This country-specific Q&A provides an overview to cartels laws and regulations that may occur in the United Kingdom.
This Q&A is part of the global guide to Cartels. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/cartels/
What is the relevant legislative framework?
The two principal pieces of legislation that govern cartel activity are the Competition Act 1998 and the Enterprise Act 2002, both as amended by the Enterprise and Regulatory Reform Act 2013. Under Regulation (EC) No.1/2003, UK competition authorities and courts are also entitled to apply Article 101 of the Treaty on the Functioning of the European Union (TFEU) (although see further below on Brexit).
Chapter I of the Competition Act, which is modelled on Article 101 TFEU, prohibits agreements, decisions or concerted practices between undertakings that may affect trade in the UK, and have as their object or effect the restriction, distortion or prevention of competition. There is an exemption under section 9 of the Competition Act (equivalent to Article 101(3) TFEU), which broadly applies where efficiencies flowing from the agreement outweigh the anticompetitive effects. However, it is highly unlikely that cartel conduct (such as price fixing) would ever qualify for such an exemption.
It is also a criminal offence under the Enterprise Act for an individual to agree or implement certain prohibited cartel activities (price fixing, market sharing, limitation of production or supply and bid rigging). This is subject to certain defences and exclusions (e.g. it is a defence if the individual did not intend for the arrangements to be concealed from customers or the CMA, or if the individual sought legal advice regarding the agreements prior to their implementation).
To establish an infringement, does there need to have been an effect on the market?
Cartel conduct can constitute an infringement irrespective of whether it had an anti-competitive effect on the market.
Individuals can be criminally prosecuted under the Enterprise Act for agreeing to implement prohibited cartel activities (whether or not they actually took place).
Does the law apply to conduct that occurs outside the jurisdiction?
The Chapter I prohibition applies if the agreement, decision or practice is or is intended to be implemented in the UK. Similarly, the criminal cartel offence will apply to an agreement outside the UK if it is, or is intended to be, implemented in whole or in part in the UK.
Which authorities can investigate cartels?
The Competition Act and the TFEU are enforced by the Competition and Markets Authority (CMA) and certain sectoral regulators (e.g. the Financial Conduct Authority, in relation to financial services). Unless otherwise stated, for ease of reference the rest of this chapter focuses on the CMA.
The CMA is the only competition regulator with the power to investigate criminal cartels, and shares its powers of investigation and prosecution with the Serious Fraud Office (SFO). The SFO is the intended prosecutor of the offence in England, Wales and Northern Ireland in cases that involve complex fraud. In Scotland, the CMA and the National Casework Division (NCD) of the Crown Office cooperate to investigate and prosecute criminal cartel cases.
What are the key steps in a cartel investigation?
The CMA will open an investigation if it has reasonable grounds for suspecting a breach of competition, e.g. following a complaint by a third party or an application for leniency.
The first formal milestone in an investigation is generally for a case initiation letter to be sent to the parties. This outlines the conduct being investigated, the relevant legislation, the expected timetable and key contacts. The CMA also typically publishes a notice of investigation on its website, briefly summarising the suspected infringement.
Parties under investigation are kept updated either by telephone or in writing, and able to meet members of the case team at periodic ‘state of play’ meetings.
At the conclusion of the investigation, the CMA may:
(i) close the investigation due to administrative priorities;
(ii) decide that there are no grounds for action;
(iii) accept commitments relating to future conduct; or
(iv) issue a statement of objections that the parties’ conduct infringes competition law. The parties will be entitled to make representations, following which the CMA may issue an infringement decision, impose fines and direct the anticompetitive conduct to end.
What are the key investigative powers that are available to the relevant authorities?
The key investigative powers in relation to Chapter I investigations are as follows.
(i) Information requests
The CMA may, where it has reasonable grounds to suspect that there has been cartel conduct, give written notice requiring any person (including third parties) to provide specified documents or information relevant to its investigation. Refusal to comply with a formal information request without reasonable excuse is punishable by a fine, and it is a criminal offence to provide false or misleading information or to destroy, conceal or falsify documents.
(ii) Dawn raids
The CMA may conduct unannounced inspections to search for relevant documents or information evidencing cartel conduct. Dawn raids are typically used at the outset of an investigation (and sometimes later on in the process) where the CMA suspects there is a risk that evidence might otherwise be destroyed.
During a raid, the CMA may require the production of documents, take copies of relevant documents and require on-the-spot explanations of any such document. If the raid is carried out pursuant to a court warrant, the CMA will also be able to use reasonable force to obtain entry, and will be entitled to take away originals of documents, hard drives, mobile phones and other electronic devices.
The CMA has the power to require individuals connected to a business which is a party to an investigation to answer questions (in the form of a compulsory interview). Any information obtained by virtue of the exercise of this power will not be able to be used against that person in a criminal prosecution, except in certain limited circumstances.
The key investigative powers in relation to criminal cartel investigations are broadly as above, albeit with some additions. For example, in a criminal cartel investigation the CMA may carry out intrusive (covert) surveillance in respect of residential premises and private vehicles. The CMA is also authorised to obtain access to communications data (such as records of telephone numbers called) in criminal investigations. If the SFO is involved, it may use its (broadly equivalent) powers of investigation under the Criminal Justice Act 1987.
On what grounds can legal privilege be invoked to withhold the production of certain documents in the context of a request by the relevant authorities?
The power to require the production of information under both Chapter I and the Enterprise Act is subject to legal privilege and also the privilege against self-incrimination.
In the UK, legal privilege broadly comprises two types of communications: (i) communications between a lawyer and client made for the purpose of seeking or giving legal advice; and (ii) communications between lawyers and clients, or communications between a lawyer or client and a third party, for the dominant purpose of being used in connection with actual or pending litigation. In the UK, external and in-house lawyers are treated equally for these purposes.
What are the conditions for a granting of full immunity? What evidence does the applicant need to provide? Is a formal admission required?
When there is no pre-existing investigation, the first undertaking to apply for leniency to the CMA (which acts as the single port of call for leniency applications, including in the regulated sectors) will gain so-called ‘Type A immunity’ – full immunity from civil fines and criminal immunity for all current and former employees and directors that cooperate with the CMA. Cooperating individuals should also avoid director disqualification.
If there is a pre-existing investigation, the first undertaking to apply for leniency may be eligible for ‘Type B immunity’. The CMA will retain discretion as to whether to provide civil immunity to the undertaking and criminal immunity to employees. Type B immunity will not be available when the CMA already has, or is in the course of gathering, sufficient information to bring a criminal prosecution. If the CMA decides not to grant Type B immunity, it may still provide ‘Type B leniency’ – a reduction from any financial penalty imposed under the Competition Act and also immunity from criminal liability on a blanket or individual basis, depending on what the CMA considers to be in the public interest. Cooperating individuals should avoid director disqualification under both Type B immunity and Type B leniency.
For an undertaking to be eligible for Type A immunity, Type B immunity or Type B leniency, it must satisfy the following key conditions:
(i) accept that it participated in cartel activity in breach of law;
(ii) provide the CMA with all information, documents and evidence available to it regarding the cartel activity;
(iii) maintain continuous and complete cooperation throughout the investigation and until the conclusion of any action by the CMA;
(iv) refrain from further participation in the cartel activity from the time of disclosure (except as may be directed by the CMA); and
(v) not have taken steps to coerce another undertaking to take part in the cartel activity.
What level of leniency, if any, is available to subsequent applicants and what are the eligibility conditions?
Subsequent undertakings that provide evidence of cartel activity before a statement of objections is issued may be eligible for ‘Type C leniency’, which usually results in a reduction of 25 to 50 per cent. of the financial penalty that would otherwise have been imposed. The CMA is entitled to exercise its discretion in awarding immunity from criminal prosecution for specific individuals. Cooperating individuals should also avoid director disqualification.
For an undertaking to be eligible for Type C leniency, it must satisfy the conditions set out at (i)-(iv) in response to question 3.1 above.
Are markers available and, if so, in what circumstances?
An undertaking’s legal advisers may make an initial approach to the CMA on a ‘no names’ basis to secure a preliminary marker, protecting the applicant’s place in the queue for leniency. The adviser must confirm to the CMA that the undertaking has a ‘genuine intention to confess’ and must ensure that there is a ‘concrete basis’ for suspecting cartel activity.
The CMA must be provided with sufficient details to determine whether there is a pre-existing investigation. If the CMA confirms that Type A immunity is available, the adviser must identify the undertaking and provide details of the suspected infringement and evidence to support this. A similar approach may be made to obtain a marker for Type B immunity, although in Type B cases it is possible to ask whether immunity is available without a requirement to make an immediate application if the CMA confirms that it is.
What is required of immunity/leniency applicants in terms of ongoing cooperation with the relevant authorities?
A senior representative of the applicant must sign a letter indicating a commitment to continuous and complete cooperation throughout the CMA’s investigation and enforcement. CMA guidance notes that the approach to leniency should be a genuine effort to assist the CMA in investigating and enforcing against cartel conduct. If the CMA becomes concerned with an applicant’s cooperation, the matter will be raised with the applicant by the case team.
Does the grant of immunity/leniency extend to immunity from criminal prosecution (if any) for current/former employees and directors?
Type A immunity results in full criminal immunity for each of the undertaking’s existing and former employees and directors. The CMA retains discretion as to how to apply criminal immunity under Type B immunity, Type B leniency and Type C leniency.
Is there an ‘amnesty plus’ programme?
Yes. If an undertaking is cooperating with an investigation in respect of one cartel, and comes forward with information resulting in full immunity in respect of separate cartel activity, it will receive a reduction in the fine imposed in respect of the first cartel (in addition to any reduction it would have received for its cooperation in relation to the first cartel alone).
Does the investigating authority have the ability to enter into a settlement agreement or plea bargain and, if so, what is the process for doing so?
The CMA will consider settlement as long as it believes that the evidential standard for giving notice of its proposed infringement decision is met. Settlement discussions can be initiated either before or after the statement of objections is issued.
The CMA retains broad discretion in considering which cases to settle. To date, the CMA’s formal settlement procedure has been used in eight cases, the first of which was in 2015.
What are the key pros and cons for a party that is considering entering into settlement?
Settling parties will be granted a discount of up to 20 per cent. (if pre-statement of objections) or up to 10 per cent (if post-statement of objections), in addition to any leniency discount.
However, the CMA will usually require a settling party to make an unequivocal admission of liability in relation to the nature, scope and duration of the infringement, which could clearly have a detrimental impact for the party’s position before other authorities and (potential) civil claimants.
What is the nature and extent of any cooperation with other investigating authorities, including from other jurisdictions?
The CMA cooperates with the European Commission and National Competition Authorities in other EU member states through the European Competition Network (ECN). The CMA also has a memorandum of understanding with Scottish authorities for cooperation in criminal cartel cases over which Scottish courts may have jurisdiction.
The CMA is also permitted to disclose confidential information to agencies in other jurisdictions in certain circumstances. The UK has mutual assistance arrangements relating to competition law with the United States, Canada, Australia and New Zealand.
Information supplied as part of an application for leniency will not be passed to an overseas agency without the consent of the provider, except that information may be disclosed within the ECN in accordance with the provisions of the ECN’s Notice.
What are the potential civil and criminal sanctions if cartel activity is established?
The CMA may impose a fine of up to 10 per cent. of the infringing undertaking’s worldwide turnover in its last business year. The CMA can also apply to the High Court for the disqualification of a director for up to 15 years.
An individual found guilty of a criminal cartel offence may receive a fine of up to £5,000 and be imprisoned for up to 6 months (if convicted in a magistrate’s court) or receive an unlimited fine and be imprisoned for up to five years (if convicted in the Crown Court).
What factors are taken into account when the fine is set? In practice, what is the maximum level of fines that has been imposed in the case of recent domestic and international cartels?
The level of the sanctions imposed are determined by the nature of the anticompetitive arrangements, the impact on consumers and whether parties have applied for leniency.
Under fining guidelines issued in April 2018, the CMA will attempt to assess how much of an undertaking’s turnover has been affected by the infringing conduct, and will factor in the duration of the conduct and consider the need for deterrence. There are several aggravating factors (e.g. delaying the CMA’s investigation) and mitigating factors (e.g. acting under duress or genuine uncertainty as to whether the agreement constituted an infringement) which can affect the level of fine imposed.
To date, the largest single fine that the CMA has imposed is £58.5 million on British Airways in connection with a price-fixing agreement with Virgin Atlantic in 2012. Most fines have been significantly lower (although fine levels may increase after the UK’s withdrawal from the EU, if the CMA tackles larger cases that would currently be the natural domain of the European Commission).
Are parent companies presumed to be jointly and severally liable with an infringing subsidiary?
The conduct of a subsidiary may be imputed to a parent company where the subsidiary carries out in all material respects the instructions given to it by the parent company. For wholly-owned subsidiaries, there is a rebuttable presumption that a parent company exercises decisive influence over the subsidiary.
Are private actions and/or class actions available for infringement of the cartel rules?
A private action for damages may be brought in the High Court or the Competition Appeals Tribunal (CAT). Actions may be brought in either forum where an infringement decision has already been issued (a ‘follow-on’ action) or where there the infringement is alleged (a ‘stand-alone’ action).
A consumer body is able to bring a representative action before the CAT on behalf of two or more consumers, and a person acting as class representative may bring collective proceedings on behalf of all potential claimants. This will require the CAT to issue a collective proceedings order, authorising the person to bring proceedings as class representative, providing a description of the class of persons whose claims may be included and specifying whether the proceedings will continue on an opt-in or opt-out basis.
What type of damages can be recovered by claimants and how are they quantified?
Damages are usually calculated with the intention of restoring the victim to the position they would have been in had the infringement not occurred.
On what grounds can a decision of the relevant authority be appealed?
Decisions made by the CMA and sectoral regulators under the Competition Act may be appealed to the CAT on points of law, points of fact or as to the amount of the fine. There is a further right of appeal from judgments of the CAT, on a point of law or as to the amount of the fine, to the Court of Appeal, with the possibility of a subsequent appeal to the Supreme Court on a point of law or public importance. Appeals may be made by a party to the agreement or by a third-party that can show sufficient interest.
What is the process for filing an appeal?
A notice of appeal summarising the issues in dispute and the relief sought must be filed with the CAT registrar within two months of a decision.
What are some recent notable cartel cases (limited to one or two key examples, with a very short summary of the facts, decision and sanctions/level of fine)?
In February 2019, the Chairman of the CMA, Lord Tyrie, set out in a letter to the Secretary of State for Business, Energy and Industrial Strategy the need to raise the compensation cap for cartel whistle-blowers. Lord Tyrie noted that the maximum compensation available should be commensurate with the financial impact, the loss of career prospects and the distress that whistle-blowers may encounter.
What are the key recent trends (e.g. in terms of fines, sectors under investigation, applications for leniency, approach to settlement, number of appeals, etc.)?
Lord Tyrie has also noted that, as criminal cartel prosecutions represent a small part of the CMA’s overall enforcement work, the CMA does not maintain the scale of expertise usually possessed by an agency with powers of prosecution. Therefore, the primary responsibility for cartel prosecution may sit more naturally with the SFO.
What are the key expected developments over the next 12 months (e.g. imminent statutory changes, procedural changes, upcoming decisions, etc.)?
Following the UK’s withdrawal from the EU, the CMA will only be able to investigate a breach of UK competition law. The European Commission will still be able to enforce EU competition law against UK businesses for infringements which have an effect in an EU member state. Therefore, businesses will potentially be subject to dual investigation by the CMA and the European Commission. Even in the event of a ‘no deal’, the CMA has noted that it expects close ongoing co-operation with the European Commission in respect of cartel investigations.