Competition Act 1998 Investigations: Procedure and Practice

Question 1

What are the Three Stages of an Investgiation?

Answer 1

1. Informal Information Gathering.
2. Formal Investigation.
3. Case Culmination.

P. 343.

As a public body, the CMA is subject to judicial and merits review.

Question 2

Where does the CMA Source its Investigations?

This concerns Informal Informaton Gathering.

Answer 2

• Complaints.
• Whistleblowers.
• Leniency Applications.
• Independent reserach.

P. 343.

When filing a complaint, it is important to clearly provide the CMA with as much high-quality information as possible, including such things as a sector overview, market analysis, hard evidence of breach, substantiation of harm, and providing leads. Otherwise, it may not have the resources to follow up.

Question 3

What is a Leniency Application (LA)?

Answer 3

An agreement between a Cartel Member (CM) and the CMA to report evidence of infringement in exchange for partial or total immunity.

P. 344.

Question 4

Which Violations do Leniency Applications concern?

Answer 4

Violations of the Chapter 1 Prohibition (C1P), specifically:
* Price Fixing.
* Market Sharing.
* Output Restriction.
* Collusive Tendering.

P. 344; Applications for Leniency and No-Action in Cartel Cases (OFT1495), at [2.2]–[2.3].

If the violation concerns a Vertical Agreement, only Price Fixing suffices.

Question 5

What are the Three Types of Leniency available?

Answer 5

• Type A, which guarantees:
  
  • Corporate immunity from financial penalties;
  • Personal immunity from criminal prosecution; and
  • Protection from director disqualification proceedings.
• Type B, which provides discretionary:
  
  • Corporate immunity from financial penalties;
  • Personal immunity from criminal prosecution; and
  • Protection from director disqualification
• Type C, which affords the same protection as Type B, but to a less certain degree.

P. 344-347.

Question 6

What are the Conditions for Type A Leniency?

Answer 6

Prerequisites:
1. The Member is the first to approach the CMA; and
2. The CMA otherwise has insufficient information to substantiate reported cartel activity.
3. The Member must not have coerced another party to partake in cartel activity.

Requisites:
1. The Member shows a genuine intention to confess to partaking in cartel activity;
2. Provides the CMA with all non-legally privileged evidence it possesses;
3. Maintains continuous and complete cooperation throughout the investigation and subsequent enforcement to the best of its abilities; and
4. Refrains from further partaking in cartel activity.

P. 344-347; Applications for Leniency and No-Action in Cartel Cases (OFT1495), at [2.2]–[5.19].

Question 7

What are the Conditions for Type B Leniency?

Answer 7

Prerequisites:
1. The Member is the first to approach the CMA; after
2. The CMA has already begun an investigation; and
3. Can provide significantly valuable information.
3. The Member must not have coerced another party to partake in cartel activity.

Requisites:
1. The Member shows a genuine intention to confess to partaking in cartel activity;
2. Provides the CMA with all non-legally privileged evidence it possesses;
3. Maintains continuous and complete cooperation throughout the investigation and subsequent enforcement to the best of its abilities; and
4. Refrains from further partaking in cartel activity.

P. 344-347; Applications for Leniency and No-Action in Cartel Cases (OFT1495), at [2.2]–[5.19].

Question 8

What are the Conditions for Type C Leniency?

Answer 8

Prerequisites:
1. The Member is not the first to approach the CMA; but
2. Approaches before it issues a Statement of Objections (SO); and
3. Can provide significantly valuable information.

Requisites:
1. The Member shows a genuine intention to confess to partaking in cartel activity;
2. Provides the CMA with all non-legally privileged evidence it possesses;
3. Maintains continuous and complete cooperation throughout the investigation and subsequent enforcement to the best of its abilities; and
4. Refrains from further partaking in cartel activity.

P. 344-347; Applications for Leniency and No-Action in Cartel Cases (OFT1495), at [2.2]–[5.19].

Question 9

What is a Statement of Objections?

Answer 9

A document outlining preliminary findings and concerns regarding potential anticompetitive conduct.

A Draft Penalty Statement is sent alongside the SO.

Lecture Notes.

For up to 12 weeks thereafter, the Suspect(s) will have the right to make written and oral representations regarding the SO’s allegations. See §31(1)(b) – CA 1998.

Question 10

What is the Process for Applying for Leniency?

Answer 10

1. Confidential CMA Guidance.
2. Initial Inquires regarding Leniency Availability.
3. Preliminary Marker.
4. Application Package and Internal Investigation by the Applicant.
5. Decision regarding Application Success.

P. 349-353.

A Marker is a tool used by the CMA to reserve a party’s place in the application queue without disclosing its identity or the substance of the violation. The Agreement itself will be finalized when the CMA issues its SO, and prior to enforcement, it will also issue No-Action Letters.

Question 11

How does the CMA determine whether to open a Formal Investigation?

Answer 11

By observing the Prioritization Principles:
* Resources: Can the CMA realistically afford to take on this case?
* Impact: Will an intervention appreciably improve consumer welfare?
* Outcome Certainty: Is an intervention realistically likely to succeed?
* Strategy: Does this case appreciably further strategic objectives?

Impact is likely the most important criterion.

P. 368; Prioritisation Principles for the CMA (CMA16).

Question 12

If a Case satisfies the Prioritization Principles, when will the CMA decide to open a Formal Investigation?

Answer 12

When it believes there are reasonable grounds for suspecting a breach of competition law, based on current or new evidence.

P. 372; §25 – CA 1998.

Question 13

What is a Case Initiation Letter?

Answer 13

A document sent to the Suspect(s) to inform them of the Investigation and formally request their cooperation.

P. 372; §26 – CA 1998.

The CMA may decide to forego this if it would prejudice the investigation, e.g. prior to an unannounced inspection or witness interviews.

Question 14

What is a §25A Notice?

Answer 14

A public notice of the fact that the an Investigation into Suspect(s) has begun.

P. 373; §25A – CA 1998.

Question 15

What are the CMA’s Information Gathering Powers?

Answer 15

It can:
* Require the production of data and documents;
* Require questions be answered;
* Enter business premises without a warrant;
* Enter and search business premises under a warrant; and
* Enter and search domestic premises under a warrant.

Failure to comply without reasonable excuse is punishable by a fine.

P. 374; §26-§29 – CA 1998.

Generally, written notice must be given, unless it would prejudice the Investigation, and Suspects must comply to the best of their abilities. Likewise, the CMA will usually afford reasonable time for legal advisors to arrive on-site.

Question 16

What sort of Information would the CMA request be Produced?

Answer 16

Information regarding the Suspect(s), its conduct, and its Counterparties, Competitors, Customers, and Consumers.

P. 376.

This may include data the Suspect does not currently have, such as market share estimates.

Question 17

Who may be Questioned by the CMA, and what must the Questions concern?

Answer 17

• Any individual who has a connection to the Suspect(s); regarding
• Any subject relevant to the Investigation.

P. 377; §26(A)(1) – CA 1998.

Question 18

For Questioning, when is an Individual deemed to have a Connection to the Suspect?

Answer 18

If they are, or were:
* Tasked with managing or controlling the Suspect; or
* Employed by, or otherwise working for, the Suspect.

P. 377; §26(A)(6) – CA 1998.

Bear in mind that legal advisors usually attend questioning with their clients.

Question 19

Under what Conditions will a Warrant be issued?

Answer 19

Under any one of the following:
* An Officer has already attempted to enter relevant premises but has been unable to do so.
* There are reasonable grounds for believing the Suspect(s) is withholding documents;
* There are reasonable grounds for believing documents would be concealed, removed, tampered with, or destroyed if requested.

Question 20

What Information is the CMA precluded from demanding?

Answer 20

Privileged Communications, which includes communications made:
* With legal advisors; or
* In connection with, or in contemplation of, legal proceedings.

Even if they concern an Investigation.

P. 399; §30 – CA 1998; Tesco v OFT [2012] CAT 6, at [26]–[33].

Question 21

How does the Privilege against Self-Incrimination limit the CMA’s Questioning?

Answer 21

It cannot force a business to provide answers that would require an admission of guilt.

P. 400; Orkem SA v Commission [1989] E.C.R. 3283, at [34]–[35].

Naturally, this does not prevent the CMA from seizing or requiring production of documents already in existence, nor from requiring information relating to facts.

Question 22

Does the Privilege against Self-Incrimination extend to a Suspect’s Ordinary Employees.

Answer 22

Yes, seemingly, since they are seen as incorporated into the Undertaking as an economic unit during their employment.

P. 402; Becu and Others ECLI:EU:C:1999:419, at [26].

Question 23

What is considered Confidential Information in an Investigation?

Answer 23

• Information regarding the Suspect’s past or future strategies.
• Financial (or similar) information that is less than two years old.
• Information that may adversely affect the competitive process is disclosed.
• Survey responses that require respondants to remain anonymous or may harm the Suspect if disclosed.

P. 403; Transparency Guidance, at [4.15].

Suspects may formally request that certain information be treated confidentially under one of these categories. Such information could only be disclosed under the circumstances outlined in Pt. 9 – EA 2002, such as necessity for facilitating CMA functions.

Question 24

What is an Interim Measure?

Answer 24

An order to modify or cease certain conduct.

P. 411; §32(3)-§35(7) – CA 1998.

Question 25

On what Grounds may the CMA impose an Interim Measure?

Answer 25

If it believes such measures:
* Are urgently necessary to prevent significant damage to a person or category of person; or
* Protect the public interest;
* Are an appropriate use of its discretion; and that
* The relevant conduct would not be exempted under §9(1).

‘Damage’ entails harm to economic functioning or competition.

P. 411-420, 424-427; §35(2) – CA 1998.

Third parties may submit an application for the imposition of interim measures.

Question 26

What is a State of Play Meeting?

Answer 26

A meeting wherein the CMA discusses the Investigation with the Suspect, focusing on updates, timetables, information requests, and other practical issues.

P. 421.

Question 27

What are the Possible Outcomes of an Investigation?

Answer 27

• Settlement.
• Issuance of an infringement decision.
• Closure on finding no grounds for action.
• Closure on grounds of administrative priorities.
• Closure upon accepting commitments regarding future conduct and cessation of present conduct, if offered.

P. 438-451.

All these outcomes are appealable by Third Parties through the CAT.

Question 28

For a Suspect, what are the Commercial Advantages and Disadvantages of offering Conduct Commitments?

Answer 28

Advantages:
* Neutralize the risk of a fine.
* Minimize long-term legal costs.
* Neutralize the risk of a publicized infringement and damages.

Disadvantages:
* Neutralize the possibility of the case fizzling out.

P. 445.

That said, serious infringements, e.g. price fixing or abuse of dominance, cannot be resolved through Conduct Commitments, or if it otherwise believes accepting one would undermine deterrence.

Question 29

For a Suspect, what are the Commercial Advantages and Disadvantages of Settling?

Answer 29

Advantages:
* Minimize the size of a fine.
* Minimize long-term legal costs.

Disadvantages:
* Admit wrongdoing.
* Accelerate follow-up action from Third Parties.
* Neutralize the possibility of the case fizzling out.

P. 454-460.

Question 30

If an Infringement Decision is made, how is the CMA accordingly empowered?

Answer 30

It may:
* Give such directions as it deems appropriate to cease the infringement; and
* Impose a fine.

P. 461; §31-§33, and §36 – CA 1998.

Directions usually entail modifying or terminating the Suspect’s conduct.

Question 31

In an Infringement Decision, under what circumstances will a Fine be additionally imposed?

Answer 31

When the CMA is satisfied the Perpetrator’s conduct was either intentional or negligent.

P. 464; §36(3).

Question 32

In an Infringement Decision, what are the CMA’s Policy Objectives when determining Penalties?

Answer 32

• Specific Deterrence: To deter the Perpetrator from recidivism.
• General Deterrence: To deter Third Parties from anticompetitive conduct.

P. 465; Penalties Calculation Guidance, at [1.3]–[1.4].

Question 33

In an Infringement Decision, how does the CMA Calculate a Fine?

Answer 33

1. Seriousness: Determine the conduct’s seriousness.
2. Duraiton: Determine the conduct’s duration.
3. Extenuating Circumstances: Account for aggrivating or mitigating factors.
4. Deterrence: Consider the strategic importance of deterrence.
5. Hard Limits and Proportionality: Consider the statutory maximum (10% global turnover per annum) and double jeopardy fines imposed by other authorities.
6. Discounts: Account for leniency and settlement discounts, if applicable.

P. 476.

Agreements and conduct grossing annually below £20m and £50m, respectively, are unlikely to attract fines, but such protection is not rock-solid. See §39-§40 – CA 1998.