the individuals concerned must also be shown as regards arrangements performed from 20 June 2003 to 31 March 2014.
2.3 Is liability under the cartel legislation civil, criminal or both?
Civil liability exists for companies under the Chapter I prohibition and criminal liability for individuals under the Enterprise Act.
2.4 Can both individuals and companies be prosecuted under the cartel legislation?
Yes. Companies can be prosecuted for the civil cartel offence under the Chapter I prohibition. Individuals involved in the same offence can be concurrently prosecuted for the criminal cartel offence under the Enterprise Act.
2.5 Can foreign companies be prosecuted under the cartel legislation?
Yes – provided that the components of the cartel offence are satisfied, they apply irrespective of where the companies are incorporated.
2.6 Does the cartel legislation have extraterritorial reach?
Yes, provided that the components of the cartel offence are satisfied. The civil offence applies to agreements actually (or intended to be) implemented in the United Kingdom, regardless of where they were entered into or where the companies are incorporated.
The criminal offence applies to agreements entered into outside the United Kingdom only if they are in fact implemented in whole or part in the United Kingdom (ie, not merely based on intent). The test for implementation can be satisfied if there are affected sales in the United Kingdom.
2.7 What is the statute of limitations to prosecute cartel offences in your jurisdiction?
There are no limitation periods for public enforcement action for the criminal cartel offence under the Enterprise Act or for the civil cartel offence under Chapter I of the Competition Act.
The limitation period for standalone actions in England and Wales is six years. The beginning of the limitation period is the later of:
- the date on which the infringement of competition law that is the subject of the claim ceases; and
- the claimant's date of knowledge – defined as the date on which the claimant first knows or could reasonably be expected to know:
- of the infringer's behaviour;
- that the behaviour constitutes an infringement of competition law;
- that the claimant has suffered loss or damage arising from the infringement; and
- the identity of the infringer.
Such limitation period is suspended while a CMA investigation is ongoing and for at least one year after the conclusion of such investigation.
3 Investigations – general
3.1 On what grounds may the enforcement authorities commence an investigation?
Section 25 of the Competition Act sets out the legal basis for the Competition and Markets Authority (CMA) to commence enforcement activities under the Chapter I prohibition. The CMA cannot use its statutory powers unless it has sufficient evidence to give it reasonable grounds to suspect that an infringement has taken place. The CMA will typically be alerted to this evidence in one (or a combination) of three ways:
- a complaint from a third party;
- an application for leniency/whistleblowing; and/or
- evidence obtained as a result of the CMA's market monitoring function.
The CMA considers all complaints it receives, but is not compelled to formally investigate all suspected breaches of competition law. If the CMA decides not to prioritise a suspected infringement, it may send an advisory or warning letter to the company or companies that are the subject of a complaint.
3.2 What investigatory powers do the enforcement authorities have in conducting their investigation?
|Order the production of specific documents or information||Yes||Yes|
|Carry out compulsory interviews with individuals||Yes||Yes|
|Carry out an unannounced search of business premises||Yes*||Yes*|
|Carry out an unannounced search of residential premises||Yes*||Yes*|
|Right to ‘image' computer hard drives using forensic IT tools||Yes||Yes|
|Right to retain original documents||Yes||Yes|
|Right to require an explanation of documents or information supplied||Yes||Yes|
|Right to secure premises overnight (eg, by seal)||Yes||Yes|
The CMA does not have the power to search a person in civil investigations and cannot force a business to provide answers that would result in an admission that it has infringed competition law.
In criminal investigations only, the CMA and the Serious Fraud Office (SFO) have the power to access communications data (including telephone and messages records) of the individuals under investigation.
The CMA/SFO also has the power to compel individuals to answer questions if they relate to a criminal cartel investigation, but any statements made in response to mandatory interview questions may not be used against that person upon prosecution for the cartel offence.
3.3 To what extent may the enforcement authorities cooperate with their counterparts in other jurisdictions during their investigation? How common is such cooperation in practice?
The CMA is currently part of the European Competition Network (ECN) and cooperates with other ECN members in relation to identification of suspected infringements and ongoing investigations. After Brexit, the CMA will leave the ECN, but a close degree of cooperation between the CMA and the ECN is still expected after Brexit.
The CMA will also liaise with non-ECN competition authorities where appropriate. For example, in October 2018 the CMA opened an investigation into the Atlantic Joint Business Agreement and noted it was liaising with the European Commission and the US Department of Transportation in relation to the investigation.
3.4 Is there an opportunity for third parties to participate in the investigation?
Third parties may be contacted by the CMA and required to provide evidence from as early as the initial state of the CMA's investigation. If the CMA's provisional view is that the conduct under investigation amounts to an infringement, the CMA will issue a statement of objections together with an announcement on its case page.
The CMA may also provide an opportunity for third parties to submit written representations on a non-confidential version of the statement of objections if they are:
- the original complainant; or
- a third party that:
- the CMA thinks will be directly and materially affected by the outcome of the CMA's investigation, but has not made a complaint to the CMA;
- is likely to materially assist the CMA with its investigation; and
- has requested the opportunity to comment on the statement of objections.
3.5 What are the general rights and obligations of the enforcement authorities during the investigation?
The CMA has the investigatory powers set out in response to question 3.2.
The CMA is also subject to a general commitment to act with transparency – on this basis, the CMA seeks to keep parties abreast of developments in the investigation and ensures that updates and decisions are made available to the public via its website.
The CMA also has further obligations around the handling of sensitive information received in the course of an investigation, and must consider – although it is not bound by – representations from parties as to the confidentiality of any materials provided.
3.6 What are the general rights and obligations of the target company during the investigation?
The party under investigation has general rights of defence. Parties are entitled to receive key evidence and information about the CMA file, and to request copies of additional documents where necessary. In addition, parties are given the right to make submissions in respect of the CMA's position at various stages of the investigatory process, including the right to reply, a key part of the procedure enabling the parties concerned to submit their response to the matters set out in the statement of objections.
Once an investigation has been opened, the parties are obliged to cooperate with written requests for information and searches of business and domestic premises, and the CMA may require individuals connected with a business to answer questions at interview. Offences and/or sanctions may apply to parties that fail to comply with such steps.
Parties under investigation have the right to make representations as to the confidentiality of information shared with the CMA during the investigation. If the CMA considers such representations to be valid, it may take a range of steps to shield such information from disclosure, including aggregation or anonymization of data, excision of certain information or provision of data ranges.
3.7 What principles of attorney-client privilege apply during a cartel investigation?
Under English law, privileged communications are communications either between a professional legal adviser and client or made in connection with, or in contemplation of, legal proceedings, including communication with both in-house and private practice counsel. The English rules on privilege apply where the CMA conducts an inspection on its own initiative, or on behalf of the European Commission or a competition authority of another EU member state.
When the CMA is only assisting the European Commission with an investigation in the United Kingdom, EU rules of privilege apply, meaning that legal advice provided by in-house counsel and lawyers not qualified in an EU member state is not considered privileged.
3.8 Are details of the investigation publicly announced? If so, what principles of confidentiality apply?
The CMA will generally publish a notice of investigation on its website shortly after opening the formal investigation. The notice will include basic details of the case and a brief summary of the suspected infringement and industry sector involved. The CMA will not normally publish the names of the parties at this stage but will do so later in the process and if a statement of objections is issued. However, the CMA will generally not publish or update any notice where doing so may prejudice the investigation – or any criminal investigation or company disqualification order investigation – connected with that case.
It is the CMA's normal practice to publicly announce the issue of the statement of objections on its website, together with a short summary of the statement of objections along with an announcement to the media, and on the Regulatory News Service where the matter is judged market sensitive.
If an infringement decision is issued, the CMA will normally issue a press announcement (including on the Regulatory News Service), as well as a formal announcement on its own website and case page.
The CMA is under a statutory duty to protect confidential information it receives during the course of any investigation; this applies to confidential information relating to individuals and companies. Such information may be disclosed only under limited statutory ‘gateways'. Restrictions on other disclosures of confidential information apply to both the CMA and other recipients; a person making an unlawful disclosure commits a criminal offence.
4 Investigations – step by step
4.1 What initial steps do the enforcement authorities take to commence a cartel investigation?
allegations and whether any further clarification or information is needed from the relevant complainant. On the basis of this preliminary assessment, the CMA will identify whether the conduct complained of falls within its remit.
The CMA will then apply its Prioritisation Principles, sometimes alongside informal discussions with the complainant. This process is designed to assist the CMA in efficiently allocating resources, taking account of:
- the likely impact of an investigation, directly or indirectly, for consumers;
- the strategic significance of the case;
- the risks involved in taking on the case; and
- the resources required to complete any such investigation.
The CMA will allocate the case to the appropriate area of the Enforcement Directorate, responsible for antitrust and cartel investigations within the CMA, for further investigation. The CMA will generally seek to gather more information from a range of sources, including the complainant, the entities under investigation and third parties. Such information will be gathered on an informal basis at this stage, relying on voluntary cooperation with requests for information, clarifications and face-to-face meetings or interviews.
The case is then allocated a designated case team, for the day-to-day running of the case, and a senior responsible officer for certain oversight functions, including authorisation for opening a formal investigation. Once the CMA has decided to open a formal investigation, the parties being investigated will be sent a case initiation letter identifying the alleged conduct, the relevant legislation, the case timetable and key contact details.
The CMA will publish notice of the investigation on its website as soon as practicable, provided that doing so will not prejudice the investigation.
The CMA can also open a criminal investigation into the alleged conduct, but only where there are reasonable grounds to suspect that a cartel offence has been committed and there is good reason to exercise its powers to investigate individuals.
4.2 Are dawn raids commonly conducted in your jurisdiction? If so, what are the pre-conditions for conducting a dawn raid? When, where and by whom are they conducted? Do the enforcement authorities have the power to search private as well as company premises?
Dawn raids are often carried out by the CMA in the course of its investigations. The CMA carried out dawn raids in relation to eight ongoing investigations in 2017 and seven more in 2018.
For investigations under the Chapter I prohibition, the CMA has the power to enter and, in certain circumstances, search premises for documents relevant to a suspected infringement of UK or EU competition law. A warrant may be required depending on the circumstances.
In order to enter business premises (ie, any premises or part thereof not used as a dwelling), no warrant is required. The CMA must give two days' notice to the occupier of the intended visit unless the occupier is a party to the suspected infringement, the CMA has otherwise made all reasonable attempts to notify the occupier or the CMA has obtained a warrant.
The CMA may seek a warrant from the High Court or Competition Appeal Tribunal to enter and search business premises if:
- the CMA has reasonable grounds to believe that there are documents on the premises which should have been produced;
- there are reasonable grounds to believe that relevant documents would be concealed, removed, tampered with or destroyed if the CMA required that they be produced; or
- an officer was unable to gain entry without a warrant and there are reasonable grounds to believe that the premises contain documents which would need to be produced.
Where the CMA wishes to gain entry to domestic premises, a warrant is always required and may be sought on the basis of the first and second grounds above.
Dawn raids will be carried out by CMA officials, who will generally arrive at the premises at 9:30am if entering the premises with a warrant or without giving notice. Competition act warrants must usually be executed between 9:30am and 5:30pm, unless the court orders otherwise. Where the premises are entered with notice, officials will adhere to the timings set out in the notice.
In relation to criminal cartel investigations, the CMA may also seek a warrant from the High Court to enter business or domestic premises, provided that there are reasonable grounds to believe that there are documents on the premises relevant to the investigation and:
- a person has failed to comply with a notice requiring the documents to be produced;
- it is not practicable to serve a notice requiring the production of the documents; or
- the service of a notice requiring the documents to be produced might seriously prejudice the CMA's investigation.
4.3 What powers do officers have during the dawn raid? Are there any limitations on these powers?
For investigations under the Chapter I prohibition, the CMA has the authority to enter business premises without a warrant and to seize evidence.
However, a party cannot be required to produce or disclose privileged communications.
Undertakings cannot be required to answer questions where the answer may involve the admission by the undertaking of the existence of a breach of the Competition Act. However, this does not protect parties from disclosing documents which may be used to establish such infringements.
Where a warrant has been issued, the officials named in the warrant shall also have additional powers to:
- use such force as is reasonably necessary to enter the premises;
- search the premises; and
- take possession of relevant documents if necessary to preserve them or prevent interference with them, or where it is not reasonably practicable to take copies on the premises.
Officials may authorise third persons – for example, computer experts – to accompany them to carry out specific tasks under the supervision of the authorised CMA officials.
The CMA may also make use of certain other powers, known as ‘seize and sift' powers, when searching commercial premises, subject to certain statutory considerations. These allow the CMA to take copies, or take possession of, documents where it is necessary to determine their relevance at a later date, or where the document comprises both relevant and irrelevant information, and it is not reasonably practicable to make such determination or separate out such material on site.
CMA officials can also enter premises and seize evidence in relation to a criminal cartel investigation with a warrant, and may authorise third parties to exercise these powers on its behalf
In addition, the CMA may utilise the ‘seize and sift' powers outlined above during criminal cartel investigations, taking into account the same considerations and subject to the same limitations.
4.4 What are the rights and obligations of the target company and any individuals targeted during a dawn raid?
Where CMA officials intend to enter business premises without a warrant, they must provide the occupier of the premises with the following on arrival:
- details of the subject matter and purpose of the investigation; and
- details of the offences committed by not complying with the CMA.
Before entering the premises, CMA officials must provide the occupier with evidence of their authorisation to carry out the visit. This will be a document signed by a senior CMA official authorising the CMA investigator to enter the specified premises. CMA investigators will usually present photo identification to demonstrate their authority to enter the premises.
When exercising their ‘seize and sift' powers, CMA officials are further required to give notice of the following to the occupier of the premises:
- a description of the items that have been seized;
- the grounds for seizing the documents; and
- details of provisions of the Criminal Justice and Police Act 2001 in relation to making an application to the court for the return of documents.
If no one is at the premises at the time the CMA intends to enter by force, officials must take reasonable steps to inform the occupier of the intended entry and give it and/or its legal representative reasonable opportunity to attend.
If the premises are unoccupied or the occupier is absent, officials must leave the premises as secure as they found them. Where an occupier cannot be informed of the inspection, a copy of the warrant must be left in a prominent place within the premises.
In all cases, the occupier is entitled to legal advice and, where deemed reasonable by CMA officials, reasonable time will be allowed to enable legal advice to be sought.
Parties have a right to apply to the High Court to vary or discharge a warrant in civil investigations. Parties must make any such application immediately and keep CMA officials informed. CMA officials will generally delay the search for a reasonable period, not exceeding two hours.
A party has the right to notify the CMA officials where it believes that a document does not fall within the scope of the investigation and query why copies are being taken. Where copies are taken nonetheless, the party has the right to make representations to the CMA after the inspection as to why the document is not relevant and should be returned or destroyed.
Where the CMA takes copies or extracts of a document, the party has the right to receive its own copy. The party is also entitled to accompany CMA investigators during the inspection of the premises, in order to monitor what steps they have taken.
In general, parties must ensure they comply with CMA officials and avoid:
- intentionally obstructing CMA officers;
- destroying or falsifying documents; or
- providing false or misleading information.
4.5 What evidence can be seized during a dawn raid? Do the enforcement authorities have the power to interview witnesses and take statements during a dawn raid?
During a dawn raid, CMA officials have the power to:
- require the production of documents relevant to the investigation;
- require the provision of information relevant to the investigation;
- require explanations of relevant documents;
- require a person to state where a document may be found;
- take copies of, or extracts from, relevant documents;
- require production of any information stored in visible and legible electronic form which can be taken away;
- take any steps necessary to prevent interference with relevant documents;
- take with them any equipment as appears necessary – for example, to take copies of relevant documents; and
- require individuals connected with a party to the investigation to answer questions on matters relevant to the investigation.
The CMA also has the right to question persons connected with the business.
In relation to the cartel offence, the CMA has the power (with a warrant) to:
- enter the premises using such force as is reasonably necessary;
- search the premises;
- take possession of relevant documents;
- take any steps necessary to preserve or prevent interference with documents;
- require any person to provide an explanation of any relevant document;
- require any person to state where a relevant document may be found; and
- require any information stored electronically to be produced in a form in which it is visible and legible and in which it can easily be taken away.
4.6 How can a company best prepare itself for dawn raids? What best practices should it follow in the event of a dawn raid?
Companies should have a clear procedure in place in the event of a dawn raid and ensure that all members of staff are familiar with it. The following best practices are encouraged:
- Alert senior executives on site and in-house counsel to attend.
- Cooperate with the officials – failure to cooperate may constitute a criminal offence for any individuals found to be obstructive.
- Verify contact details for the official in charge and check that the investigation mandate to the inspection is authorised.
- Contact external lawyers and request that officials delay the start of their investigation until external counsel arrive.
- Gather an internal team to assist with the investigation.
- Ensure that on-site employees are informed of the investigation and what is expected of them during the raid.
- Ensure that internal document destruction protocols are suspended.
Employees should not delete, destroy or conceal any evidence, and there should be no external communications regarding the investigation with any competitors or with third parties, including customers, without the prior consent of the company's executives/lawyers. The company should consider any stock exchange announcements which may be necessary and prepare a press release in the event that one becomes necessary.
4.7 What are the next steps in the cartel investigation following a dawn raid? What timeframe do these typically follow?
There are no set timelines or limits on the timeframe for CMA investigations. This will depend on a range of factors, such as the complexity of the matter and the level of cooperation from the parties involved.
Dawn raids are only one tool at the CMA's disposal during its investigatory phase, alongside other powers to issue written requests for documents and information and to question individuals at interview.
As the CMA continues with its investigation, it will review and analyse the information collected in order to establish any relevant theories of harm. The CMA will generally provide updates to the business involved via email or phone during this period, informing them of the progress of the investigation, the next steps and the expected timings moving forward.
The CMA will hold more formal ‘state of play' meetings – at a minimum, after the initial investigatory steps and prior to announcing a decision as to whether a statement of objections will be issued.
If the CMA issues a statement of objections, the parties will have an opportunity to make representations in response. During this time, the parties will be invited to inspect the file held by the CMA in relation to the matter, in order to provide them with the opportunity to form a proper defence. The parties will often have the chance to make representations to the CMA at an oral hearing also.
The CMA will then issue its final decision on the case, providing the parties with a draft penalty notice and providing opportunity to comment, both in writing and at an oral hearing.
4.8 What factors will the enforcement authorities consider in assessing whether cartel activity has taken place?
The CMA will first consider whether there is evidence of an agreement between the parties with an explicitly anti-competitive object, such as price fixing, limits on production or investment or market sharing.
If no such agreement can be identified, the CMA will consider whether any agreements nonetheless demonstrate such anti-competitive effects, so as to prevent, restrict or distort competition in the United Kingdom.
Any anti-competitive effects of the agreement must be appreciable. Where an agreement has an anti-competitive object, the effects are automatically deemed appreciable.
In the case of agreements with an anti-competitive effect, however, this will be judged according to the parties' combined market share. A restrictive ‘horizontal' agreement (an agreement among competitors) between entities with a combined market share of 10% or more will be deemed to have an appreciable anti-competitive effect. The effects of a ‘vertical' anti-competitive agreement (an agreement among the parties at different levels of the supply chain) will be considered appreciable if it is made between entities with a combined market share of at least 15%.
An agreement or practice will be exempt where it contributes to improving the production or distribution of goods, or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit. The exception will not apply if the restrictions imposed are more than what is necessary for this purpose, or where they enable the parties to eliminate competition in a substantial part of the products concerned.
4.9 In case of a finding of cartel activity, can the company seek to negotiate a settlement, plea bargain or similar resolution? If so, what is the process for doing so?
A party may approach the CMA in order to initiate settlement discussions before or after the statement of objections is issued. The CMA will seek a mandate to engage in such discussions from the CMA's Case and Policy Committee. If considered appropriate, all businesses involved will be invited to explore settlement with the CMA.
Discussions will follow a set timetable appropriate to the case, rather than a fixed or pre-determined timeframe. Settlement discussions can proceed with all or only some of the businesses involved – non-participating parties will be investigated in parallel under ordinary investigatory procedures.
Where the discussions take place before the statement of objections, the CMA will present the party with a summary statement of facts and the key documents on which the CMA is relying, along with a list of documents on the CMA's file. The parties will be given the opportunity to make limited representations as to the summary statement of facts, particularly with regard to any factual inaccuracies.
Each business considering settlement will also be presented with a draft penalty calculation, which will reflect the extent of its involvement in the alleged cartel. The parties will have the opportunity to make limited representations with regard to the draft calculation.
The Case and Policy Committee will need to approve any decision to settle. The party must then confirm its agreement to the settlement, including the necessary admission, in writing. The CMA will then issue an infringement decision against the settling party.
Businesses seeking settlement must accept upfront a maximum penalty – that is, the maximum amount that the CMA could impose under an infringement decision. This is then subject to a settlement discount, capped at 20% for settlements reached prior to the statement of objections and 10% for those reached after. Any potential discount will be revoked if the decision is appealed to the Competition Appeal Tribunal. The CMA also has the discretion to decide that it will not pursue a disqualification order or undertaking against a party's directors as part of the settlement process.
A party may pull out of the settlement process at any time prior to confirming its acceptance in writing, including its admission. Where the party pulls out of settlement discussions or the discussions are otherwise unsuccessful, the case will revert to the usual administrative procedure.
The CMA does not engage in negotiation or plea bargaining of any kind outside of the established settlement process.
5.1 Is a leniency programme in place in your jurisdiction? If so, how does this function?
Yes. Part 3 of the Office of Fair Trading's (OFT) September 2012 "Guidance as to appropriate amount of penalty for substantive infringements of competition law" (which the Competition and Markets Authority (CMA) applies) outlines the corporate leniency policy applied in the United Kingdom. A more detailed explanation of the CMA's leniency policy is outlined in the OFT's July 2013 "Guidance on applications for leniency and no-action in cartel cases".
The three types of leniency are as follows:
- Type A: The applicant must be the first applicant and there must not be a pre-existing investigation by the CMA. The information provided must be enough for the CMA to take forward a credible investigation; and the company/individuals involved must provide all relevant information, accept participation in the cartel, cooperate with the CMA and cease participation in the cartel. The applicant should identify a "concrete basis for the suspicion" of a cartel and have a "genuine intention to confess". If the CMA confirms availability, the undertaking must make an immediate application and provide details of its identity.
- Type B: The applicant must be the first in a pre-existing investigation. Information provided must add significant value to the investigation and the applicant must comply with the other conditions for Type A above.
- Type C: This is available for applicants that are coercers and/or not the first to apply, regardless of whether there is a pre-existing investigation. Information must add significant value to the investigation.
5.2 What are the benefits of applying for leniency, both for the first mover and for subsequent applicants?
Type A: Applicants that successfully meet this threshold will receive corporate immunity (no fine), blanket immunity from criminal prosecution for cooperating current or former individual employees/officers, and director disqualification protection. If the applicant coerced other undertakings to participate in the cartel, Type A immunity will not be available.
Type B: Applicants will benefit from discretionary corporate immunity from financial penalties or percentage fine reductions. Cooperating current or former individual employees and directors could benefit from discretionary immunity from criminal prosecution (‘blanket' immunity or otherwise). Directors could benefit from protection against disqualification, provided that corporate immunity or a leniency reduction is granted. If the applicant coerced other undertakings to participate in the cartel, Type B leniency/immunity will not be available.
Type C: Applicants will benefit from a discretionary reduction in fines of up to 50% and discretionary immunity from criminal prosecution for specific individuals, to be agreed with the CMA. Director disqualification protection is available if a corporate leniency reduction is granted.
5.3 What steps does a leniency application involve? What timeframe do these typically follow?
In November 2017 the CMA issued an information note clarifying the process behind handling leniency applications across regulated sectors. The note confirms that the CMA should always be approached first, so that parties secure their place in the leniency ‘queue' – this position will then determine corresponding positions with other regulators, without the need to submit concurrent leniency applications.
The CMA and regulators will then cooperate closely throughout the application process, with the CMA having responsibility for all initial inquiries and other regulators to which the case is eventually assigned having responsibility for confirming any markers/leniency applications. The CMA remains solely responsible for assessing criminal immunity applications.
There is no set timeframe between an applicant beginning the leniency application process and the CMA confirming its leniency status and accepting its application.
5.4 What are the rights and obligations of the applicant during the leniency application and over the course of its cooperation with the enforcement authorities?
In its initial application for leniency, a party must disclose its identity and submit information concerning:
- the nature of the arrangement;
- the timeframe of the arrangement;
- the product and geographical markets within the scope of the arrangement;
- any evidence held by the party; and
- the names and locations of all other parties to the arrangement.
Prior to confirmation of its leniency status, the party will also need to submit:
- a statement confirming (or amending where necessary) the information previously submitted, whether orally or in writing;
- all relevant documentary evidence held; and
- the identity of all employees and directors who may give evidence.
Complete cooperation is required of applicants on an ongoing basis while the CMA completes its investigation and during any subsequent proceedings.
During the leniency application process, the party's identity is typically withheld from the other parties until a statement of objections has been distributed. In addition, submissions and statements made in relation to a leniency application are protected from disclosure under the EU Damages Directive.
5.5 Is the leniency programme open to individuals? Can employees or former employees benefit from a leniency application filed by their employer? Do the authorities operate a programme for individual whistleblowers separate to the leniency programme?
The CMA runs a whistleblower programme, allowing individuals who are aware of the existence of, but not actively involved in, a cartel to receive up to £100,000 for providing significant ‘inside information' about such cartel. In February 2018 the CMA reported that this mechanism had resulted in a 30% rise in the number of cartel tip-offs and introduced a new "Be Safe, Not Sorry" campaign reinforcing the availability of the whistleblower regime. Individuals who actively participated in the cartel are not entitled to any financial remuneration when blowing the whistle, but will instead benefit from immunity from prosecution by submitting a leniency application.
A ‘no-action' letter may also be granted where an individual whose employer has taken part in cartel activity is the first to report cartel conduct directly to the CMA in return for immunity from prosecution and/or director disqualification. In such instances, the relevant company may lose the chance to apply for Type A or B immunity.
5.6 Can leniency be denied or revoked? If so, on what grounds?
Once the statement of objections has been issued, leniency applications will no longer be accepted. Similarly, applications will not be considered from individuals once they have been charged with a cartel offence.
The CMA exercises discretion as to whether a party may qualify for leniency. Where the applicant provides the CMA with details and evidence of activities for which it previously lacked grounds to investigate, a party will usually be denied leniency only where it is found to have coerced others into participating in the cartel.
With regard to applications relating to activities which are already the subject of a CMA investigation, the CMA has discretion as to whether it will accept any further applications. The CMA will weigh the potential benefits of granting leniency against the resources already expended in the investigation, taking into account the overall level of cooperation offered.
As discussed in question 5.4, the grant of leniency carries with it obligations as to the ongoing cooperation of the applicant. At any time before conclusion of the case, the CMA may withdraw a grant of leniency and take enforcement action against the applicant if it concludes that the party has breached such obligations. The CMA will notify the party first of the alleged non-compliance and of the intention to withdraw leniency, giving the party reasonable opportunity to remedy such breach where appropriate.
6 Penalties and sanctions
6.1 What penalties may be imposed in criminal proceedings on companies? What penalties may be imposed on individuals?
The criminal offence under the Enterprise Act can be brought only against ‘persons'. For implementing or causing the implementation of cartel arrangements after 20 June 2003, individuals can face up to five years' imprisonment and/or an unlimited fine. Such prosecutions were first imposed in Marine Hoses, in which three individuals were imprisoned (two for three years and one for two-and-a-half years) in June 2008. In September 2015 one director was sentenced to six months' imprisonment (suspended for 12 months) and two other directors were acquitted following trial in Galvanised Steel Tanks. In September 2017 one individual was sentenced to two years' imprisonment, suspended for two years (as well as disqualified from acting as a company director for seven years), having pleaded guilty to dishonestly agreeing to divide supply and customers and fix prices in Precast Concrete Drainage Products.
6.2 What penalties may be imposed in civil proceedings on companies? What penalties may be imposed on individuals?
The Competition and Markets Authority (CMA) has the power to impose fines on companies that have intentionally or negligently breached the Chapter I prohibition, up to a maximum of 10% of their worldwide turnover. Such agreements are void and unenforceable.
Generally, companies with a combined UK annual turnover below £20 million will benefit from immunity from fines, but this will not apply to breaches of Article 101 of the Treaty on the Functioning of the European Union or price-fixing agreements.
Directors can also be disqualified for a period of up to 15 years where they knew, or ought to have known, that their company was guilty of an infringement of EU or UK competition law. The CMA can either apply to the court for such orders or agree a disqualification undertaking with the relevant director. The CMA secured its first director disqualification on 1 December 2016, disqualifying Daniel Aston for five years due to his breaches of competition law in Posters and Frames.
In April 2018 the CMA announced two further director disqualifications arising out of the Estate Agent cartel, with one director disqualified for three-and-a-half years and the second for three years. In July 2018 the CMA produced revised guidance in relation to director disqualification orders in response to its public consultation. In 2019 the CMA disqualified five directors across two different cases relating to pre-cast concrete drainage products and ‘cover bidding' in the market for services relating to refurbishing non-residential premises.
6.3 How are penalties in cartel cases determined? In deciding on the applicable penalties, will the enforcement authorities consider penalties imposed in other jurisdictions?
Revised fining guidance published in April 2018 sets out a six-stage process for calculating fines. The CMA must provide a draft penalty statement to the parties setting out how the fine has been calculated and giving the parties a reasonable period to make representations:
- Starting point: Maximum of 30% of relevant turnover (the turnover of the undertaking in the product and geographic market affected in the last financial year preceding the date on which the infringement ended). More serious offences are likely to have a starting point of 21% to 30%.
- Duration: For infringements lasting more than one year, the fines cannot be multiplied by more than the number of years of the infringement.
- Aggravating or mitigating factors: These include:
- role as a leader or instigator;
- involvement of directors/senior management;
- recidivism; and
- failure to comply with a warning/advisory letter.
- Mitigating factors include:
- acting under severe duress;
- genuine uncertainty as to whether the agreement/conduct constituted an infringement;
- termination of the infringement as soon as the CMA intervenes; and
- cooperation with the CMA's investigation (eg, by providing staff for voluntary interviews and/or witness statements).
- Deterrence and proportionality: Deterrent effect on the undertaking on which it is imposed and on other undertakings in the same field. This will be assessed by looking at the undertaking's financial size and position over a period of three years.
- The overall cap: 10% of worldwide turnover.
- Leniency or settlement discounts.
If a penalty or fine has been imposed by the European Commission or by a court or other body in another member state in respect of an agreement or conduct, the CMA must take that penalty or fine into account when setting the amount of a penalty in relation to that agreement or conduct.
6.4 Can a defendant company pay the legal costs incurred by and/or penalties imposed on its employees?
Subject to a company's articles of association, a company can indemnify the legal costs and/or financial penalties imposed on a former or current employee.
7.1 Can the defendant company appeal the enforcement authorities' decision? If so, which decisions of the authority can be appealed (eg, all decisions or just the final decision) and to which reviewing authority? What is the standard of review applied by the reviewing authority (eg, limited to errors of law or a full review of all facts and evidence)?
Decisions can be appealed in the first instance to the Competition Appeals Tribunal (CAT) – a specialist competition tribunal set up to determine appeals of decisions applying the competition provisions ‘on the merits' (both law and fact; and both liability and quantum). The CAT may remit the decision to the Competition and Markets Authority (CMA) for reconsideration or reach its own decision which supersedes that of the CMA.
Further appeals on points of law or quantum of a penalty are available at the Court of Appeal in relation to CAT proceedings in England and Wales, but only with the permission of the CAT or the appellate court. CMA decisions may also be challenged under judicial review procedures before the High Court.
An appeal suspends a company's requirement to pay any fine until the appeal is determined.
7.2 Can third parties appeal the enforcement authorities' decision, and if so, in what circumstances?
Addressees of a decision by the CMA have the right to appeal to the CAT.
Third-party complainants that can demonstrate a sufficient interest in a decision of the CMA may appeal a decision to the CAT in certain circumstances. Where the CMA closes an investigation on the basis that there is insufficient evidence to pursue an infringement, this decision may be appealed to the CAT. However, where the CMA decides to close an investigation without reaching a view on the merits (eg, due to resource allocation issues), there is no decision to appeal. In such a scenario, a third party will have the right only to apply for judicial review.
Third parties with a sufficient interest may further appeal a decision of the CAT to the Court of Appeal on a point of law only. As with an appeal from addressees, any appeal must be made within two months of notification or the CMA's publication of the decision.
8 Private enforcement
8.1 Are private enforcement actions against cartels available in your jurisdiction? If so, where can they be brought?
Both follow-on and standalone claims can be brought before the Competition Appeals Tribunal (CAT) or the High Court.
8.2 Can private enforcement actions be brought against both companies and individuals?
Private enforcement actions can be brought against companies only as a follow-on claim under the Chapter I civil offence or standalone action.
Only the Competition and Markets Authority (CMA) and the Serious Fraud Office (SFO) enforce the criminal offence in England, Wales and Northern Ireland; while the Crown Office Procurator Fiscal Service enforces such offence in Scotland.
8.3 Are class actions or other forms of collective action available in your jurisdiction?
Following CAT approval, collective proceedings can be brought if the following requirements are met:
- The claimants have "the same, similar or related issues of fact or law";
- The matter in dispute are "suitable to be brought in collective proceedings"; and
- The representative bringing such proceedings on behalf of the wider class of claimants is regarded as "just and reasonable".
The CAT's approval order will stipulate whether the class will be defined using the ‘opt-in' or ‘opt-out' model. Under the former, the representative will bring a claim on behalf of all parties that have expressly decided to participate; while under the latter, the representative will bring a claim on behalf of all parties that fit a particular description, unless some parties expressly choose to be excluded.
In July 2017 the CAT dismissed an application for ‘opt-out' collective proceedings in MasterCard, on the basis that the parties had not adequately shown how any damages would be distributed so as to adequately reflect the losses suffered by the individual consumer parties, given their substantial number and stark differences. On 16 April 2019, the CoA set aside the CAT's order dismissing the application. This has now been remitted to the CAT for re-hearing. The CoA denied Mastercard permission to appeal to the Supreme Court but Mastercard have sought leave to appeal directly to the Supreme Court – the result of which will likely not be known until early Autumn 2019.
In July 2018 two collective follow-on claims for damages were commenced against truck makers fined in the European Commission's Trucks decision. The first is an ‘opt-out' action brought by a special purpose vehicle, UK Trucks Claim Limited, claiming damages of up to £20,000 per truck. The second is an ‘opt-in' action instituted by industry trade association the Road Haulage Association, encompassing more than 3,650 claimants. Approval of such claims by the CAT is pending, with the hearing initially scheduled for June 2019. However, on 17 May 2019, the Competition Appeal tribunal adjourned the two applications in view of uncertainty created by the Court of Appeal decision in the Mastercard case. The CAT decided that it was in the best interests of justice to adjourn the applications until either (i) the Supreme Court denies Mastercard's application to appeal or (ii) until such time as the Supreme Court issues judgment on Mastercard's appeal.
8.4 What process do private enforcement actions follow?
Parties that are subject to a competition law investigation or infringement finding may also enter into voluntary redress schemes under the Consumer Rights Act 2015, to voluntarily compensate parties that have suffered loss as a result. A fast-track procedure for bringing claims is also available to small and medium-sized enterprises, where a hearing takes place within six months and the CAT can impose caps on the parties' costs.
8.5 What types of relief may be sought and what types of relief are most commonly awarded? How is the relief awarded determined?
Follow-on actions rely on a decision taken by either the CMA or the European Commission establishing a breach of competition law, meaning that the claimant is required only to prove that it suffered damage as a result. Standalone claims will succeed only if the claimant establishes that the defendant breached competition law, and that it suffered a loss as a result. The CAT may also grant injunctions as regards both standalone and follow-on actions, and such actions may be brought in the civil courts by way of a breach of statutory duty claim.
8.6 Can the decision in a private enforcement action be appealed? If so, to which reviewing authority?
The decision of either the CAT or High Court can be appealed to the Court of Appeal
9 Trends and predictions
9.1 How would you describe the current cartel enforcement landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
The impact of Brexit on the UK cartel enforcement regime is yet to be seen. In its July 2018 White Paper, the UK government indicated that it will maintain current antitrust prohibitions alongside strong cooperation with EU competition authorities. In a speech in May 2018, Competition and Markets Authority (CMA) Executive Director Michael Grenfell reiterated that Brexit poses significant challenges for competition law enforcement, including an increase in caseload and requirements for further funding. He also noted that there was an uptick of over 35% in competition enforcement activity by the CMA between 2013 and 2018. The CMA's 2018–19 Annual Plan also notes that it is keen to take on a bigger role on the world stage post-Brexit, including maintaining national jurisdiction over the larger and more complex cases that were previously under the EU's exclusive jurisdiction.
In September 2018 the UK government published guidance on the application of competition law in the event of a ‘no-deal' Brexit, stressing that short-term changes will be minimal. However, both this guidance and commentators note that in a ‘no-deal' scenario, businesses may face a ‘jurisdiction vacuum', with no agreement on jurisdiction for live antitrust and merger investigations with effects on UK markets. Furthermore, the extent to which UK courts will continue to look to EU court judgments is still unknown; some have suggested that the absence of a ‘single market imperative' may mean that occasions will arise where the United Kingdom seeks to be more innovative as regards competition policy (eg, in relation to fast-moving digital markets).
In March 2019 the CMA published "Guidance on the functions of the CMA after a ‘no deal' exit from the EU". The guidance explains how the United Kingdom will operate as a standalone competition regime after a no-deal exit from the EU. The most significant change would be the end of the one-stop shop principle and that anti-competitive behaviour could be subject to parallel enforcement action by both the European Commission and the CMA. The CMA (or concurrent regulator) will be able to rely only on its powers under the Chapter I prohibition and will no longer be able to apply Article 1 of the Treaty on the Functioning of the European Union, subject to certain transitional rules concerning investigations already being carried out before the United Kingdom's exit from the European Union.
10 Tips and traps
10.1 What would be your recommendations to companies faced with a cartel investigation and what potential pitfalls would you highlight?
Leniency applications continue to be a key consideration for companies that identify potential anti-competitive conduct. Although leniency can be an attractive option, particularly if first through the door, significant implications result from any leniency application. Most pertinent is the risk of damages resulting from follow-on claimants.
The admission of guilt also limits a company's prospects in any later challenge to the infringement finding and may alert competition authorities in other jurisdictions to the existence of an infringement. A leniency application further requires extensive cooperation with the CMA during its investigation, which can be onerous in terms of resources and the amount of evidence that must be provided to secure protection. The CMA will also hold an extensive file of contemporaneous documents and corporate statements about the applicant.
Companies must therefore carefully consider the implications of a leniency application before deciding this is the best course of action to take.
Companies may also face evidentiary pitfalls such as losing documents or access to key witnesses. Investigations can take place years after the event and may take a number of years to conclude. Document retention policies should be kept in mind as soon as an investigation begins, to ensure that the company can maximise its chances of successfully defending its conduct. Similarly, a company should take detailed witness statements from key employees involved at the outset of an investigation.
Related to this, once a party becomes aware of potential infringements, it is advisable to conduct a detailed internal audit in parallel to identify the extent of any infringement and any relevant materials that may exist to help defend or cooperate with the investigation. In particular, parties should seek to identify and catalogue the most problematic evidence, so that they can formulate an appropriate defence strategy as soon as possible.
Any competition law infringement brings with it the risk of adverse publicity. Other than in exceptional circumstances, the Competition and Markets Authority will publish its statement of objections and the infringement decision. As a result, companies should ensure that an appropriate team is in place to manage any PR impact stemming from the investigation and shape the public narrative where possible to minimise any reputational damage.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.