Regulatory Outlook | Competition | July 2017

Current issues

Brexit

The implications for the competition law regime and its enforcement in the UK, including the role the Competition and Markets Authority (CMA) plays, will depend on the outcome of the ongoing negotiations. There are numerous aspects of the EU competition law regime, such as state aid and the safe harbour for vertical agreements, which businesses may be urging the UK Government to retain in force or mirror in the UK post-Brexit.

Geo-blocking

The European institutions continue to debate a ban on geo-blocking – preventing use of a website or the sale of goods to customers based on their geographical location. MEPs voted on a geo-blocking report in April 2017, with the outcome yet to be announced. It is reported that the Commission wanted the Council and Parliament to agree by the end of June. Now that the rules on portability of online content have been agreed, attention is likely to shift to the geo-blocking rules.

Digital comparison tools market study

In March 2017, the CMA announced the second phase in its market study into digital comparison tools (DCTs), such as price comparison websites. Although finding that DCTs enable consumers to compare products/services, make informed choices and save money, concerns were raised around transparency of information, how effectively the DCTs compete, and how DCTs are regulated.

Collective redress

In 2013, alongside its then-draft Damages Directive, the European Commission adopted its recommendation for EU Member States on common principles for injunctive and compensatory collective redress for infringements of EU law. The Commission recommended that Member States implement the principles into their national collective redress systems. The Commission will assess the implementation by
26 July 2017 and consider whether further strengthening measures are required.

21st Century Fox/Sky plc

Following merger control clearance by the European Commission, the UK’s Secretary of State for Culture, Media and Sport issued a European Intervention Notice in March 2017, citing grounds of media plurality and commitment to broadcasting standards. Ofcom and the CMA delivered reports on public interests and jurisdictional issues respectively on 20 June 2017.

Energy price cap

In its manifesto, the Conservatives stated that they will review the cost of energy with the ambition that the UK have the cheapest energy costs in Europe. The manifesto stated that they would introduce a safeguard tariff cap to extend the price cap to customers on poor-value tariffs. In light of the Election results, it remains to be seen whether this is something that the Conservatives will look to impose. In any event, there could be scope for energy companies to challenge a regulated price cap if its effect would be to dampen competition or if it is intended to apply only to certain companies’ tariffs.

In focus: Personal liability

While liability for infringement of competition law typically rests with the corporate business, in the UK individuals can also be held liable.
Criminal cartel offence

The Enterprise Act allows for criminal prosecution against individuals who have made or implemented, or cause to be made or implemented, arrangements whereby two undertakings engage in prohibited cartel activity. That activity could take the form of price fixing, limitation of production or supply, customer or market sharing, and/or bid rigging.

This criminal cartel offence captures individuals, regardless of their level of seniority within a business, who have played a key part in cartel activity.

Individuals who are found guilty of the criminal cartel offence are liable, on conviction, to imprisonment for a maximum term of five years and/or an unlimited fine.

Previously, for an individual to be guilty of this offence, they needed to be proven to have acted ‘dishonestly’. This made it difficult for the competition authorities to bring prosecutions successfully. Since April 2014, however, there is no longer a requirement for the individuals involved to have acted ‘dishonestly’. We would, therefore, expect to see more prosecutions under this offence in the future, and the CMA’s intelligence and investigation teams are believed to be currently looking into a number of suspected cartels.

Competition disqualification orders

The CMA can apply to the court for a competition disqualification order, under the Company Directors Disqualification Act, in respect of an individual director where:

• the company, of which the individual is a director, commits an infringement of competition law, whether unlawful anti-competitive agreements or an abuse of dominance; and
• the individual’s conduct as a director makes them unfit to be concerned in the management of a company.

Where an order is made, the individual will be disqualified from acting as director for up to 15 years.

The CMA secured its first competition disqualification order in December 2016, disqualifying the managing director of Trod Limited for a period of five years. The CMA had found that Trod had agreed with a competitor not to undercut each other’s prices for posters and frames sold on Amazon UK.

Enforcement against individuals set to increase

Competition law enforcement, including individual prosecution, remains at the forefront of the CMA’s mind. The CMA’s latest annual plan for 2017/18 confirms that it is looking to ramp up enforcement in this area and increase the number of investigations each year.

The focus on enforcement highlights the need for individuals to understand what conduct is or is not permissible. Individuals should pay close attention to their organisation’s competition compliance policy to understand what may constitute an infringement of competition law. As the defence to the criminal cartel offence illustrates, obtaining legal advice when you are unclear about specific conduct can not only be a way of ensuring that you are not infringing competition law but may also act as a defence in future.

Dates for the diary

Summer 2017 – European Commission decision expected in relation to the legality of absolute territorial restrictions in agreements between TV broadcasters and firm studios.

Summer 2017 – European Commission decision expected in relation to allegations that Google is abusing its dominant position in the CCA markets for internet search services.

13 August 2017 – CMA Phase 2 decision due on merger of two NHS Foundation Trusts in Manchester, which could have a significant impact on future consolidation in the UK healthcare sector.

28 September 2017 – CMA’s final report on digital comparison tools market study expected.

Autumn 2017 – EU General Court may deliver judgment on Commission’s decision to prohibit the proposed acquisition of Telefónica UK by Hutchison 3G UK.