UK: latest moves on cartel enforcement action


In summary

This article provides an overview of cartel enforcement action in the United Kingdom during the period from March 2021 to March 2022, including judgments and civil enforcement by the UK Competition and Markets Authority. It also highlights major developments following the United Kingdom’s exit from the European Union and developments regarding broader reform proposals.


Discussion points

  • UK civil enforcement under section 2 of the Competition Act 1998 or article 101 of the Treaty on the Functioning of the European Union
  • Recent competition director disqualification undertakings and judicial proceedings
  • Antitrust reform proposals

Referenced in this article

  • Competition and Markets Authority
  • Competition Appeal Tribunal
  • Section 2 of the Competition Act 1998
  • Article 101 of the Treaty on the Functioning of the European Union
  • Chapter I of the Competition Act 1998
  • Multilateral Interchange Fees damages litigation

Introduction

The UK Competition and Markets Authority (CMA) is the primary enforcement authority in the United Kingdom for civil cartels under the Chapter I prohibition under section 2 of the Competition Act 1998 (CA98) and for criminal cartels under section 188 of the Enterprise Act 2002 (EA).

Criminal cartels include agreements relating to price-fixing, the sharing of markets or customers, limiting production or supply, or bid rigging. Breaches of Chapter I can give rise to fines of up to 10 per cent of global group turnover for a company, and disqualification from serving as a director for up to 15 years for an individual. Participation in a criminal cartel may also give rise to the imposition of a five-year prison sentence or unlimited fines (or both), for an individual, and disqualification from serving as a director for up to 15 years.

Until the end of the Brexit transition period on 31 December 2020, the CMA was also the primary enforcer in the United Kingdom with regard to article 101 of the Treaty on the Functioning of the European Union (TFEU).

On 24 March 2022, the CMA published its annual plan for 2022 to 2023. [1] In light of the UK’s exit from the EU, the CMA noted that ‘this is a period of considerable change for the CMA’ with the complexity of its work ‘continuing to increase’ along with the CMA expanding its work in digital markets. Accordingly, the CMA entered 2022 with 12 competition enforcement cases, which is an increase over previous years and will likely have a knock-on effect on the new cases the CMA is able to pursue. The CMA stated, ‘these [workload] challenges will continue to limit our flexibility in what we can deliver this year.’

As a result of the ongoing covid-19 pandemic, the CMA’s ability to conduct on-site inspections (dawn raids) and to open new investigations on the basis of such inspections was limited over the relevant period. However, the CMA stated in its annual plan that it is ‘in the process of restarting some activities such as inspections and site visits’.

In terms of policy areas, the CMA has said it will focus in particular on:

  • protecting consumers and driving recovery during and after the covid-19 pandemic;
  • strengthening its place as a global competition authority;
  • fostering effective competition in digital markets; and
  • supporting the transition to a low carbon economy.

Civil enforcement under article 101 and Chapter I

In the second half of 2021 and in early 2022, the CMA issued infringement decisions in the pharmaceutical industry, the market for the supply of electric vehicle chargepoints and in respect of domestic lighting products.

The period also saw cartel enforcement by the Payment Systems Regulator (PSR) and the Office of Rail and Road (ORR), which have concurrent competition law powers with the CMA.

In January 2022, the PSR issued an infringement decision imposing fines totalling more than £33 million following its investigation into two cartels in the prepaid cards market (cards used by local authorities to distribute welfare payments to vulnerable members of society). [2]

Also in January 2022, the ORR announced that it was consulting on proposals offered by the Rail Assessment Centre Forum that aim to open up the provision of train driver psychometric assessments to greater competition. [3]

Supreme court proceedings

Damages actions against Mastercard and Visa payment schemes

As previously reported, on 19 December 2007, the European Commission (the Commission) issued an infringement decision (the MIF decision) against Mastercard that its European Economic Area (EEA) multilateral interchange fees (MIFs), governing fee payments between banks relating to transactions made using payment cards, breached article 101 of the TFEU. [4] Its decision was upheld by the General Court (GC) on 24 May 2012 [5] and the Court of Justice of the European Union (CJEU) (with the GC and the European courts) on 11 September 2014. [6]

On 14 July 2016, the Competition Appeal Tribunal (CAT) found for Sainsbury’s, a UK retailer, in a stand-alone damages action against Mastercard, in relation to losses suffered by Sainsbury’s as a result of Mastercard’s UK MIF. [7] The CAT held that the Mastercard UK MIF was a restriction on competition by effect under Chapter I and article 101. Accordingly, Sainsbury’s was entitled to recover an amount equivalent to the overcharge paid by it during the claim period, and it was awarded £68.6 million plus interest in damages. Mastercard appealed the CAT’s judgment to the Court of Appeal.

On 30 January 2017, in a separate but similar stand-alone action, the High Court of England and Wales (the High Court) rejected a stand-alone action for damages brought by several other UK high street retailers (namely, Asda, Arcadia, Next, B&Q, Comet, New Look, Iceland, Argos, WM Morrisons and Debenhams), ruling that Mastercard’s UK, Irish and EEA MIFs were not restrictive of competition under Chapter I and article 101. [8] The High Court held that it was not bound by the CAT’s findings of law or fact in the separate Sainsbury’s proceedings. The retailers appealed the judgment to the Court of Appeal.

In other separate but related proceedings, Sainsbury’s and, separately, Asda, Argos and Morrisons (with a number of other UK retailers that have since settled) brought a stand-alone damages action under Chapter I and article 101 against Visa in respect of Visa’s UK MIFs. On 30 November 2017, the High Court held that Visa’s UK MIFs did not restrict competition for the purposes of Chapter I and article 101(1). [9] Both the retailers and Visa appealed aspects of the judgment to the Court of Appeal.

The appeals relating to all the MIF stand-alone judgments (namely, the CAT’s and the High Court’s Mastercard MIF judgments and the High Court’s Visa MIF judgment) were heard jointly by the Court of Appeal in April 2018. On 4 July 2018, the Court of Appeal determined that it was bound to follow the CJEU’s 2012 decision against Mastercard and held that Visa’s and Mastercard’s setting of their UK MIFs was a restriction of competition under article 101(1). The case was remitted by the Court of Appeal to the CAT for reconsideration of the possible application of article 101(3) and for the assessment of the quantum of the claim. [10]

Visa and Mastercard appealed the Court of Appeal’s judgment to the Supreme Court, while some of the retailers appealed certain aspects of the judgment. The Supreme Court heard the appeals in January 2020. As it had done with regard to the Court of Appeal proceedings, the Commission made written submissions and appeared before the Court to make oral submissions. The Supreme Court handed down its judgment on 17 June 2020. [11]

The Supreme Court rejected all the appeals by Visa and Mastercard and upheld the finding of the Court of Appeal that the default UK MIFs charged within the Visa and Mastercard payment card schemes constituted an unlawful restriction of competition under article 101(1) and Chapter I. Prior to the relevant proceedings, there had been no English or European ruling that Visa’s MIF was a restriction of competition.

The Supreme Court’s judgment had significant implications for the payment card schemes since, as a result, they have a competition infringement finding against them in relation to their MIFs from the highest court in the United Kingdom, and for the scores of claimants whose proceedings had been stayed pending the outcome of these lead cases.

The appeals turned on points of material importance in competition law damages claims and are of a much wider significance, including with regard to a collective damages action brought against Mastercard on behalf of UK consumers under the UK opt-out regime (see below with regard to the proceedings in Walter Hugh Merricks CBE v Mastercard Inc and Others).

The appeals to the Supreme Court tested:

  • the circumstances in which the English courts are bound by judgments of the European Courts;
  • whether the standard of proof is reserved for national law;
  • the type of evidence that is required to meet the standard of proof under English law with regard to article 101(3) of the TFEU;
  • the basis upon which an agreement that is restrictive of competition under article 101(1) of the TFEU can be exempted under article 101(3), provided it satisfies certain conditions;
  • how damages are to be assessed; and
  • the principle of finality in litigation.

In terms of the binding nature of judgments by the European Courts, the Supreme Court determined that whether a judgment of the European Courts is binding depends upon whether the findings upon which that decision is based are materially distinguishable from those made or accepted in the case before the English Courts. The Supreme Court said that in its judgment, the essential factual basis upon which the European Courts held that there was a restriction on competition with regard to the relevant Mastercard MIF was mirrored in the proceedings.

In relation to the question of whether an agreement, decision or concerted practice that is restrictive of competition is exempted from the prohibition imposed by article 101(1) of the TFEU, the Supreme Court rejected Visa’s argument on whether consumers received a fair share of the benefits resulting from the restriction of competition (in this case, the MIF). It determined that for this condition to be satisfied in the two-sided market, the disadvantages suffered by the merchants must be counterbalanced by the advantages benefiting them, the merchants. Accordingly, any resulting benefits to cardholders from the MIF are not relevant.

In relation to the assessment of damages, the matter at issue concerned the degree of precision that is required in the quantification of mitigation of loss where a defendant to a claim for damages arising out of a breach of competition law asserts that the claimant has mitigated its loss through the ‘passing on’ of all or part of an overcharge to its own customers. The Supreme Court determined that the law requires no greater precision in the quantification of pass-on from the defendant than from a claimant seeking to quantify damages. The appeals were remitted to the CAT for reconsideration of the evidence on the assessment of quantum of Sainsbury’s respective claims against Visa and Mastercard.

In July 2021, Sainsbury’s and Mastercard entered into a settlement agreement and the case was withdrawn by consent on 6 August 2021. In September 2021, Sainsbury’s and Visa entered into a settlement agreement and the case was withdrawn by consent on 11 November 2021.

In addition to the UK damages actions by retailers, in September 2016, a collective damages action was brought against Mastercard on behalf of UK consumers under the opt-out regime in section 47B of the CA98 in Walter Hugh Merricks CBE v Mastercard Inc and Others. [12] On 21 July 2017, the CAT held that the claim was not eligible for inclusion in collective proceedings. [13]

On 16 April 2019, the Court of Appeal upheld an appeal against the CAT’s judgment, finding that the CAT had erred in refusing to grant a collective proceedings order (CPO). [14] Accordingly, it remitted the CPO application back to the CAT for rehearing. On 24 July 2019, Mastercard was granted permission to appeal the judgment to the Supreme Court.

On 11 December 2020, the Supreme Court handed down its judgment, dismissing Mastercard’s appeal in a three-to-two ruling. [15] The action concerns the largest collective claim in the United Kingdom to date and has reopened the possibility of a claim by 46.2 million individuals for alleged losses incurred over 16 years across all retail sectors.

The judgment held that the complexity of the distribution of damages and the risk of over- (or under-) compensation did not necessarily constitute a bar to certification. A central purpose of the power to award aggregate damages in collective proceedings is to avoid the need for individual assessment of loss. In particular, there will be cases where the mechanics of approximating individual loss are so difficult and disproportionate that some other method may be more reasonable, fair and just. In addition, the diversity of consumers, retail business and the extent of passing-on of overcharges to consumers were also not necessarily a bar to certification.

In this regard, the correct test is whether the class was more suitable for collective proceedings than individual actions. In particular, if difficulties identified with the claims forming the basis of the collective proceedings were themselves insufficient to deny a trial to an individual claimant who could show an arguable case to have suffered some loss, then those same difficulties should not be sufficient to lead to a denial of certification for collective proceedings. The case will now return to the CAT, which will apply the prescribed test as determined by the Supreme Court.

Although the majority judgment has provided clarification on the correct approach for the CAT to take when considering whether claims are suitable for collective proceedings, the dissenting judges cautioned that this approach has the potential to ‘very significantly diminish the role and utility of the certification safeguard’. However, the test for certification remains important and the certification stage will continue to constitute a bar to certain claims.

This was illustrated when the claim returned to the CAT for reconsideration. While the CAT, in a judgment of 18 August 2021 (applying the principles and guidance set down by the Supreme Court judgment), made a CPO, [16] it rejected an application to include a claim for compound interest. The CAT ruled that, in the absence of a credible or plausible method of estimating what loss by way of compound interest was suffered on an aggregate basis, the new proposed claim for compound interest ‘was not suitable for an aggregate award’. It follows from the CAT’s judgment that even a relative test for suitability will not always be satisfied, and that a relatively high merits threshold may continue to be applied at certification hearings. Nevertheless, the landmark judgment in Merricks has paved the way for a number of other opt-out CPO certifications in relation to abuse of dominance claims pertaining to landline telephone services[17] and boundary fares. [18] In relation to cartel claims, in April 2022, the CAT refused to certify an opt-out CPO relating to the conduct of foreign exchange traders at certain banks, referring in particular to concerns about the strength of the proposed claims. [19] Those claims arose further to Commission infringement decisions that various major banking groups had infringed article 101 by participating in a single and continuous infringement covering the whole EEA in foreign exchange spot-trading.

High court and CAT proceedings

New and novel CAT case management procedure in pharmaceutical proceedings

On 31 January 2022, the CAT handed down a ruling on the conduct of the appeals brought by pharmaceutical companies, including Advanz Pharma, Auden McKenzie and Allergan, and PE houses Cinven and Hg Capital, challenging the CMA’s infringement decisions in respect of Hydrocortisone tablets (relative to allegations of pay-for-delay and excessive pricing) and Liothyronine tablets (relative to allegations for excessive pricing). [20] In light of the length and complexity of these decisions, notices of appeal, and defences, the CAT held that the traditional way of dealing with regulatory appeals would not work well. It therefore introduced a novel trial procedure for the progress and case management of the appeals, requiring the appellants and the CMA to cooperate in the production of ‘ambulatory drafts’ in respect of each decision.

The production of ambulatory drafts is a new and novel procedural requirement by the CAT, the purpose of which is to set out those matters that are uncontroversial between the parties, as well as to identify and demarcate areas of controversy and dispute between the parties. This enables the final hearing of complex appeals to focus on the matters in dispute and to give the CAT a clear appreciation of the matters that the parties view to be common ground. This is an important change in the CAT procedure and, if adopted more widely going forward, is likely to give rise to a material increase in the cost of bringing an appeal against decisions of the CMA.

Musical instruments appeal by leniency applicant

On 19 April 2021, the CAT unanimously upheld the CMA’s decision in relation to the musical instrument firm Roland, which was fined £4 million in June 2020 for restricting online discounting of its electronic drum kits under Chapter I and article 101. Although the fine imposed by the CMA had been reduced under its leniency programme, Roland appealed against the level of the fine that it had already agreed to pay as part of the settlement. The CAT dismissed Roland’s arguments that resale price maintenance (RPM) was not sufficiently serious to justify such a high fine. The CMA also made an application to revoke the settlement discount following Roland’s appeal. The CAT held that there would be no unfairness in holding that Roland, in choosing to appeal the fine, would lose the benefit of the settlement discount. As a result, the CAT held that Roland would lose the benefit of the 20 per cent discount and its fine was increased to £5 million – an increase of more than £1 million. [21]

Following this case, the CMA adopted new procedural guidance prohibiting parties that enter into settlement with the CMA in exchange for a reduced fine from challenging or appealing the CMA’s decision (see below).

Damages actions against Barclays, UBS, HSBC, etc

On 25 February 2021, the High Court dismissed a strike-out application brought by claimant groups who are pursuing follow-on damages claims against a number of banks, including Barclays, Citigroup, Mitsubishi UFJ Financial Group, HSBC and UBS. [22] The claims arise in part as follow-on claims from two European Commission decisions, finding that banks had infringed article 101 in cartels relating to foreign exchange spot trading. [23] The claimant groups claimed damages for loss suffered as a result of the banks’ alleged manipulation of FX rates, which the investment and pension funds allege forced them to pay inflated prices to buy and artificially low prices to sell. The defendants argued that the investment funds mitigated part of their losses by passing them on to others (ie, the investors in the funds), which the claimant groups subsequently applied to strike out.

The Court ruled that that the pass-on defence could not be shown to be impossible or bound in law to fail because the majority of the claimants are trusts, and under English law a trust beneficiary can claim its own damages when it has suffered a loss because of a breach of competition rules, and accordingly refused the claimants’ application to strike out the defendants’ pleadings. On 15 December 2021, by order of the High Court, the damages claim was transferred to the CAT. [24]

‘Pay for delay’ in Paroxetine case

On 30 January 2020, the CJEU handed down a preliminary ruling on a number of questions referred to it by the CAT in relation to five appeals brought by six pharmaceutical companies challenging the CMA’s infringement decision fining the companies for agreeing to delay generic entry into the market for the drug paroxetine. [25]

In February 2016, the CMA imposed fines totalling £44.99 million on GlaxoSmithKline (GSK), Alphapharm Ltd and Generics (UK) Ltd under Chapter I of the CA98 and article 101 of the TFEU with regard to pay-for-delay arrangements in relation to generic paroxetine. [26] It found that, between 2001 and 2004, GSK (the originator supplier of branded paroxetine) had agreed to make payments and other value transfers totalling more than £50 million to two generic manufacturers (Alphapharm and Generics (UK)), which were aimed at delaying the generic firms’ potential UK entry with generic versions of paroxetine.

GSK, Generics (UK), Xellia and Alpharma, Actavis UK and Merck appealed to the CAT. As there were significant overlaps between the five appeals of the CMA’s infringement decision, the CAT heard them together and, on 8 March 2018, referred a number of the questions relating to pay-for-delay in the context of patent disputes and patent litigation to the CJEU for a preliminary ruling, while ruling on some of the other points in favour of the CMA. [27]

In this regard, the CAT dismissed GSK, Generics (UK), Actavis and Xellia/Alpharma’s argument that the CMA’s infringement decision erred in finding that the agreements did not benefit from the exemption under the Competition Act 1998 (Land and Vertical Agreements Exclusion) Order 2000. In addition, the Tribunal dismissed GSK’s argument that the infringement decision erred in finding that the agreements did not benefit from an exemption under Commission Regulation (EC) No. 2790/1999 (the Vertical Block Exemption Regulation) or from individual exemption.

On 30 January 2020, the CJEU ruled, among other points, that a patent settlement agreement between a manufacturer of originator medicines and a manufacturer of generic medicines (who are potential competitors, whereby the generic manufacturer commits not to enter the market or not to challenge the patent in return for a transfer of value) has the object of restricting competition if it is clear that the transfer of value can have no explanation other than the commercial interest of the parties to the agreement being not to engage in competition on the merits, unless the relevant settlement agreement is accompanied by pro-competitive effects.

This ruling influenced the outcome of similar cases. For example, the CJEU applied principles established in this case in its Lundbeck decisions of 25 March 2021, [28] confirming that not only should a restriction by object of article 101 be interpreted narrowly, but also that patent settlement agreements cannot automatically be deemed a restriction by object, even if they include a value transfer from the originator to the generic manufacturer. Notwithstanding this, where value transfers cannot have any justification other than as a reflection of the commercial interests of the parties not to compete, the agreement can be considered to restrict competition by object.

Subsequently, on 10 May 2021, the CAT upheld the CMA’s decision and unanimously dismissed all the pharmaceutical companies’ remaining grounds of appeal in respect of the infringements. [29] However, it reduced the fines imposed by the CMA by £27.1 million owing to various factors, including uncertainty of the law at the time and the novelty of the case.

Following the CJEU’s judgment, the CAT rejected the argument that Alphapharm and Generics UK were not potential competitors to GSK since both conditions were satisfied, namely that the generic company must have a firm intention and inherent ability to enter the market; and entry must not face insurmountable barriers.

Furthermore, the CAT stated that the approach for assessing whether a settlement agreement was a by object restriction was ‘not a term of art’, and found, in principle, that each agreement was a restriction by object. As a result of this decision, the Department of Health and Social Care will now be able to seek follow-on damages in the Courts.

Civil investigations

Investigations in the pharmaceutical industry

In 2021 and 2022, the CMA progressed a number of ongoing investigations in the pharmaceuticals sector, proceeding to decisions in its investigations concerning prochlorperazine and hydrocortisone, and closing its investigation of nitrofurantoin. In setting out its annual plan for 2022 to 2023, the CMA emphasised its continuing focus on the sector, noting that ‘we will continue to progress our ongoing investigations into anticompetitive conduct in the pharmaceutical sector, with a view to ensuring that the NHS, and ultimately the taxpayer, does not pay more than they should for essential medicines and treatments.’ [30]

Prochlorperazine tablets

On 3 February 2022, the CMA issued an infringement decision fining a number of pharmaceutical companies and Cinven over £35 million for an illegal arrangement in the supply of prochlorperazine POM, a prescription anti-nausea drug. According to the CMA, Alliance Pharmaceuticals, Lexon, Medreich and Focus (now owned by Advanz Pharma) had entered into a market exclusion arrangement that had as its object the restriction of competition in breach of Chapter I. The CMA determined that Alliance and Lexon were party to an agreement whereby:

  • Lexon would not compete with Alliance in the supply of prochlorperazine POM manufactured for Lexon by Medreich in return for compensation from Alliance; and
  • Alliance and Lexon would give effect to the agreement by each of them entering into a distribution agreement with Focus for their respective prochlorperazine POM product, save that Lexon would not supply any of its prochlorperazine POM product to Focus and, for the compensation to be transferred from Alliance to Lexon, Lexon would include in its distribution agreement with Focus an obligation on Focus to share with Lexon the profit made by Focus on the sale of prochlorperazine POM by any supplier. [31]

A number of the companies fined have since filed appeals in the CAT against the CMA’s decision.

In January 2021, the CMA had closed part of its prochlorperazine investigation, namely, whether the separate distribution agreements between Alliance Pharmaceuticals and Focus; and Focus, Lexon and Medreich in relation to the supply of prochlorperazine POM in the United Kingdom in themselves individually infringed Chapter I, on administrative priorities. [32]

Nitrofurantoin capsules

On 8 October 2021, the CMA also closed its investigation into a suspected anticompetitive arrangement between AMCo, Morningside and Alliance Healthcare relating to the supply of nitrofurantoin capsules on administrative priority grounds. [33] The CMA had opened its investigation in 2017, and in July 2019 it issued an SO alleging that the three pharmaceutical companies had participated in anticompetitive agreements or concerted practices in relation to the supply of nitrofurantoin capsules, an antibiotic commonly used to treat urinary tract infections. [34] At the time of writing, this is the only case the CMA closed in the period covered following the issuance of an SO.

Hydrocortisone tablets

On 15 July 2021, the CMA imposed fines of over £260 million [35] on pharmaceutical companies Auden Mckenzie, Waymade and AMCo (now owned by Advanz Pharma), and their private equity or corporate owners for parts of the relevant period, in relation to the supply of hydrocortisone tablets (HT). [36] The CMA found that Auden Mckenzie (now Accord-UK) had abused its dominant position by charging excessive and unfair prices for HT further to the Chapter II CA98 prohibition. The CMA also found that Auden had entered into a pay-for-delay agreement with each of Advanz Pharma and Waymade in breach of Chapter I CA98, further to which Auden had paid its alleged potential competitors not to enter the market independently with the supply of their own HT product. As a result of the operation of the Orphan Drug regulations, Auden’s marketing authorisation (MA) was for ‘full indication’ 10mg HT, namely for the treatment of adrenal insufficiency in both adults and children, while all subsequent applicants for an MA were permitted a ‘reduced indication’ MA for the treatment of adrenal insufficiency in children only. The CMA decision was appealed to the CAT by all the addressees with the exception of Waymade.

Electric vehicle chargepoints

On 8 March 2022, the CMA published its decision to accept commitments in its investigation, under Chapters I and II CA98, in the market for the supply of electric vehicle chargepoints on or near motorways. [37] Under the commitments, Gridserve, a major chargepoint operator, agreed not to enforce exclusive rights in contracts with a number of motorway service area operators after November 2026, and not to enforce exclusive rights at any motorway service sites that are granted funding under the UK government’s Rapid Charging Fund. As a result of this, competitor chargepoint operators will be allowed to install chargepoints at the relevant sites regardless of any exclusive rights.

Domestic lighting products

On 23 March 2022, the CMA announced that it had fined Dar Lighting Ltd, a supplier of domestic lighting products, £1.5 million for infringing competition law by engaging in RPM. [38] Between 2017 and 2019, the company required retailers to sell at or above a minimum price, which prevented them from offering discounts beyond a certain level. The CMA applied a 35 per cent increase as part of the fine calculation, as the CMA had issued two separate letters prior to initiating its investigation, in which it had warned Dar of its suspicions that the company was restricting retailers’ ability to discount products – and that this would amount to RPM. Further to those letters, however, Dar did not take adequate steps to comply with the CMA’s warnings. The amount of the fine was discounted by 20 per cent under the CMA’s settlement procedure.

Other civil enforcement action

In the second half of 2020, the CMA launched investigations into suspected anticompetitive arrangements concerning Leicester City FC-branded products and merchandise, [39] header bidding services, [40] ferry operators, [41] immigration removal centres [42] and the recycling of end-of-life vehicles. [43] Those are in addition to the CMA’s existing investigations into the Atlantic Joint Business Agreement, [44] replica football shirts, [45] the supply of construction services [46] and the financial services sector. [47]

Competition director disqualification orders

In 2002, the EA gave the UK competition authorities the power to seek CDOs pursuant to which directors of companies found to have participated in a criminal cartel [48] (cartel offence) may be disqualified from being a director for up to 15 years. Under the EA, participation in a cartel offence may also give rise to the imposition of a five-year prison sentence, unlimited fines, or both.

However, this power was essentially unused until a change in the law, which provided that, for conduct after 1 April 2014, it was no longer necessary for the CMA to prove that an individual had acted ‘dishonestly’ in committing the cartel offence to secure a CDO.

The CMA has demonstrated its determination to pursue CDOs by going after directors who participated in a cartel offence found by the CMA in its infringement decisions. For example, on 11 January 2022, it secured a disqualification undertaking from a company director, [49] following a finding by the CAT that the director’s actions caused his company, Lexon, to participate in the illegal exchange of sensitive commercial information pertaining to the antidepressant nortriptyline. [50]

On 22 July 2021, the High Court granted two directors who had been subject to competition disqualification undertakings permission to continue to act as director in the particular circumstances of the case. Both had been directors of Associated Lead Mills Ltd when the undertaking was found by the CMA to have engaged in a cartel in the roofing materials sector. [51] The High Court order specifies, however, that this is subject to a number of strict conditions, including that they may not take on the directorship of any other company and that certain companies may not carry out any trading activities. [52]

Reform proposals

Proposed reforms to competition policy

In February 2021, an independent report by John Penrose MP (the Penrose Report) submitted that the UK’s competition and consumer regulators ‘are lagging behind their equivalents in other countries’, noting that the CMA ‘opens fewer enforcement cases than its opposite numbers in France and Germany [and] issues lower aggregate fines for breaches of competition laws’. [53]

Further to reform proposals set out in the Penrose Report, in July 2021, the Department for Business, Energy and Industrial Strategy (BEIS) published a consultation on proposed reforms to competition policy, inviting views on a range of possible reform measures. [54] Following that consultation, BEIS announced that the UK government had decided to take forward a number of reforms. In respect of competition enforcement in particular, the proposed reforms envisage amending the Chapter I prohibition so that it can apply to conduct implemented outside the UK, depending on the effects of the conduct within the UK. Further, the government has also stated its intention to broaden the power to interview individuals, extend the duty to preserve evidence and allow the CMA to ‘seize-and-sift’ evidence when inspecting a domestic premises under a warrant. The proposed reforms also provide for stronger investigative and enforcement powers across competition tools.

The BEIS says, however, that many of the proposed reforms ‘require legislation to implement’ and that the government ‘will identify the appropriate legislative vehicle or vehicles as Parliamentary time and priorities allow’.

Digital markets

In July 2020, the CMA published a detailed market study into online platforms and digital advertising, concluding that existing competition law tools were not sufficient to regulate the major online platforms. The CMA report concluded that the concerns identified in those markets are so wide ranging and self-reinforcing that the CMA’s existing powers are not sufficient to address them.

The CMA accordingly recommended:

  • the establishment of a Digital Markets Unit (DMU), which will designate digital platforms that have ‘strategic market status’ (SMS);
  • the establishment of an enforceable code of conduct to govern the behaviour of platforms designated as having SMS; and
  • the grant of powers to the DMU that will enable it to make a range of pro-competitive interventions, including the ability to break up platforms.

The DMU was officially established on 7 April 2021 on a temporary and non-statutory basis to focus on operationalising and preparing for the new regime. This involves building teams with the relevant capabilities, working closely with government to provide key insights to inform decisions about the new regime, and evidence gathering on digital markets. The non-statutory DMU is an interim solution pending government consultations that took place in 2021.

Further to those consultations, in May 2022, the government confirmed its plans to give enforcement powers to the DMU and reiterated that it ‘will bring forward legislation to implement these reforms when parliamentary time allows’. [55] The Queen’s Speech of 2022, which sets out the programme of legislation that the government intends to pursue in the forthcoming parliamentary session, announced the government’s plans to publish a draft Digital Markets, Competition and Consumer Bill, [56] though – as noted by the CMA – this means that a Bill will not be introduced in the next Parliamentary session (2022 to 2023). [57]

While the CMA works with the government on these new proposals (which are intended to complement its current enforcement powers), the CMA will continue to use its existing competition powers to conduct investigations in the digital sector. As noted by the CMA’s Executive Director of Enforcement, Michael Grenfell:

until the proposed new regime comes into force there are concerns about digital markets which need to be addressed now. In these fast-moving markets, we cannot wait for legislation to be introduced to address concerns in the sector. [58]

Update to CMA Procedural Guidance

On 10 December 2021, the CMA published an updated version of its guidance on investigation procedures in CA98 cases (the Procedural Guidance). Under the revised Procedural Guidance, a business subject to an investigation under CA98 that agrees to enter into settlement with the CMA in exchange for a reduced fine must confirm that the infringement decision will remain final and binding as against it, even if another decision addressee successfully appeals it, and that it will not challenge or appeal against the decision to the CAT. [59]


Notes

[1] Annual Plan 2022/2023, published 24 March 2020.

[2] Anti-competitive conduct in the prepaid card services sector, PSR decision 18 January 2022.

[3] ‘Investigation under section 25 of the Competition Act 1998 in respect of the rules for membership of the RACF’, Notice of intention to accept commitments of 27 January 2022.

[4] COMP/ 34579, Mastercard I, Commission decision of 19 December 2007.

[5] Case T-111/08, Mastercard and Others v Commission, judgment of 24 May 2012.

[6] Case C-382/12, Mastercard and Others v Commission, judgment of 11 September 2014.

[7] Sainsbury’s Supermarkets Ltd v Mastercard Inc and Others [2016] CAT 11, judgment of 14 July 2016.

[8] Asda Stores Ltd and Others v Mastercard Inc and Others [2017] EWHC 93 (Comm), judgment of 30 January 2017.

[9] Sainsbury’s Supermarkets Limited v Visa Europe Services LLC and others [2017] EWHC 3047, judgment of 30 November 2017.

[10] Sainsbury’s Supermarkets Limited v Mastercard Incorporated and Others [2018] EWCA 1536 (Civ), judgment of 4 July 2018.

[11] Sainsbury’s Supermarkets Ltd (Respondent) v Visa Europe Services LLC and Others (Appellants) and Sainsbury’s Supermarkets Ltd and Others (Respondents) v Mastercard Incorporated and Others (Appellants) [2020] UKSC 24, judgment of 17 June 2020.

[12] Section 47B of the Competition Act 1998 allows representative litigants to apply to the Competition Appeal Tribunal (CAT) to bring proceedings for damages on an opt-out basis on behalf of a class of claimants.

[13] Walter Hugh Merricks CBE v Mastercard Inc and Others [2017] CAT 16, judgment of 21 July 2017.

[14] Walter Hugh Merricks CBE v Mastercard Incorporated and Others [2019] EWCA Civ 674, judgment of 16 April 2019.

[15] Mastercard Incorporated and others (Appellants) v Walter Hugh Merricks CBE (Respondent) [2020] UKSC 51, judgment of 11 December 2020.

[16] Walter Hugh Merricks CBE v Mastercard Incorporated and Others [2021] CAT 28, judgment of 18 August 2021.

[17] Justin Le Patourel v BT Group PLC [2021] CAT 30, judgment of 27 September 2021.

[18] Justin Gutmann v First MTR South Western Trains Limited and Others [2021] CAT 31, judgment of 19 October 2021.

[19] Mr Phillip Evans and Michael O’Higgins FX Class Representative Limited v Barclays Bank Plc and Others [2022] CAT 16, judgment of 31 March 2022.

[20] Allergan PLC and ors v Competition and Markets Authority [2022] CAT 2, ruling of 31 January 2022.

[21] Roland (UK) Ltd. v Competition and Markets Authority [2021] CAT 8, judgment of 19 April 2021.

[22] Allianz Global Investors GmbH and ors v Barclays Bank plc and ors [2021] EWHC 399 (Comm).

[23] ‘Commission fines Barclays, RBS, Citigroup, JPMorgan and MUFG €1.07 billion for participating in foreign exchange spot trading cartel’, Case AT.40135. European Commission press release IP/19/2568 of 16 May 2019.

[24] Allianz Global Investors GmbH and ors v Barclays Bank plc and ors, Consent Order dated 15 December 2021.

[25] Generics (UK) Ltd and others v Competition and Markets Authority, Case C-307/18, judgment of 30 January 2020.

[26] Paroxetine, Case CE/9531/11, CMA decision of 12 February 2016.

[27] GlaxoSmithKline PLC v Competition and Markets Authority [2018] CAT 4, judgment of 8 March 2018.

[28] Sun Pharmaceutical Industries and Ranbaxy (UK) v Commission (Cases C-586/16 P), P Generics (UK) v Commission (C-591/16), P Lundbeck v Commission (C-588/16), Arrow Group and Arrow Generics v Commission (C-601/16 P), P Xellia Pharmaceuticals and Alpharma v Commission (C-611/16) and P Merck v Commission (C-614/16), judgment of 25 March 2021.

[29] GlaxoSmithKline PLC v Competition and Markets Authority [2021] CAT 9, judgment of 10 May 2021.

[30] See footnote 1.

[31] ‘Pharmaceuticals: suspected anti-competitive agreements’, Case 50511-2, CMA decision of 3 February 2022.

[32] ‘Pharmaceuticals: suspected anti-competitive agreements’, Case 50511-2, investigation opened on 10 October 2017.

[33] ‘Statement regarding the CMA’s decision to close an investigation into suspected breaches of competition law in relation to the supply of nitrofurantoin capsules on the grounds of administrative priority’, statement of 8 October 2021.

[34] ‘Pharmaceutical drugs: suspected anti-competitive agreements’, Case 50511-1, investigation opened on 10 October 2017.

[35] A portion of the fine relates to the CMA’s finding of abusive conduct by Auden Mckenzie and its successors.

[36] ‘Hydrocortisone tablets: alleged excessive and unfair pricing, anti-competitive agreements and abusive conduct’, Case 50277, CMA decision of 15 July 2021.

[37] ‘Investigation into the supply of electric vehicle chargepoints on or near motorways’, CMA decision of 8 March 2022.

[38] ‘Domestic Lighting: anti-competitive practices concerning resale price maintenance’, CMA decision of 23 March 2022.

[39] ‘Suspected anti-competitive behaviour in relation to the sale of Leicester City FC-branded products and merchandise’, investigation opened on 23 September 2021.

[40] ‘Investigation into suspected anti-competitive agreement between Google and Meta and behaviour by Google in relation to header bidding’, investigation opened on 10 March 2022.

[41] ‘Investigation into a capacity sharing agreement between P&O Ferries and DFDS’, investigation opened on 11 November 2021.

[42] ‘Suspected anti-competitive conduct in connection with the procurements for contracts to supply services at Heathrow and Derwentside Immigration Removal Centres’, investigation opened on 1 March 2022.

[43] ‘Suspected anti-competitive conduct in relation to the recycling of end-of-life vehicles’, investigation opened on 15 March 2022.

[44] ‘Investigation of the Atlantic Joint Business Agreement’, investigation opened on 11 October 2018.

[45] ‘Replica football kits: suspected anti-competitive behaviour’, Case 50930, investigation opened on 15 December 2020.

[46] ‘Supply of construction services’, investigation opened on 19 March 2019.

[47] ‘Financial services sector: suspected anticompetitive arrangements’, investigation opened on 13 November 2018.

[48] Criminal cartels are the most serious and damaging forms of anticompetitive agreements, known as ‘hard core cartels’. They include agreements relating to price-fixing, the sharing of markets or customers, limiting production or supply, or bid rigging.

[49] CMA press release, ‘CMA disqualifies pharma director’ (11 January 2022).

[50] Lexon (UK) Limited v Competition and Markets Authority [2021] CAT 5, judgment of 25 February 2021.

[51]Roofing materials’, Case 50477, CMA decision of 4 November 2020.

[52] CMA, ‘Roofing materials: director disqualification’.

[53] ‘Power To The People’, Independent Report by John Penrose MP of February 2021.

[54] ‘Reforming Competition and Consumer Policy Government Response to Consultation’, dated April 2022.

[55] A new pro-competition regime for digital markets, government response to consultation of 6 May 2022.

[56] Queen’s Speech 2022, published 10 May 2022.

[57] Digital markets and the new pro-competition regime, CMA blog post of 10 May 2022.

[58] ‘Michael Grenfell: The CMA in turbulent times – where we are and where we’re going’, speech of 11 May 2022.

[59] The CMA’s investigation procedures in Competition Act 1998 cases: CMA8, update of 10 December 2021.

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