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Renewed approach to UK Competition Law: wide-sweeping reforms

23 May 2022

In this article, we provide a high level overview of the key changes to the Competition and Merger Control laws, including the enhanced enforcement powers of the UK Competition and Markets Authority (CMA) and amendments to the jurisdictional thresholds for its intervention.

On 20 April 2022, the Department for Business, Energy and Industrial Strategy (BEIS) published the UK Government's response to the Reforming Competition and Consumer Policy consultation.

Published in July 2021, the consultation emphasised the role of "healthy competition in boosting enterprise, innovation, productivity, and growth" and contributing to a "thriving free market economy". The UK Government consulted a variety of stakeholders, including trading standards, local authority interests, businesses and trade associations. The end result is a series of long-awaited reforms to the competition policy to make it more agile and robust. Reforms to the consumer law regime are also contained in the UK Government's response, but this is beyond the scope of this article.

Merger Control

Merger control is an important tenet of competition regulation and the UK Government consulted on a wide range of reforms to rebalance the system, including the development of an enhanced 'fast track' merger route.

Responses gathered as part of the consultation have informed the following adjustments to the CMA's jurisdictional thresholds:

  • Increasing the target company's turnover threshold from £70m to £100m, save for media mergers in the public interest where the threshold will still be £70m;
  • Introducing a new threshold to provide a more comprehensive and effective jurisdictional basis for certain vertical and conglomerate mergers (i.e. so-called 'killer acquisitions', whereby market-leading entities acquire smaller competitors which consequently suppresses  innovation and competition) to apply where an acquirer firm has both:
    1. an existing share of supply of goods or services of 33% in the UK or a substantial part of the UK; and 
    2. a UK turnover of £350m.

This new threshold proposal also includes a UK nexus criterion to ensure that only mergers that have an appropriate link to the UK are captured; and

  • Creating a safe harbour for small business mergers, where the UK turnover for each merging party does not exceed £10m (excluding media mergers that demand public interest intervention).

These reforms are designed to ensure that it is easier for small and micro enterprises to "grow and expand" and that "Competition Law continues to protect dynamic and innovative markets, to the benefit of UK businesses and consumers alike".

In a bid to make the merger control investigations quicker and more efficient, the reforms that the UK Government intends to take forward include:

  • Allowing the CMA to agree binding commitments (i.e. ways to allow mergers to proceed but subject to agreed remedies to resolve the competition problem identified) in Phase 2 of merger control investigation.;
  • Establishing an enhanced 'fast track' merger route that parties can request at any stage of pre-notification or Phase 1, where it is evident that the transaction is complex and warrants an in-depth investigation. This will allow the CMA to automatically refer a proposed merger straight to Phase 2 without the need for consultation or the issue of a reasoned decision. More importantly, parties that request this route will not be forced to accept that the merger may give rise to a substantial lessening of competition.
  • Revising how the CMA publishes merger decisions.

Antitrust

Section 2, Chapter I of the Competition Act 1998 (the CA) prohibits anticompetitive agreements between undertakings which could affect trade within the UK or have as their object, or effect the prevention, restriction or distortion of competition within the UK (section 2(1)). Section 18, Chapter II of the CA restricts any conduct by undertakings which constitutes the abuse of a dominant position in the market if it might affect trade in the UK.

The UK Government is seeking to demonstrate its commitment to clamping down on illegal anticompetitive conduct by:

  • Broadening the geography of the prohibition contained in Chapter I of the CA, effectively capturing any and all relevant agreements, concerted practices and decisions that might be implemented outside of the UK but that have an impact within the UK. 
  • Requiring that appeals against any interim measures imposed in CA investigations (i.e. urgent measures designed to prevent any further harm) are determined by reference to the principles of judicial review and reasonableness of decision making, rather than on the merits of the CMA’s decision.
  • Extending the CMA's evidence-gathering powers in investigations to cover:
    • the ability to interview any relevant person;
    • the power to 'seize and sift' evidence during a  domestic premises inspection under a warrant; and
    • stronger powers to gather electronic information that is stored remotely.
  • Introducing a new statutory framework and civil penalties for breaches of confidentiality rings (which are arrangements made for sharing confidential information between specified persons, such as legal advisers, for the purposes of protecting material and preventing leakage outside of the ring).

CMA's tools of investigation and enforcement powers

These proposals are intended to reinforce the CMA's ability to promote competition whilst remedying (and thereby preventing) more harm earlier in the process. The reforms that the UK Government has confirmed are being progressed include:

Enabling the CMA to impose:

  • fixed penalties of up to 1% of a business' annual worldwide turnover (alongside a daily penalty of up to 5% of daily worldwide turnover for continued non-compliance) for entities that fail to comply with investigative measures such as information requests, or who falsify, conceal or destroy evidence or, provide misleading or false information;
  • fixed penalties to natural persons of up to £30,000 (alongside a daily penalty of up to £15,000 for continued non-compliance) who conceal, falsify or destroy evidence, or provide misleading or false information; and
  • civil turnover-based penalties for non-compliance with the CMA's orders or any undertakings or commitments that the CMA has accepted.
  • Encouraging more international cooperation between the relevant national authorities, including allowing the UK's competition authorities to gather information for overseas authorities.

The Government is now assessing how to implement these numerous policy reforms, many of which will require changes to legislation. 

Reforms to competition law, along with broader proposals to change consumer laws, featured in the Queen's Speech, delivered 10 May 2022. The policy reforms clearly have the ability to change the landscape of the UK's competition laws and represent a strengthening of the competition rules post-Brexit; evidenced by the encouragement of more information sharing and cooperation between the UK and overseas national authorities.

Although it is unclear when the reforms are likely to be implemented, it is key that businesses consider the forthcoming changes. Our Competition Team is closely monitoring these reforms and we have the expertise to advise you accordingly and to assess how these proposals might impact your business. Please get in touch to explore how we can assist you.

Further Reading