Enforcement of Competition Rules Flashcards
What are the three types of enforcement of competition rules?
There can be three different types of enforcement which are possible in relation to these types of rules:
⁃ Administratively
⁃ Civil action
⁃ Criminal law
How were competition rules enforced in Europe?
In Europe, administrative enforcement was the first means of tackling these issues. The power of enforcing competition rules was solely left to the Commission - now under Regulation 1/2003.
What were the Commissions (substantial) powers of investigation?
This gives the Commission very substantial powers of investigation.
⁃ It can write and ask for information. (Investigation) arts 18, 20, 21)
⁃ It also has a right to enter premises (‘dawn raids’). This gives them access to anywhere they want to go. NB if the national authorities require a warrant before someone can gain entry, it is legitimate to require the Commission to have a warrant also, but the issue of a warrant is a mere formality - there is virtually no discretion.
- Look up ECHR requirement for a warrant*** [don’t worry too much]
- They can take over an office/company for a series of days to search and question employees.
- NB throughout these ‘raids’ the general procedural guarantees apply, i.e. right to be heard etc.
- Then, Article 23, they can impose a fine.
⁃ After the investigation the Commission consider whether there has been an infringement of Article 101/102. The Commission then make a decision. They can tell you to stop infringing. (art 7);
- They can also impose fines (up to 10% of worldwide annual turnover). These can be imposed daily until the Commission is let into the premises. (arts 23-26).
What is the burden and standard of proof?
The burden of proof is on the Commission to prove that there has been an infringement. Regulation 1/2003, art 2
The standard of proof is subject to considerable debate (don’t worry about this). Case T-36/06 Coats Holdings Ltd v Commission [2007] ECR II-110*
What is the whistleblowers policy adopted by the Commission?
The Commission has since adopted a whistleblowers policy (adapted from the USA.)
⁃ If you are party to a cartel[ So this only applies to Article 101.] and you blow the whistle then you get off completely free. You must be the first to blow the whistle to benefit from absolute immunity. If you are not first but can add value to an investigation then you can get reduced fines.
- However if you add value to the investigation (but you are not first) they may reduce your fine.
What are the options of judicial enforcement of competition rules?
Judicial enforcement of 101 and 102
Control of the Commission is possible since any measure adopted by authority of Regulation 1/2003 is an ‘act’ within the meaning of article 263 of the TFEU, and so amenable to review before the General Court. Normally strict rules on title and interest are relaxed.
- Infringement of article 101 or 102 could lead to liability in damages to anyone who has suffered loss or injury because of your actions as a cartel. [Stated as an area of delict in 2001 and 2006 cases]
- NB no relevant UK case to date that states this
- The Competition Act says nothing about whether s 2 or 18 are directly effective.
**Read chapter 3 of the Competition Act
How can competition rules be enforced by a member state?
- Any measure adopted by authority of Regulation 1/2003 is an ‘act’ within the meaning of article 263 of the TFEU, and so amenable to review before the General Court. Normally strict rules on title and interest are relaxed.
- The CMA
- National courts
- Enforcement of s 2/s 18 of the Competition Act
- Criminal sanctions
How can the CMA enforce competition rules?
⁃ The Commission is seriously understaffed. As a result form 2004 they tried to share out the responsibilities by requiring national competition authorities to help. From 2004 all Member States were required to create a competition authority if it didn’t exist, and if it did exist or was created, to assist the Commission.
⁃ In the UK the authority was the OFT which will become the “Competition and Markets Authority” from the 1 April.
⁃ The OFT is pretty useless but it does have the power to enforce Articles 101 and 102.
- The CMA can impose a very heavy fine (10% of annual turnover).
- s 2 and 18 are enforced administrative by the CMA
⁃ The OFT is subject to judicial control by the Competition Appeal Tribunal from which there is appeal to the Court of Session.
Regulation 1/2003, art 5:
‘The competition authorities of the Member States shall have the power to apply Articles 101 and 102 of the Treaty in individual cases. For this purpose, acting on their own initiative or on a complaint, they may take the following decisions: - requiring that an infringement be brought to an end, - ordering interim measures, - accepting commitments, - imposing fines, periodic penalty payments or any other penalty provided for in their national law. Where on the basis of the information in their possession the conditions for prohibition are not met they may likewise decide that there are no grounds for action on their part.’
Therefore the administrative authorities in each member state - in the UK, the Competition and Markets Authority and the various sector regulators - may apply articles 101 and 102 as and when they are joined.
Regulation 1/2003, article 3(1):
‘Where the competition authorities of the Member States or national courts apply national competition law to agreements, decisions by associations of undertakings or concerted practices within the meaning of Article 101(1) of the Treaty which may affect trade between Member States within the meaning of that provision, they shall also apply Article 101 of the Treaty to such agreements, decisions or concerted practices. Where the competition authorities of the Member States or national courts apply national competition law to any abuse prohibited by Article 102 of the Treaty, they shall also apply Article 102 of the Treaty.’
How can the national courts enforce competition rules?
Can Articles 101/102 be enforced in civil actions? (In other words, are they directly effective?)
⁃ Yes - they are horizontally directly effective since the obligations under 101/102 are placed on undertakings. This means that if there is an infringement of 101/102 then there is a remedy in damages.
⁃ For a variety of reasons, enforcement through civil actions has been largely unsuccessful - there has never been a final judgement in the UK courts for infringement of Articles 101/102 - they always get settled beforehand.
How can the OFT enforce competition rules?
The OFT has the same powers of investigation and enforcement as the Commission. The UK has also adopted the whistleblower program.
⁃ NB under the whistleblower program, immunity from the OFT does not provide immunity from civil action.
⁃ Competition Act s 47A: provides that if it is established by the OFT/Commission that there has been an infringement of Article 101/102/ section 2/18 then you can have direct access to the Competition Appeal Tribunal for recovering damages (so this is an attempt to make it easier for individuals to claim damages by removing the requirement of every affected party to prove that there has been an infringement - it is sufficient that it has already been established that an infringement has occurred).
⁃ However the problem is that this procedure is very slow. The tribunal has only given damages in 2 cases since 2003.
- This is a shortcut which says if the infringement of s 2 or 18 has been found by a competent authority (the commission or CMA) then it is established as an infringement.
- You then go to the Competitions Appeal Tribunal and show infringement of these sections caused this loss.
- **This is a good provision
- There has been two welsh cases involving injury through abuse of dominant position so s47A
What are the criminal sanctions?
⁃ A breach of Article 101/102 is not criminal. So they are only enforced by administrative authority or civil actions.
⁃ However breach of a narrower subset of conduct which is addressed by s 2/18 in the UK are subject to criminal sanctions under s 188 of the Enterprise Act.
⁃ This is addressed to “agreements” by which undertakings enter into hardcore restraints of competition (like price fixing, market sharing, quotas, bid rigging).
⁃ There has been one successful prosecution brought under s 188. The reason is that there is a requirement that entering into said agreements “dishonestly”. But it is unclear what “dishonestly” means and there is contrasting case law between Scotland and England.
⁃ However, the “dishonestly” requirement is to be removed by the Enterprise and Regulatory Reform Act 2013. Hopefully s 188 will be more effective following this amendment.
- s188 created the “cartel offence”
s. 188 Cartel offence
(1) An individual is guilty of an offence if he [dishonestly] agrees with one or more other persons to make or implement, or to cause to be made or implemented, arrangements of the following kind relating to at least two undertakings (A and B).
(2) The arrangements must be ones which, if operating as the parties to the agreement intend, would-
(a) directly or indirectly fix a price for the supply by A in the United Kingdom (otherwise than to B) of a product or service,
(b) limit or prevent supply by A in the United Kingdom of a product or service,
(c) limit or prevent production by A in the United Kingdom of a product,
(d) divide between A and B the supply in the United Kingdom of a product or service to a customer or customers,
(e) divide between A and B customers for the supply in the United Kingdom of a product or service, or
(f) be bid-rigging arrangements.
(3) Unless subsection (2)(d), (e) or (f) applies, the arrangements must also be ones which, if operating as the parties to the agreement intend, would-
(a) directly or indirectly fix a price for the supply by B in the United Kingdom (otherwise than to A) of a product or service,
(b) limit or prevent supply by B in the United Kingdom of a product or service, or
(c) limit or prevent production by B in the United Kingdom of a product.
(4) In subsections (2)(a) to (d) and (3), references to supply or production are to supply or production in the appropriate circumstances (for which see section 189).
(5) ‘Bid-rigging arrangements’ are arrangements under which, in response to a request for bids for the supply of a product or service in the United Kingdom, or for the production of a product in the United Kingdom-
(a) A but not B may make a bid, or
(b) A and B may each make a bid but, in one case or both, only a bid arrived at in accordance with the arrangements.
(6) But arrangements are not bid-rigging arrangements if, under them, the person requesting bids would be informed of them at or before the time when a bid is made.
(7) ‘Undertaking’ has the same meaning as in Part 1 of the 1998 Act.
s. 190 Cartel offence: penalty and prosecution
(1) A person guilty of an offence under section 188 is liable-
(a) on conviction on indictment, to imprisonment for a term not exceeding five years or to a fine, or to both;
(b) on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum, or to both.
(2) In England and Wales and Northern Ireland, proceedings for an offence under section 188 may be instituted only-
(a) by the Director of the Serious Fraud Office, or
(b) by or with the consent of the CMA.
(3) No proceedings may be brought for an offence under section 188 in respect of an agreement outside the United Kingdom, unless it has been implemented in whole or in part in the United Kingdom.
What is ‘dishonesty’?
We do not know what this means. Must borrow from the law of theft.
We have no idea. All cases to touch on the subject have collapsed. However since 1 April we do not require a dishonest agreement:
NB: ‘dishonesty’ removed by the Entreprise and Regulatory Reform Act 2013 as of April 2014
MacKenzie v McLean 19101 SLT (Sh Ct) 40
Kane v Friel 1997 SLT 1274 (J)
R v Whittle
One successful prosecution under the Act
