A Q&A guide to competition law in the UK (England and Wales).
The Q&A gives a high level overview of merger control, restrictive agreements and practices, monopolies and abuse of market power, and joint ventures. In particular, it covers relevant triggering events and thresholds, notification requirements, procedures and timetables, third party claims, exclusions and exemptions, penalties for breach, and proposals for reform.
To compare answers across multiple jurisdictions visit the Competition law Country Q&A tool.
This Q&A is part of the PLC multi-jurisdictional guide to competition and cartel leniency. For a full list of jurisdictional Competition Q&As visit www.practicallaw.com/competition-mjg.
For a full list of jurisdictional Cartel Leniency Q&As, which provide a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities in multiple jurisdictions, visit www.practicallaw.com/leniency-mjg.
The Enterprise Act 2002 regulates the UK merger control regime.
Currently, the Office of Fair Trading (OFT) conducts initial Phase 1 examinations of mergers. If the OFT concludes the transaction is, or may be, a "relevant merger situation" that may lead to a "substantial lessening of competition" in the UK market(s) concerned, it must refer the transaction to the Competition Commission (CC) for a fuller Phase 2 investigation and final determination, subject to very limited exceptions (see Question 4). The UK government is legislating to amalgamate the OFT and the CC into a single Competition and Markets Authority in April 2014 (see Question 39).
Certain OFT and CC decisions can be appealed to the Competition Appeal Tribunal (CAT) (see box, The regulatory authorities).
In recent years new guidance documents have been issued on:
Procedure. The OFT's jurisdictional and procedural mergers guidance (June 2009).
Substantive assessment. The OFT/CC joint merger assessment guidelines (September 2010), which aim to provide greater clarity on how the competitive impact of mergers is assessed by the OFT and the CC. The guidelines revise and expand on previous guidance contained in separate publications issued by the OFT and the CC.
A transaction is a relevant merger situation if a triggering event occurs and one of the thresholds is met.
A transaction is a triggering event if it causes two or more enterprises to cease being distinct. This occurs if the transaction leads to any of the following levels of control (including moving from one level to another):
Controlling interest (acquisition of majority voting rights over the target).
Ability to exercise control over policy (a large minority interest enabling effective control over the target).
Ability to exercise material influence (that is, to require the target's management to consider the acquirer's interests). This can arise, for example, with minority board representation or a voting interest as low as 10% to 15%.
If a transaction meets the jurisdictional thresholds and the parties do not notify, the OFT can start an investigation on its own initiative and can, at any time in the four months following the completion or public announcement of the merger (whichever is later), make a reference to the CC (see Question 4).
A triggering event must satisfy either of these two tests:
The turnover test. The target's UK turnover exceeds GB£70 million.
The 25% share of supply test. The transaction results in the creation of, or increase in, a 25% or more combined share of sales in (or in a substantial part of) the UK, of goods or services of a particular description.
Notification is voluntary. However, if a transaction meets the jurisdictional thresholds and the parties do not notify, the OFT can start an investigation on its own initiative (see Question 2, Triggering events).
Notification is therefore advisable if a merger raises substantive competition issues, to avoid an investigation after completion that may lead to the transaction's prohibition or the imposition of conditions. In that case, the acquirer would have to sell all or part of the business. A compulsory sale is more likely to be on unfavourable terms.
There is no deadline to make a filing, but the date of notification has timing implications for the transaction. OFT deadlines to decide whether to refer the merger to the CC depend on the form of notification used (see Question 4).
The OFT gives informal advice on competition issues (and/or jurisdictional issues where relevant) arising out of potential merger situations if the OFT is satisfied that both:
A confidential transaction exists, that is, the transaction is not hypothetical or in the public domain. There must be a good faith intention to proceed with the transaction, based on adequate financing and evidence of board-level consideration by the acquirer, or (for agreed transactions) heads of agreement or similar documentation.
There is a genuine issue (that is, that it may be referred to the CC).
Parties seeking the OFT's informal guidance must submit a short (no more than five pages) application to the OFT that sets out:
Why the transaction is suitable to receive informal advice (with reference to the principles above).
The theory of harm underlying the transaction that would lead the OFT to consider that referral to the CC is a genuine issue.
Any key substantive and/or jurisdictional issues on which the parties seek guidance.
Any informal advice provided by the OFT is not binding. The parties receiving informal advice must keep confidential both the content of the informal advice and the fact that informal advice has been sought.
The OFT generally aims to indicate whether it will accept or reject an application within five working days of receiving the application, but tries to handle urgent cases more swiftly.
One or both parties can notify. In practice, the buyer is usually responsible. However, given the large amount of detailed information required to complete a notification, the buyer and target must co-operate to a large extent. Notifications of hostile bids may therefore be much more difficult to complete.
Notification is made to the OFT (Mergers Group).
Notifications are made either by completing a pro-forma Merger Notice or by informal written submission. An informal written submission allows the parties greater flexibility to make their case but is not subject to a strict timetable (see Question 4).
The fee, depending on the size of the target's UK turnover, is, with effect from October 2012:
GB£40,000 where turnover is below GB£20 million.
GB£80,000 where turnover is between GB£20 million and GB£70 million.
GB£120,000 where turnover is between GB£70 million and GB£120 million.
GB£160,000 where turnover exceeds GB£120 million.
There are a few exemptions from the filing fee, notably for small and medium-sized enterprises. The fees are payable when the decision is given, unless the Merger Notice is used (see above, Form of notification), in which case the fee is payable on submission of the Merger Notice.
There is no obligation to suspend the transaction. However:
The OFT can seek undertakings or make hold-separate orders preventing parties to a completed transaction from integrating their businesses, to the extent that integration would make a prohibition or conditional clearance decision impossible to implement. This power will be toughened under the proposed new system described in see Question 39.
Once a merger is referred to the CC, the buyer must not acquire any more shares in the target without the CC's consent (section 78, Enterprise Act). When a completed merger is referred to the CC, the merged entity must obtain its consent before further integrating the businesses (section 77, Enterprise Act). In addition, the CC can seek undertakings or make hold-separate orders (sections 80 and 81, Enterprise Act).
For mergers subject to the City Code on Takeovers and Mergers (that applies primarily to companies with listed securities), a reference to the CC automatically causes the offer to lapse.
The OFT carries out a substantive examination of the proposed transaction, taking into account:
Information provided by the parties (the OFT can request parties to provide it with necessary information).
Publicly available material.
Third party views (for example, of customers or competitors of the merging undertakings) (see Question 6).
The OFT can investigate a transaction on its own initiative and refer it to the CC at any time in the four months following completion or public announcement (whichever is later). The OFT must bring the investigation to the attention of the merging parties and consult any relevant person (see Question 6). It must reach a decision as soon as reasonably practicable.
If the OFT is notified by Merger Notice, it has 20 working days (four weeks, plus public holidays) to carry out its examination and decide whether to refer the merger. This is extendable by up to ten working days (two weeks plus public holidays).
There is no maximum deadline for notifications made by informal written submission, but the OFT generally aims to reach a decision within 40 working days (eight weeks plus public holidays).
These timetables will change under the proposed new system; from April 2014, there will be a binding deadline of 40 working days from notification in all cases.
The OFT can stop the clock on these timetables if the parties fail to comply with its information requests.
The OFT makes one of the following decisions at the end of Phase 1:
Unconditional clearance.
Clearance subject to legally binding undertakings (see Question 8).
Reference to the CC for a Phase 2 investigation.
The OFT must refer a transaction if it considers that it may result in a substantial lessening of competition on the market(s) concerned. The OFT must refer the transaction if there is a more than 50% chance of the merger substantially lessening competition and the OFT has wide discretion to refer it or not if the chance is less than 50% but "greater than fanciful".
However, the OFT has discretion not to refer a merger if any of the following applies:
The merger arrangements are not sufficiently far advanced or likely to proceed to merit a CC investigation.
The market(s) concerned is of insufficient importance to merit a CC investigation. This will be considered to apply where either:
the affected markets in the UK are worth less than GB£3 million; or
the affected markets are worth less than GB£10 million (but more than GB£3 million) and the expected customer harm resulting from the merger is not materially greater than the average public cost of a CC reference (currently around GB£400,000) having regard to the:
size of the market concerned;
likelihood of a substantial lessening of competition;
magnitude of any competition that would be lost; and
duration of any substantial lessening of competition.
There are clear and quantifiable customer benefits arising from the merger (lower prices, higher quality, greater choice or greater innovation) that outweigh the substantial lessening of competition.
In addition, the OFT has the discretion not to make a reference in certain other circumstances, such as when it is considering whether to accept undertakings in lieu of making a reference.
In December 2010, the OFT published guidance on the exceptions to the duty to refer and undertakings in lieu of reference.
The CC has a statutory period of 24 weeks to conduct its investigation and publish a report. This period can be extended by up to eight weeks at the CC's discretion. The investigation includes written submissions (from the parties to the transaction and interested third parties) and oral hearings (with the parties to the transaction and very significant third parties).
The CC must decide whether there is a relevant merger situation (see Question 2) and, if so, whether it may lead to a substantial lessening of competition. The CC must make one of the following decisions at the end of Phase 2:
Unconditional clearance.
Conditional clearance, subject to legally binding undertakings (proposed by the merging parties and negotiated with the CC) (see Question 8).
Prohibition.
For an overview of the notification process, see flowchart, UK (England and Wales): merger notifications (www.practicallaw.com/5-504-3643).
The OFT publishes the following two main announcements (on its website and through the electronic Regulatory News Service) during Phase 1:
The start of its examination.
The end of its examination, announcing its reasoned decision as to whether to refer the merger.
If a merger is referred, the CC publishes a detailed report of its findings at the end of its investigation:
On its website.
In printed form.
The CC also publishes various interim reports and documents during the investigation, available on its website.
Information is published by the OFT and the CC at the start, during and at the end of Phases 1 and 2 (see above, Publicity).
Generally, all information relating to a business or an individual that the OFT or CC obtains in connection with their investigations remains confidential. However, they can disclose information in any of the following circumstances:
If they obtain consent from the party to whom the information relates (or the disclosing party).
To comply with EU law.
In connection with the investigation of a criminal offence (provided the disclosure is proportionate).
If necessary to facilitate their statutory functions.
A party can specify that information is confidential. The authorities cannot disclose information if its disclosure either:
Would be contrary to the public interest.
May significantly harm an undertaking's legitimate business interests or an individual's interest.
The OFT routinely consults third parties during its investigation through a published invitation to comment. If a merger raises substantive competition issues, the OFT usually contacts those businesses that the merging parties identified in the notification as their main competitors, customers or suppliers. In own-initiative investigations, the OFT must consult any person on whom the decision is likely to have a substantial impact.
If appropriate, the OFT also consults other regulators and relevant government departments.
During a CC investigation, third parties can make written submissions on the substance and on key interim documents.
Third parties do not have access to the OFT's files or to submissions and data submitted by the merging parties. However, the OFT can decide to make non-confidential data available for comments.
During a CC investigation, the CC will typically publish on its website key documents including the parties' submissions, on which third parties may then comment, subject to excluding from disclosure certain confidential information where publication would (in broad terms) prejudice the interests of a business or an individual or the public interest.
The OFT is not specifically required to hear third party oral representations and will seldom do so (in practice only where this would be necessitated by the general public law duty to give affected parties a fair hearing).
During a CC investigation, third parties may be invited to attend oral hearings if their views are particularly important to the merger concerned.
The substantive test both for making a reference to the CC and for the CC's decision is whether a merger is likely to lead to a substantial lessening of competition in the relevant market(s).
This can be found where the transaction creates or strengthens either:
Single-firm dominance/market power.
An oligopolistic situation (that is, co-ordinated or unilateral effects arising through a small number of competitors being reduced still further).
A merger gives rise to a substantial lessening of competition when it has a significant effect on rivalry over time and, therefore, on the competitive pressure on firms to improve their offer to customers or become more efficient or innovative (OFT and CC joint merger assessment guidelines, published September 2010).
The OFT can accept undertakings instead of making a reference at the Phase 1 stage (undertakings instead of reference) (see Question 4). At Phase 2, the CC can accept undertakings as a condition of clearing a transaction. These are negotiated and implemented only when the CC has reached an adverse finding that the merger results, or may be expected to result, in a substantial lessening of competition.
Undertakings can be:
Structural (for example, divesting the part of the business where overlaps cause competition concerns).
Behavioural (that is, formal commitments in relation to future conduct). These are less common.
The OFT and third parties that have suffered damage as a result of a breach can enforce undertakings. The CC can also make an enforcement order where it considers that an undertaking it accepted has not been, is not being, or will not be, fulfilled.
Notification is voluntary so there are no penalties. This will remain the case under the proposed new regime after 2014.
A transaction can be completed before clearance has been obtained unless it has been referred to the CC. The OFT and the CC can start civil proceedings to obtain appropriate remedies (particularly injunctions) on a breach of:
A hold-separate order.
Sections 77 or 78 of the Enterprise Act (see Question 3).
The CC can also start civil proceedings on a breach of a prohibition decision.
Any third party that has suffered loss as a result of implementation can bring an action for damages.
The following penalties apply:
Failure to observe undertakings made to, or orders given by, the OFT and the CC. Either body can start civil proceedings for appropriate remedies (such as injunctions).
Failure to comply with information requests. This causes the timetable to pause until the required information is produced.
Providing false or misleading information to the OFT or the CC. This is an offence, punishable by either or both:
a fine of up to the statutory maximum;
up to two years' imprisonment.
Where the offence of providing false or misleading information is proved to have been committed by a company with the consent, or attributable to the negligence of a director, manager or company secretary (or of an individual who purports to act in that capacity), that individual and the company are both liable (section 125, Enterprise Act).
The merging parties and interested third parties can appeal against:
The OFT's decision about whether to refer.
The CC's decision to clear or block a transaction.
Appeals are made to the CAT within four weeks of the date on which the reasoned decision was notified to the applicant or published, whichever is the earlier. In determining an appeal of a merger decision by the OFT or CC, the CAT must apply the same principles a court would apply to an application for judicial review.
The CAT's decision can be appealed (on points of law only) to the Court of Appeal.
Third parties who are aggrieved by the relevant decision of the OFT or CC have rights of appeal as described above (see above, Rights of appeal and procedure). Aggrieved parties are likely to include:
Complainants in the OFT or CC process.
Direct competitors of the merging parties.
Representative groups of either producers or consumers in the industry.
Mergers are excluded from the prohibition on anti-competitive agreements (see Question 13). However, the OFT may withdraw this exclusion in certain limited circumstances, such as where a transaction is a relevant merger situation but has not resulted in acquiring a controlling interest (see Question 2, Triggering events).
Ancillary restrictions also benefit from this exclusion. They are provisions that are subordinate to the merger's main purpose but are directly related and necessary for its implementation (for example, restrictive covenants by the seller not to compete with the business transferred within certain duration and geographical limits). Usually, they are assessed as part of the investigation. If they are unacceptable, they may have to be dropped or amended as a condition of clearance.
Any restrictions that go beyond what is ancillary may be regulated as restrictive agreements.
Mergers between water companies in England and Wales are automatically referred to the CC unless they fall below certain de minimis turnover thresholds. The CC assesses water mergers under a special test, weighing the loss of comparative competition against the transaction's possible benefits. Under proposed new water industry legislation, it is envisaged that the automatic referral system will be replaced by a "Phase 1" assessment system similar to that for ordinary merger control (see Question 4) and the turnover threshold will be raised.
Merger situations that raise public interest issues in media ownership, newspaper ownership or national security can be assessed on those public interest issues. They can also be assessed on competition issues if the Secretary of State for Business, Innovation and Skills intervenes (see box, The regulatory authorities).
A further, more restricted, category of mergers is special public interest cases (applicable in newspaper and broadcasting sectors, to mergers raising issues of national security, and to the maintenance of the stability of the UK financial system).
In these cases, the Secretary of State can order an investigation even if the normal merger jurisdictional thresholds are not met. Special public interest cases are assessed on public interest grounds only.
Restrictive agreements and practices are regulated by the Chapter I prohibition in the Competition Act 1998 (Chapter I), the UK version of Article 101 of the Treaty on the Functioning of the European Union (TFEU) (without the requirement that the agreement may affect trade between EU member states).
Chapter I prohibits agreements, concerted practices and trade association decisions that restrict competition in UK markets. This includes agreements that:
Fix prices.
Allocate markets or customers.
Unfairly discriminate.
Provide for competitors to exchange commercial information.
Involve exclusivity.
The OFT is responsible for enforcing Chapter I, in addition to Article 101, although the UK's sectoral regulators (for example, in rail, water, energy and electronic communications) have concurrent powers to investigate alleged breaches in their sector.
The OFT (or sectoral regulator) investigates alleged infringements on its own initiative or at the request of a third party complainant. In March 2011 the OFT published guidance on its procedures in investigations. In addition, private litigants can go to court seeking damages and/or injunctive relief for breaches of Chapter I and Article 101.
It is a criminal offence, known as the cartel offence, for individuals to engage in hard-core cartel activity, such as (Enterprise Act):
Price-fixing.
Market sharing.
Bid-rigging.
Quota sharing.
Currently the offence is only committed if the individual has acted "dishonestly", but this test is due to be replaced under proposed new legislation (see Question 39); it will no longer be necessary for the prosecution to demonstrate the individual's dishonesty, but it will be a defence if the individual can show that details of the arrangements concerned were disclosed to customers or published in advance. The OFT (together with the Serious Fraud Office) is responsible for criminal prosecutions of the cartel offence (see Question 24).
Companies involved in cartel activity have also been investigated by the Serious Fraud Office for breach of the English common law criminal offence of conspiracy to defraud. However, following the decision of the House of Lords in Norris (Norris v Government of the United States of America and others [2008] UKHL 16, [2008] 2 WLR 673 and R v GG plc and others [2008] UKHL 17), a prosecution under common law is only now possible if a secret cartel has aggravating features (such as deception) that elevate the cartel into an unlawful conspiracy to defraud.
Chapter I, like Article 101, applies equally to formal and informal agreements, whether legally binding or not, and whether written, oral or tacit.
An agreement that is not excluded (see Question 16) can benefit from an exemption if either:
It meets the terms of an EU or a UK block exemption (for example, the EU block exemptions for vertical agreements or for technology transfer agreements or the UK block exemption for public transport ticketing arrangements).
The OFT or a court has declared it exempt under Chapter I (or the European Commission, the OFT or a court has declared it exempt under Article 101(3)), which will occur only if all of the following criteria are met:
it contributes to technical or economic progress, or improves production or distribution;
consumers enjoy a fair share of the resulting benefit;
the restrictive elements are indispensable to the aim pursued; and
it does not give the parties the opportunity to substantially eliminate competition.
Certain agreements are automatically excluded from Chapter I, including agreements that either:
Result in a merger.
Are subject to competition scrutiny under the:
Financial Services and Markets Act 2000;
Broadcasting Act 1990; or
Communications Act 2003.
Although previously excluded under the Competition Act 1998, since April 2011 land agreements (that is, contracts and other commercial arrangements in the property sector) are now subject to scrutiny under Chapter I, regardless of whether the land agreements were entered into before or after that date.
Agreements with de minimis (that is, non-appreciable) effects are not subject to Chapter I. There is no legislative definition of this but the OFT takes into account the European Commission practice under Article 101.
Separately, agreements between undertakings with a combined turnover from their ordinary activities of below GB£20 million are not fined. The undertakings may still face an OFT investigation or a civil action by third parties. This exclusion does not apply to price-fixing agreements.
By contrast with the five-year limitation period for European Commission Article 101 and 102 decisions, there is formally no limitation period for OFT action under the Competition Act. However, some English lawyers consider that the general statutory limitation periods (in the Limitation Act 1980) also apply to Competition Act actions by the OFT, although this proposition has not to date been tested.
There are, however, two different limitation periods for third parties bringing follow-on damages claims, depending on whether the action is brought in the High Court or before the CAT. Proceedings in the High Court are subject to the general rule on limitation that applies to tort claims, which requires that a claim be brought within six years from the date on which the cause of action accrued. For claims in the CAT, the period is two years from the later of:
Issuance of the infringement decision.
Expiry of the parties' right to bring an appeal.
Final judgment in such appeal.
There is no mechanism for notification. Undertakings must self-assess whether their agreements are subject to Chapter I or Article 101 and, if so, whether they qualify for an exemption or exclusion (see Questions 15 and 16).
The OFT can, on an ad hoc basis, offer confidential, non-binding advice on the compatibility of an agreement with Chapter I or Article 101. In cases that raise new or unresolved questions requiring clarification in the interests of a wider audience, the OFT may also publish an opinion.
The OFT (or sectoral regulator) can investigate, on its own initiative, alleged infringements of both the EU's Articles 101 and 102 and the UK's Chapter I and Chapter II.
Third parties (such as customers or competitors) can prompt an investigation by:
Lodging a complaint with the OFT or the relevant sectoral regulator.
Starting civil proceedings in the courts.
The OFT aims to inform complainants whether it will open a formal investigation within four months of receiving the complaint, and says that it can more easily do this where it receives a "well structured written complaint supported by evidence".
Informal complainants. Any complainant or third party can lodge an informal complaint with the OFT. The OFT acknowledges receipt and, if it decides to close the file, will inform all complainants.
Formal complainants. A complainant who submits a written, reasoned complaint to the OFT and is (or is likely to be) materially affected by the agreement or practice concerned, is granted (on its request) formal complainant status. The main advantage of acquiring this status is that the formal complainant has the opportunity to become involved at key stages of the OFT investigation.
The OFT will, in a particular case, consider providing the formal complainants with access to the same information as is available to companies under investigation at the outset of its formal investigation. This will depend on the circumstances of the individual case. Where the OFT provides such information, the formal complainant is legally obliged to respect its confidentiality.
If the OFT does not issue a statement of objections setting out a provisional finding of infringement (see Question 20), the formal complainant only can comment on the OFT's provisional findings before a definitive decision is made to close the file.
If the OFT issues a statement of objections, the formal complainant is consulted and given an opportunity to comment either in writing or at an oral hearing.
Third parties (including formal complainants) are not normally invited to attend the parties' oral hearings, except in "appropriate cases, such as where there are differing views on a key issue like market definition or differing interpretations offered in respect of a key piece of evidence".
The latest guidance on the OFT's investigation procedures was published in October 2011. It provides that, for the first time, there is now a "separation of powers" between the investigating team and the decision-makers within the OFT, thus strengthening checks and balances with a view to giving greater procedural protection to the parties under investigation.
The OFT is not obliged to pursue an investigation, and will assess whether to do so on the basis of the apparent strength of the case and its prioritisation criteria.
If the OFT, on considering the evidence, does not find an infringement, it will issue either a brief case closure statement or a reasoned decision that there are no grounds for action.
If the OFT, on considering the evidence, reaches a provisional view that there is an infringement, it either negotiates commitments from the parties to end the infringement or issues to the allegedly infringing parties a formal "statement of objections" which sets out the basis for its provisional view and the evidence relied on. Handling of the case then moves from the investigating team to the Case Decision Group, a panel comprising three OFT officials who are not in the investigating team, at least one of whom is a member of the OFT's senior management and at least one of whom must be a lawyer. The parties then have the opportunity to examine the (disclosable) evidence on the OFT's file, to attend an oral hearing and then to make a written submission in response to the statement of objections, before the OFT issues its final decision. An infringement decision will often also include a fine, and the parties will first be able to make representations on the proposed fine, including at a separate oral hearing.
Since March 2011, there is also a Procedural Adjudicator (an OFT staff member independent of the investigatory team and of the Case Decision Group), whose role was strengthened in October 2012. The Procedural Adjudicator is responsible for resolving disputes on procedural issues in the investigation and also chairs the oral hearing.
There is no set timetable for conducting an investigation.
The OFT's handling of the process has become more transparent. On commencing a formal investigation, it publishes a "case opening notice" with brief details of the case and the proposed timetable (but normally not the identity of the parties under investigation). The OFT also announces the issuance of a statement of objections or the securing of commitments, and publishes any final decision.
The OFT has a basic duty to keep information relating to any business or individual confidential, subject to exceptions.
Exceptions. The OFT can disclose confidential information provided during an investigation under Chapter I or Article 101 with the consent of the party that supplied it. It is advisable when making submissions to identify any material that is confidential.
The OFT can also disclose confidential information to facilitate its statutory duties as a further exception to the basic duty of confidentiality.
However, if the OFT is proposing disclosure, it must both:
Inform the person supplying the information of its proposed action.
Give that person a reasonable opportunity to make representations that the information should not be disclosed.
Before disclosing, the OFT must consider:
The extent to which disclosure is necessary.
Whether disclosure would be contrary to the public interest.
The need to exclude from disclosure:
commercial information that may significantly harm the legitimate business interests of an undertaking; and
information relating to the private affairs of an individual that may significantly harm the individual's interests.
It is open to a party to request that certain information be kept confidential. In dealing with this request, the OFT applies the same rules as are described above (see above, Automatic confidentiality).
The OFT has extensive powers to investigate suspected cartels under Chapter I, including powers to:
Require information to be provided.
Make unannounced inspections of premises (dawn raids), where officials can examine and take copies of documents and require members of staff to provide explanations of relevant facts or documents.
Use surveillance powers (watching a person's home or office).
For the cartel offence (see Question 13), the OFT's dawn raid powers extend to removing originals of documents. Its surveillance powers are also more extensive, including the right to plant bugging devices in residential premises or vehicles and to use informants.
The OFT may be prepared to enter into settlement discussions with the parties following issuance of a statement of objections, and only if there is enough evidence of an infringement, at the initiative of either the OFT or the parties. This is entirely at the OFT's discretion. The aim is that, in return for the party concerned admitting the infringement and agreeing to a streamlined procedure for the remainder of the investigation, the OFT may reduce the fine. Settlements were reached with some of the addressees of the statement of objections in the OFT's investigations into alleged price-fixing of:
Dairy products (February 2008).
Tobacco products (July 2008).
Interestingly, as the tobacco case showed, settlement does not preclude the party appealing to the CAT against the infringement decision and fine.
The OFT intends to issue guidance on settlement procedures.
The OFT can accept binding commitments offered to it by an individual or an undertaking to address potential infringements of the EU and UK competition rules and is likely to do this where all of the following apply:
The competition concerns are readily identifiable.
The commitment offered would be effective in meeting the competition concerns.
The proposed commitments are capable of being implemented effectively and, if necessary, within a short period of time.
Only in exceptional circumstances will the OFT accept commitments in cases involving price-fixing, bid-rigging or market-sharing cartels. In determining the appropriate commitments, the OFT assesses the seriousness of the effects on competition.
A party can (but is not required to) offer binding commitments at any time during the OFT's investigation until a decision is made. However, the closer the OFT is to reaching a decision, the less likely it is to consider it appropriate to accept commitments.
If the OFT intends to accept a commitment, it notifies affected parties, who have an opportunity to provide representations within a specified period set by the OFT (not less than 11 working days from the date of notice). The OFT and the parties can negotiate to finalise the binding commitments. If a binding commitment is accepted, the OFT publishes it. The OFT makes no statement as to the legality of agreements before commitments are accepted.
The OFT can:
Order modification or termination of the infringing agreement or practice.
In urgent cases, where it has a reasonable suspicion of infringement, adopt interim measures to order an agreement to be suspended, pending the outcome of the investigation.
If the OFT finds that an agreement breaches Chapter I and is not exempt, it can impose an administrative fine of up to 10% of the annual worldwide turnover of the offending undertaking's corporate group. In September 2012, the OFT published guidance as to the appropriate amount of a penalty, explaining the steps it takes to calculate a fine and the relevant aggravating and mitigating factors to apply to the starting point which is 30% of the corporate group's turnover in the relevant market. If a fine is not paid, the OFT can recover the amount as a civil debt.
Disqualification of directors. Directors of infringing companies can face disqualification from UK directorships, for up to 15 years.
The OFT can apply to the High Court for a Competition Disqualification Order (CDO) against a director. Alternatively, the OFT may accept undertakings from a director, instead of continuing with an application for a CDO. The provision of undertakings is also likely to lead to a shorter period of disqualification than the OFT would seek in applying for a CDO.
The Court can make a CDO against a director, not only where it is proven that the director concerned was involved in the infringement, but also if either the:
Director's conduct did not contribute to the breach but the director had reasonable grounds to suspect that the undertaking's conduct constituted a breach and took no steps to prevent it.
Director did not know but ought to have known that the undertaking's conduct constituted a breach.
In June 2010, the OFT published revised guidance setting out its approach to seeking CDOs against directors in competition law cases. A year later, in June 2011, the OFT published a general guidance document for directors (Company directors and competition law), which gave more details on its approach to CDOs, including in relation to non-executive directors. The OFT is yet to exercise its power to make a stand-alone CDO application, but CDOs were ordered by the Crown Court in the context of the cartel offence prosecutions in the marine hose cartel. This resulted in the disqualification in June 2008 of three directors for periods of between five and seven years (see R v Whittle, Allison & Brammar [2008] EWCA Crim 2560 for the defendants' appeal against their sentences). Despite not having made CDO applications, the OFT has stated that it often considers doing so in cartel investigations and the revision of its guidance indicates a stepping up in its approach to seeking CDOs.
Cartel offence. Individuals convicted of the cartel offence (see Question 13) are liable to either or both:
Up to five years' imprisonment.
An unlimited criminal fine.
To date there have been only two prosecutions of the cartel offence. First, following the US Department of Justice investigation into the marine hose cartel in the US, three UK businessmen involved in the cartel agreed to plead guilty to the cartel offence in order to return to the UK. They were subsequently, in June 2008, sentenced to imprisonment for between two-and-a-half and three years each for committing the cartel offence (on appeal, the sentences were reduced by about one-third). All three defendants were also disqualified from acting as company directors for periods of between five and seven years.
Second, in August 2008, the OFT announced criminal charges against four former executives of British Airways for alleged participation in a long-haul passenger fuel surcharge cartel with Virgin Atlantic. The trial began in April 2010 but collapsed a month later when a significant volume of additional evidence was introduced by Virgin Atlantic during the trial, which neither the OFT nor the defendants' legal teams had an opportunity to review. The OFT decided that it would be potentially unfair to continue with the trial.
There have been a number of other criminal investigations by the OFT but to date no charges have been brought in those.
Parties to a restrictive agreement can escape up to 100% of administrative fines, and individuals who have committed the cartel offence can escape imprisonment, by blowing the whistle on unlawful arrangements. To obtain full immunity, the whistleblower must do all of the following:
Stop all further participation in the cartel activity.
Be the first cartel participant to inform the authorities of the arrangement.
Not have been the ringleader or instigator of the cartel, nor have encouraged any of its members to engage in unlawful activities.
Co-operate continuously and fully with the authorities throughout the investigation, providing all relevant information and evidence.
Smaller reductions in administrative fines (of up to 50%) may be available if some but not all of these criteria are met.
Small agreements (that is, agreements that do not fix prices between undertakings with a combined annual turnover that does not exceed GB£20 million) that infringe Chapter I are exempt from fines.
The OFT has published detailed guidance on leniency applications (the latest in October 2011, although in October 2012 the OFT began consulting on amendments as regards the treatment of legally privileged material).
Offending provisions of an agreement are void and unenforceable. If, under contract law, they are not severable from the agreement, the whole agreement is void. The OFT can also order modification or termination of an infringing agreement (see above, Orders).
A third party that can show that it has, or is likely to, suffer loss as a result of a prohibited restrictive agreement or practice can bring a civil action for damages and other civil remedies (for example, injunctions). The action can be subsequent to or independent of any OFT investigation.
If the OFT or the European Commission makes a decision that Chapter I or Article 101 has been infringed and this decision is no longer subject to appeal (see Question 26), third parties can also bring a follow-on action for damages before the CAT or the High Court without further need to prove an infringement.
The UK government is currently considering proposals to make it easier for parties to bring damages cases, including the possibility of bringing full stand-alone actions (for a finding of infringement and the award of damages) in the CAT.
The procedure for a follow-on action for damages before the CAT is subject to separate procedural rules from those that normally apply to civil litigation, as set out in the CAT Rules 2003. Of particular note is that there is a two-year limitation period for bringing such actions (see Question 16).
Class actions, in the US sense of the term (that is, a large group of people bringing an action collectively), are not permitted under English litigation procedural rules. English courts have resisted attempts to establish US-style claims where a group of claimants purports to bring an action on behalf of a larger group. The leading case in this area is Emerald Supplies v British Airways [2009] EWHC 741 (Ch) and [2010] EWCA Civ 1284.
However, there are three procedures under English law that provide scope for a claim to be brought on behalf of multiple parties:
Section 47B of the Competition Act provides that a specified consumer body can bring an action before the CAT on behalf of two or more consumers. The CAT's rules regulate these actions. To date only one claim has been brought, that is, the Consumers' Association claim for damages against JJB Sports on behalf of consumers who had been over-charged as a result of price-fixing in the supply of replica football shirts. The action attracted only about 130 claimants.
Part 19 of the Civil Procedure Rules (CPR) makes certain provisions for the bringing, or joint management, of representative actions, which might be considered a form of class action. However, the attempt to establish a representative claim in the air cargo litigation in Emerald Supplies failed.
Part 19 of the CPR also provides the court with the power to make a group litigation order, which allows for the collective management by the court of a number of separate cases that give rise to common or related issues of fact or law.
The proposals on competition damages being considered by the UK government (see above, Third party damages) envisage options for making it easier to bring collective actions.
Parties to the agreement can appeal to the CAT against OFT and sectoral regulators' decisions, within two months of the date on which the appellant was notified of the disputed decision. An appeal can be on points of law or fact.
Making an appeal automatically suspends the obligation to pay fines but not the decision itself. However, the CAT can order suspension of a decision, pending the hearing.
The CAT's powers include:
Confirming or setting aside the decision.
Sending the case back to the regulator for further investigation.
Confirming or amending the level of financial penalties imposed.
Adopting interim measures.
A CAT decision can be appealed, on points of law only, to the Court of Appeal.
A third party with sufficient interest in the proceedings has the same rights of appeal to the CAT as a party (see above, Rights of appeal and procedure).
Monopolies and abuses of market power are only regulated under civil law. The Chapter II prohibition in the Competition Act (Chapter II) mirrors Article 102 of the TFEU (without the requirement that the conduct may affect trade between EU member states).
It prohibits:
Unilateral conduct which is an abuse by an undertaking having a dominant market position within the UK (or any part of the UK).
The abuse by more than one undertaking of a jointly dominant position, although there is a high threshold to establish this.
The OFT, the sectoral regulators or (in certain circumstances) the Secretary of State can make market investigation references to the CC where there are reasonable grounds to suspect that any of the market's features have the effect of preventing, restricting or distorting competition in the UK.
Before making a market investigation reference, the OFT or sectoral regulator can conduct an initial market study or market review to see whether there is sufficient concern to merit a reference. Voluntary action addressing the concern can be accepted instead of a reference to the CC. A market study can lead to other outcomes, including investigations under Chapters I or II.
Market investigations do not involve a prohibition and there are no penalties, but the CC has wide powers to remedy any anti-competitive market features identified by its investigation, by imposing behavioural or structural undertakings on industry participants.
The test for dominance is the same as that under EU law. A dominant position arises if a company has a position of economic strength that enables it to prevent effective competition by affording it the power to behave, to an appreciable extent, independently of its competitors, customers, and ultimately of its consumers (United Brands v Commission (Case C-27/76) [1978] ECR 207).
Dominance is assessed by various factors, including:
Market share (a market share of over 50% is presumed dominant, but a share of under 40% is unlikely to be dominant).
Market structure.
Barriers to entry.
The degree of countervailing buyer power.
Abuses are unilateral commercial acts that either:
Exploit the dominant position by imposing harsh trading terms on customers or suppliers, for example:
excessive pricing;
imposing unfair trading terms and conditions.
Seek to exclude competition, for example:
predatory pricing;
rebating policies designed to remove competitors;
imposing exclusivity obligations;
refusing to supply customers who are downstream competitors (in certain circumstances);
bundling/tying.
There are only very limited exclusions to Chapter II, including:
Conduct by an undertaking operating services of a general economic interest.
Conduct that results in a merger.
There are no formal exemptions. However, certain conduct that would otherwise be an abuse may not be prohibited if there is a proportionate objective justification (for example, if a price discrimination policy expands output or if a rebating policy improves efficiency).
Conduct of minor significance (that is, if the undertaking's annual turnover does not exceed GB£50 million) is exempt from fines. However, this does not protect the undertaking from damages actions brought by third parties (see Question 35).
There is no formal notification and clearance process. However, the OFT offers ad hoc informal guidance on the application and interpretation of Chapter II and Article 102 (see Question 17).
The procedure is the same as for restrictive agreements (see Questions 18 to 21 and 23). For market investigations, see Question 27.
The regulator's powers are the same as for restrictive agreements and practices (see Question 22).
The penalties are the same as for restrictive agreements (see Question 24). To the extent that an agreement infringes Chapter II, it is unenforceable in the courts.
The same rules apply as for restrictive agreements (see Question 25).
There are no significant differences as Chapter I mirrors Article 101 and Chapter II mirrors Article 102.
Joint ventures (JVs), where they are not notifiable under the EU Merger Regulation (Regulation (EC) 139/2004 on the control of concentrations between undertakings), are dealt with either under the merger control rules (see Questions 1 to 12) or under Chapter I/Article 101 (see Questions 13 to 26):
If the JV involves both of the following, it is subject to UK merger control rules:
one (or more) parents acquiring at least material influence (see Question 2, Triggering events) over an existing enterprise (or several existing enterprises), which means that some continuing business or goodwill are injected into the JV; and
the turnover or 25% share of supply test being satisfied (see Question 2, Thresholds).
In theory it could also be assessed under Article 101 but not under Chapter I. (Calculation of the turnover test depends on the JV structure. If only part of the parents' businesses are input into the JV, the relevant turnover is the total of all the businesses that will be controlled by the JV. If the parents pool the entirety of their businesses into the JV, the relevant turnover is the totality of all the businesses minus the turnover of the largest business.)
If the JV does not involve one or more parents acquiring at least material influence over an existing enterprise, it will be assessed under Chapter I/Article 101.
Generally, disclosure of information is restricted (see Question 5). However, in some circumstances, exchange of information between authorities in different jurisdictions is permitted:
Disclosure of information under UK rules. The OFT or other public authority, when exercising its powers under the Enterprise Act and other specified competition legislation (including the Competition Act), can disclose information to an overseas authority to facilitate:
the carrying out of investigations for the enforcement of competition law;
bringing civil or criminal proceedings in relation to an infringement of competition law; and
deciding whether to start or end investigations or proceedings.
In deciding whether to disclose, the OFT must consider whether:
the matter in relation to which the disclosure is sought is sufficiently serious to justify making the disclosure;
there are arrangements in place for the provision of mutual assistance between the UK and the other jurisdiction in relation to disclosure;
the law of that jurisdiction provides appropriate protection in relation to disclosure.
However, information gathered by the OFT during a merger or market investigation cannot be disclosed. In addition, the Secretary of State can prohibit disclosure if he considers that the overseas authority is exercising an inappropriate jurisdiction.
Disclosure of information under EU rules. For the purpose of applying Articles 101 and 102, national competition authorities and the European Commission can exchange and use in evidence any matter of fact or law, including, in some circumstances, confidential information (Regulation (EC) 1/2003 on the implementation of the rules on competition laid down in Articles 101 and 102 of the TFEU (formerly Articles 81 and 82 of the EC Treaty) (Modernisation Regulation)). This is subject to a number of restrictions, including that:
the information can only be used to apply Articles 101 and 102 in relation to the subject matter for which it was originally collected;
the information cannot be used to impose custodial sanctions on individuals; and
exchange is subject to the rules of professional secrecy.
Disclosure is made through the European Competition Network (ECN), which consists of the European Commission and the national regulators from each EU member state. The OFT has regard to considerations in the Enterprise Act when deciding whether to disclose information under the Modernisation Regulation.
Fundamental reforms of UK competition law institutions and procedures are contained in proposed legislation, the Enterprise and Regulatory Reform Bill, which was being considered by the UK Parliament in 2012/13. The main elements of the proposed reform include:
UK competition authorities (see Question 1). The Office of Fair Trading (OFT) and the Competition Commission are to be amalgamated into a single unitary body, the Competition and Markets Authority, although in merger and market cases there will be separate teams within the CMA for Phase 1 and Phase 2 (see Question 4).
Merger control (see Questions 4 and 9). There will be a statutory deadline for a Phase 1 decision of 40 working days from full notification, subject to exceptions. Notification will not be compulsory, and parties will be free to complete without notification or clearance, but the CMA will have stronger powers to make hold-separate orders before clearance, including powers to order the reversal of integration that has already occurred.
Criminal offence (see Question 13). The criteria for the cartel criminal offence will be changed to avoid the need to prove an individual has acted dishonestly, making it easier to convict directors, managers or employees personally involved in serious anti-competitive arrangements.
For market investigations (see Question 27, Market investigations), shorter time limits are being introduced, including a maximum of one year for the Phase 1 market study, and normally a maximum 18 months for the full Phase 2 market investigation.
The reforms are expected to take effect in April 2014.
Description. Official government website where all UK legislation can be found, including the Enterprise Act 2002 and the Competition Act 1998.
Description. The OFT's official website. Contains all OFT guidelines issued, such as, for example, the OFT jurisdictional and procedural mergers guidance (June 2009), OFT/CC joint merger assessment guidelines (September 2010), and OFT guidance on the exceptions to the duty to refer and undertakings in lieu of notice.
W www.catribunal.org.uk/240/Rules-and-Guidance.html
Description. The CAT's official websites. CAT Rules 2003 set out the procedure for a follow-on action for damages before the CAT.
W http://www.competition-commission.org.uk
Description. The Competition Commission's official website. Contains all Competition Commission reports, and the Competition Commission's rules of procedure and guidance, including on mergers and on market investigations.
Head. Philip Collins (Chairman) and Clive Maxwell (Chief Executive)
Contact details. Fleetbank House
2-6 Salisbury Square
London
EC4Y 8JX
United Kingdom
T +44 84 5722 4499
E enquiries@oft.gsi.gov.uk
W www.oft.gov.uk
Outline structure. The OFT is an independent public body, regulated by a board of 12 members, including the Chairman, Chief Executive, three executive directors and seven non-executive directors.
Responsibilities. The OFT's main competition responsibilities are to:
Procedure for obtaining documents. The OFT's weekly gazette publishes details of notifications, consultations and other competition news. Its website provides detailed information about decisions under the Competition Act, and consultations and decisions on mergers and market investigations (see above, Contact details).
Head. Roger Witcomb (Chairman) and David Saunders (Chief Executive)
Contact details. Victoria House
Southampton Row
London
WC1B 4AD
United Kingdom
T +44 20 7271 0100
E info@cc.gsi.gov.uk
W www.competition-commission.org.uk
Outline structure. The CC is an independent public body, with a Chairman and three deputy chairmen. Inquiry groups consist of three to six members (usually including a lawyer, an accountant and an economist, and led by the Chairman or a Deputy Chairman) drawn from a panel of 46. Specialist inquiry groups investigate certain regulated sectors (such as telecommunications and utilities).
Responsibilities. The CC undertakes in-depth investigations into mergers and markets under the Enterprise Act 2002. It makes the final decision in most merger and market investigation cases, and determines appropriate remedies.
Procedure for obtaining documents. Information on the CC's procedures, ongoing and concluded inquiries, and reports from 1950 onwards, are available on its website (see above, Contact details).
Head. The Hon Mr Justice Barling (President)
Contact details. Competition Appeal Tribunal
Victoria House Bloomsbury Place
London
WC1A 2EB
United Kingdom
T +44 20 7979 7979
F +44 20 7979 7978
W www.catribunal.org.uk
Outline structure. The CAT is a specialist independent tribunal established to hear appeals under the UK and EU competition law provisions.
Cases are heard before a panel of three, consisting of the President or a member of the panel of chairmen (comprising judges of the Chancery Division of the High Court and other senior lawyers) and two ordinary members (who have expertise in law or related fields such as economics, business and accountancy).
Responsibilities. The CAT hears appeals from decisions by the OFT, the CC, and the sectoral regulators. It can consider the case merits, errors of fact and law, or improper use of powers or discretion, and can:
Procedure for obtaining documents. Judgments, procedural rules and guidance are published on the CAT's website (see above, Contact details).
Head. Rt Hon Dr Vince Cable (Secretary of State)
Contact details. Ministerial Correspondence Unit Department for Business, Innovation and Skills
3rd Floor 1 Victoria Street
London
SW1H OET
United Kingdom
T +44 20 7215 5000
F +44 20 7215 0105
E enquiries@bis.gsi.gov.uk
W www.bis.gov.uk
Outline structure. The Department for Business, Innovation and Skills is a government ministry. There is a Minister of State responsible for competition policy, currently Jo Swinson MP.
Responsibilities. The Department for Business, Innovation and Skills formulates UK government policy on competition law. Involvement in merger and market investigations is limited and the Secretary of State is only involved in:
Procedure for obtaining documents. Decisions made by the Secretary of State are available as press releases on the Department for Business, Innovation and Skills website, as are consultation papers and guidance (see above, Contact details).
T +44 20 7444 3597
F +44 20 7283 6500
E michael.grenfell@nortonrose.com
W www.nortonrose.com
Qualified. Solicitor, England and Wales, 1988
Areas of practice. Competition and anti-trust law (EU and UK); merger control (EU and UK); telecoms regulation; utility regulation; public and administrative law.
Recent transactions
T +44 20 7444 3347
F +44 20 7283 6500
E martin.coleman@nortonrose.com
W www.nortonrose.com
Qualified. Solicitor, England and Wales, 1979
Areas of practice. Competition and anti-trust law (EU and UK); merger control (EU and UK); sector regulation; transport regulation; public and administrative law.
Recent transactions
T +44 20 7444 3834
F +44 20 7283 6500
E peter.scott@nortonrose.com
W www.nortonrose.com
Qualified. Solicitor, England and Wales, 1999; solicitor advocate with higher rights of audience, 2002
Areas of practice. Competition and anti-trust law (EU and UK); competition litigation; merger control (EU and UK); general commercial litigation.
Recent transactions
T +44 20 7444 3104
F +44 20 7283 6500
E mark.jones@nortonrose.com
W www.nortonrose.com
Qualified. Solicitor, England and Wales, 1996
Areas of practice. Competition and anti-trust law (EU and UK); merger control (EU and UK); utility regulation; public procurement; public and administrative law.
Recent transactions
