Parallel competition investigations involving the Competition and Markets Authority – how could they work?

United Kingdom

Competition infringements can involve conduct by businesses in another EU Member State which produces effects in the United Kingdom. Given the growth of cross-border e-commerce, the likelihood of conduct overseas producing effects on competition in the UK, among other countries, is higher than ever before.

In such cross-border cases, establishing that an offence has occurred under UK law may require the production of evidence only available in that Member State.

Under the current EU enforcement framework, a legal framework exists for case allocation and enforcement of EU competition law as between national competition authorities and the European Commission.

  • Where the Commission decides to investigate a particular matter, it has exclusive jurisdiction to do so under the Modernisation Regulation 1/2003. To facilitate this, the Commission has sweeping enforcement powers which enable it to investigate and sanction businesses operating across the EU.
  • Where the Commission is not investigating a matter, the UK’s Competition and Markets Authority (“CMA”) may conduct its own investigation. It is possible that this may occur alongside other EU national authorities under the framework established by the Modernisation Regulation, which facilitates cross-border investigation support and information sharing between authorities.

A key issue being explored at present is how this process of case allocation and co-operation could work post-Brexit?

The possibility for parallel investigations post Brexit

The European Commission can and probably will continue to investigate infringements of EU Competition law where the suspected anti-competitive conduct has occurred in the UK. Being located outside of the EU will not provide a shield for UK businesses against the application of EU competition law. However, depending on the outcome of the Brexit process, the Commission may no longer have its information gathering powers in relation to the UK. Therefore, securing a bilateral support arrangement with the CMA will be of mutual interest.

The Commission will not, however, investigate and issue sanctions for infringements that affect trade within the UK. This enforcement activity will be the sole reserve of the CMA (and various UK sector regulators with concurrent enforcement powers).

To address this so-called “enforcement gap”, it is likely that we will see the CMA open antitrust investigations in relation to anti-competitive conduct suspected of breaching the Competition Act 1998 in parallel with the European Commission investigating any EU infringement in relation to the same conduct. Given the two facets of the Modernisation Regulation described above (namely, exclusive competence for the Commission and co-operation between European national authorities) could no longer apply, how will the CMA secure important evidence located in another EU Member State when enforcing UK competition law?

A new framework for international co-operation

The answer of course lies in engaging in a new international co-operation framework for competition enforcement across the EU and the UK. Indeed, such frameworks already exist with varying degrees of co-operation between the European Commission and other overseas competition authorities.

The CMA’s written and oral submissions earlier this month to the House of Lords Select Committee on the European Union (the Internal Market Sub-Committee) revealed an eagerness of the part of the CMA to try to replicate the cross-border co-operation arrangements found under the Modernisation Regulation, together with certain proposal under a proposed directive to make European national authorities more effective enforcers.  A summary of the CMA’s oral submissions to the sub-committee is available at: http://www.cms-lawnow.com/ealerts/2017/09/a-vision-of-uk-competition-law-after-brexit.

The CMA envisaged that the legal framework would be expected to cover at least the following areas:

  • Notification of new case initiations and the coordination of investigative measures
  • Bilateral and multilateral evidence sharing to facilitate civil and criminal enforcement by overseas agencies
  • Obtaining evidence to assist overseas enforcers
  • Enforcement of investigative measures and remedies.

Deciding whether to initiate a parallel investigation

In its submissions to the Lords Select Committee, the CMA noted it would continue to apply case prioritisation criteria in deciding whether to open a case. Such an assessment would take into account the potential difficulties in obtaining evidence located outside the jurisdiction and the likely impact of any parallel EU investigation.

In parallel with the Commission

The ability to conduct investigations in parallel with the European Commission will likely mean a greater CMA antitrust caseload.

The CMA noted that, given the Commission will tend to take on large cross-border cases, any “enforcement gap” would most likely apply to larger (and often more complex) cases. In making this point, it specifically referred to Commission’s recent enforcement action against internet giant, Google, noting, “if we were to pursue that sort of case in the future, we would want to work very closely with the Commission, which may pursue a parallel investigation. It obviously makes sense, then, for us to be able to share information and evidence in real time. To have that in place is key.”

The CMA evidently shows no signs of shying away from big cases against large multinational businesses. It recognises that its lofty ambitions will however require, critically, a close co-operation framework between the CMA and the Commission, noting “[t]he efficacy of [the Modernisation Regulation] will obviously fall away within the UK, so it is really important that we put arrangements in place that replicate or at least deliver the equivalent co-operation.”

In parallel with other Member State national authorities

As with the present system, the possibility for such parallel investigations should continue to exist. However, as the Modernisation Regulation will no longer be available, new bilateral or multilateral arrangements will be required – possibly as part of the existing European Competition Network (“ECN”).

Co-operation arrangements with other EU national authorities did not play second fiddle during the CMA’s submissions to the Lords sub-committee. Lord Currie, chairman of the CMA noted, “[c]clearly, we will want to work closely with our European counterparts… That co-operation is absolutely essential, but the precise mechanisms are to be determined.”

In parallel with non-EU authorities

Both the CMA and European Commission already cooperate with non-EU competition authorities, e.g. in relation to large-scale merger cases. These co-operation arrangements are typically reflected in a memorandum of understanding or best practices agreement. Post-Brexit, the UK will no longer benefit from bilateral arrangements entered into by the EU, e.g. those put in place with the US, Canada, Japan, South Korea and Switzerland. The CMA will therefore need to decide upon the merit and basis for new bilateral arrangements with select jurisdictions going forward.