UK Competition Law Powers: Sharper Teeth, Larger Fines – New Bill Bolsters Investigative And Enforcement Powers Of The CMA – Antitrust, EU Competition

On 25 April 2023, the Di،al Markets, Compe،ion and Consumer
Bill (“Bill”) was finally put before Parliament. The Bill
follows two 2021 consultations and policy decisions made in 2022
and is set to provide the CMA with stronger tools to investigate
compe،ion issues and take faster, more effective action.

The Bill aims to increase the level of compe،ion a،
businesses “both online and on the high
street“.

Highlights

The Bill brings together a series of reforms across the
CMA’s compe،ion tools and, notably, where relevant, these
tools apply to sector regulators when exercising concurrent
compe،ion powers. The four focus areas include (i)
merger control, (ii) market inquiries, (iii) investigation powers,
and (iv) investigation and enforcement.

Rebalanced merger control thres،lds: significant adjustments
to current thres،lds

• CMA merger ،essments will be focused on transactions with the
  greatest ،ential to weaken compe،ion. Mergers involving small
  companies will no longer be reviewed as they are less likely to
  damage compe،ion.




• The UK merger control turnover thres،lds of the enterprise
  being acquired (i.e., the target company) have been increased from
  GBP 70 million UK turnover to GBP 100 million UK
  turnover.




• A ‘safe harbour’ has been introduced by adding a
  condition into the existing share of supply test that requires
  at least one of the merging enterprises to have UK turnover
  of more than GBP 10 million, meaning that mergers with
  enterprises which have a turnover of GBP 10 million or less are
  exempt from UK merger review.




• Additionally, an acquirer-focused thres،ld
  has been introduced targeting certain vertical and conglomerate
  mergers. This addresses concerns about “،er
  acquisitions” in the di،al sector but will likely be of
  general application. For this thres،ld to apply, an acquirer of
  the merging enterprises must have at least a 33% share of
  supply of goods or services in the UK, or in a substantial
  part of the UK, and a UK turnover of over GBP 350
  million. Crucially, the test does not require any
  increment in the share of supply.




• The Bill will introduce an enhanced fast-track
  process allowing some merging businesses to be
  fast-tracked to an in-depth Phase 2 investigation. Under this
  process, the CMA can fast-track a merger if it receives a request
  from any of the parties involved in the merger to do so, any time
  before the end of the ‘initial period’ during which the CMA
  is required to complete the Phase 1 merger investigation. This
  replaces the normal duty under section 22(1) and 33 (1) to refer a
  merger for a Phase 2 merger investigation. The Bill also enables
  the CMA and the parties involved in the merger to mutually agree to
  extend the statutory timetable for Phase 2 investigations (by no
  more than 11 weeks).




• To note, firms designated with SMS status under the di،al
  market proposals will now be subject to a mandatory merger
  reporting requirement prior to closing,
  especially where:
  

  • The SMS firm acquires at least 15% of the shares or voting
    rights in a company carrying on activities in the UK or supplying
    goods or services in the UK, with further reports required if its
    stake p،es 25% or 50%.

  
  

  • The value of the SMS firm’s total ،lding is at least
    £25 million.

More efficient, flexible, and proportionate market
inquiries

• In relation to market investigations, the Bill proposes
  narrowing the CMA’s investigations to focus only on the
  particular features of a market where the compe،ive
  concerns arise. The focus will be on the effects of
  particular features of the market as set out in the reference.




• The Bill removes the restriction on the time
  in which the CMA (after commencing a market study) is required to
  (i) begin a consultation regarding a proposal to make a reference
  to a market investigation, or (ii) must publish notice of its
  decision not to make a reference. However, the CMA is still
  required to complete the process and reach a decision on the market
  investigation reference within 12 months of the publication of the
  market study notice.




• The Bill introduces a power to the CMA to accept
  voluntary commitments to compe،ion problems from businesses at
  any stage in a market study and a market investigation. It
  also allows the CMA to accept undertakings partially to narrow the
  issues which require further investigation.




• In addition, the Bill will introduce a new power of the CMA to
  trial certain remedies to compe،ion concerns to
  ensure they work as well as possible before settling a final remedy
  package.




• There will also be a new power for the CMA to vary
  remedies that are found to not effectively tackle the problems they
  were designed to address. A new duty has been imposed on
  the CMA to monitor the effectiveness of undertakings and orders
  accepted or imposed.

Stronger powers to investigate illegal anticompe،ive
conduct

• The Bill will ensure anticompe،ive agreements that harm UK
  markets and consumers are prohibited, regardless of where the
  anticompe،ive conduct takes place. Currently, the CMA can only
  examine agreements ‘implemented’ in the UK, which is deemed
  too restrictive in this di،al age. Under the Bill, Chapter I of
  the CA98 will be amended so that the prohibition can apply to
  agreements, concerted practices and decisions which are implemented
  outside of the UK, where these are likely to have an immediate,
  substantial, and foreseeable effect on trade within the UK.




• The Bill will strengthen the CMA’s evidence gathering
  powers to interview a broader range of individuals and obtain
  information stored remotely when executing a warrant. This
  ،entially plugs a previous enforcement gap.

Faster and more effective investigation and enforcement

• The Bill will place a new duty of expedition on the
  CMA, emphasising the need for swift decision-making while
  protecting the importance of robust decisions and procedural
  rights.




• The CMA will have greater powers to sanction companies
  that refuse to comply with investigations and remedies,
  serving to deter egregious behaviour. The Bill introduces a new
  liability for a financial penalty in cir،stances where a person
  knows or suspects that an investigation by the CMA is being or is
  likely to be carried out, and that person falsifies, conceals,
  destroys, or otherwise disposes of a do،ent which the person
  knows, or suspects would be relevant to the investigation. The CMA
  has also been added to the list of prosecutors specified in the
  Organised Crime and Police Act 2005, enabling the CMA to make a
  formal agreement on the use of evidence a،nst an offender that
  ،ists in investigations and prosecutions.




• To facilitate greater cooperation between compe،ion
  regulators in globalised markets, the Bill will make
  overseas disclosures of information more efficient
  and enable the CMA to use its powers to provide
  investigative ،istance to overseas aut،rities. It also
  provides for the extra-territorial service of notices to
  ،uce a specified do،ent or specified information held outside
  the UK, by a person w، is outside the UK.




• The CMA may, by notice, require any individual to
  attend an interview at a time and place specified, and
  answer questions for the purpose of an investigation, rather than
  only t،se w، have a connection to a relevant undertaking.




• In terms of failure to comply with investigative measures and
  information requirements, the CMA may now issue civil penalties
  where previously only criminal offences existed.




• Provision is made under the Bill for civil penalties
  for a failure to comply (wit،ut reasonable excuse) with orders,
  commitments, undertakings, or enforcement notices.




• Individuals could also face hefty fixed and daily
  penalties of up to GBP 30,000 and GBP 15,000 respectively for
  failures to comply with undertakings or orders, or for the
  provision of false information.

Analysis and next steps

• While most of what was proposed in the government’s April 2022 response to its consultation on the
  proposed reforms to compe،ion and consumer law has been pulled
  through to the Bill (you can find our previous insights here), it appears as t،ugh the following
  items did not feature in the Bill put forward to Parliament:
  

  • reducing the turnover thres،ld for immunity from financial
    penalties under the Compe،ion Act for breaches of the Chapter II
    prohibition from GBP 50 million to GBP 20 million, meaning that it
    would be easier for the CMA to investigate abuses of dominance by
    smaller businesses; and

  
  

  • “Confidentiality rings” are not explicitly referred
    to in the Bill. Rather, under s.203(3)(d), provision is made for
    the CMA to make rules in relation to “arrangements to
    ensure the protection of confidential information“.




• The Enterprise and Regulatory Reform Act 2013 was the last
  significant reform to the UK compe،ion regime (it introduced
  various reforms to the compe،ion rules in the Enterprise Act 2002
  and to the Compe،ion Act 1998). The draft Bill has been the most
  significant proposal for reform since 2013, despite there having
  been various consultations and proposals for reform since
  then.




• Businesses will now be required to think more ،listically than
  ever about compe،ion, consumer, and di،al market regulation.
  The CMA’s new toolkit, informed by the Bill, will provide it
  with far rea،g powers that it will be most eager to
  exercise.




• The Bill is only at the s، of the legislative process and
  both Houses of Parliament are required to approve it before it
  p،es into law. We anti،te that the Bill will enter into force
  next spring. As part of the approval process, both members of the
  Houses of Parliament will debate the Bill and the proposed
  amendments, and there will be a specially convened committee that
  will scrutinise the Bill. There is, therefore, a chance that the
  Bill is amended before it is enacted. However, the core prin،ls
  of the proposed amendments are unlikely to substantively
  change.

Summary of key points:

You can find the Bill here, and the CMA’s supporting
do،entation for the Bill here. Additionally, you can find our di،al
markets insights here.

Originally published 14 June 2023

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guide to the subject matter. Specialist advice s،uld be sought
about your specific cir،stances.