The UK government has proposed one of the most significant reforms of UK competition law in recent years which is likely to have a far-reaching impact in practice. While the proposed Digital Markets Competition and Consumer Bill, announced in the May 2022 Queen's speech, has been delayed, at least in part, due to the current political circumstances, we look at the government's proposals.
In July 2021, the UK government consulted on Reforming Competition and Consumer Policy. In May 2022, the government published its consultation response, proposing a range of changes to strengthen competition in the UK. These cover a general pro-competition strategy, merger control, market inquiries, anticompetitive conduct and competition enforcement.
Recognising the role of fair and open competition for the economy, the government is proposing, among other things, that:
- the CMA prepare regular ‘State of Competition’ reports for government assessing the strength of competition in the UK, and
- a statutory duty of expedition for the CMA in relation to its competition law functions, including functions relating to the new digital competition regime.
The government confirmed its support for the current voluntary, non-suspensory merger control regime, but is proposing the following changes to current merger jurisdictional thresholds:
- raising the turnover threshold from £70 million to £100 million, and
- creating an additional basis for establishing jurisdiction to enable review of vertical and conglomerate mergers which do not involve direct competitors, whereby at least one of the merging businesses has (i) a share of supply of goods or services of 33% in the UK or a substantial part of it, and (ii) a UK turnover of £350 million.
The government is also intending to introduce a safe harbour for small mergers where each party’s UK turnover is less than £10 million.
The aim of targeting vertical or conglomerate mergers is also to allow the CMA to have jurisdiction on 'killer acquisitions' which involve the purchase by large competitors of start-ups or potential entrants.
The government is proposing a number of measures to make the market inquiry process more flexible, efficient and proportionate, including:
- providing the CMA with greater flexibility to define the scope of its market investigations
- allowing more opportunities for binding commitments to be accepted during market studies and market investigations
- creating more flexible remedies in market investigations by enabling the CMA to require businesses to conduct trials to determine the final format of remedies and to amend remedies in a 10-year period following its finding of an adverse effect of competition.
To facilitate the delivery of faster and more flexible competition investigations, the government is proposing to strengthen the CMA's enforcement powers under the Competition Act 1998 (CA98) by:
- amending the Chapter I prohibition so that it can apply to agreements, concerted practices and decisions implemented outside of the UK but having an effect on the conduct in the country
- granting the CMA new evidence-gathering powers in investigations under the CA98 with regard to interviews of individuals, preserving evidence, 'seizing and sifting' evidence when inspecting domestic premises under a warrant and obtaining information stored remotely when executing a warrant
- in relation to the CMA’s interim measures decisions in CA98 investigations: providing that appeals against such decisions are determined by reference to the principles of judicial review rather than on the merits of the CMA’s decision, and amending the rules governing how the CMA provides access to its case file when taking interim measures decisions
- introducing a new statutory framework for confidentiality rings
- reducing the turnover threshold for immunity from financial penalties under the CA98 for breaches of the Chapter II prohibition from £50 million to £20million
- expanding the jurisdiction of the Competition Appeal Tribunal (CAT) to include the ability to grant declaratory relief, and
- removing statutory requirements in the CMA’s internal decision-making processes for findings of infringement in CA98 cases, allowing the CMA to determine its own processes.
To promote competition effectively in a modern economy, the government is progressing the following policies that will apply across all the CMA’s competition tools:
- where a business fails to comply with an investigative measure, allowing the CMA to impose fixed penalties of up to 1% of its annual worldwide turnover, and an additional daily penalty of up to 5% of daily worldwide turnover while non-compliance continues
- where it is a natural person who fails to comply with an investigative measure, fixed penalties can be up to £30,000 with an additional daily penalty of up to £15,000 while non-compliance continues
- enabling the CMA to impose civil turnover-based penalties for non-compliance with orders imposed by the CMA, or undertakings and commitments accepted by the CMA, across its competition enforcement functions: introducing a civil penalty regime for breaching commitments or undertakings, directions, orders or interim measures capped at 5% of annual turnover, and introducing an additional daily penalty of up to 5% of daily turnover of the company’s corporate group while non-compliance continues, and
- permitting more effective and flexible international cooperation by updating the rules governing information sharing between authorities and enabling the UK competition authorities to use compulsory information gathering powers to obtain information on behalf of overseas authorities.
What does this mean?
Once enacted by Parliament, the government's proposals will bolster the CMA's powers and make its various procedures more flexible, which should strengthen competition in the UK. It remains to be seen what the final shape of the reform will be and how it will match up against the EU's regime, but it is obvious that the CMA will have more teeth and more powers once reforms go through.