Competition Law Notes - Investigations and Enforcement
Read our FREE Competition Law Notes on the topic of Investigations and Enforcement. Perfect for law exam revision and general reference.
- The meaning and importance of enforcement
- Who enforces competition law?
- Public enforcement
- Investigation powers
- Privilege/Self-incrimination
- Civil enforcement
- Criminal sanctions (UK)
- Private enforcement
- What is private enforcement?
- When and where can a company sue or be sued?
- Who will bring claims?
- Relationship with public enforcement
- Case study
The meaning and importance of enforcement
- Ensuring compliance with competition law
- Ability to detect and investigate
- Sanctions for non-compliance
- The risks for companies
Who enforces competition law?
- The European Commission
- applies EU competition rules
- acts if conduct/agreement may affect trade between Member States
- The Office of Fair Trading
- applies UK Competition Act 1998 (similar provisions to EU rules but purely UK impact) as well as EU competition rules
- National Courts
- the Competition Appeal Tribunal
- the High Court
- the Commercial Court
Legislation and texts
- EC
- EC Treaty
- Regulation 1/2003
- Notice on co-operation within network of competition authorities
- Notice on co-operation between the Commission and the courts of the EU Member States
- UK
- Competition Act 1998 (“CA98”)
- Enterprise Act 2002 (“EA02”)
- Powers of investigation OFT 404
- Enforcement OFT 407
- Powers for investigating criminal cartels OFT 515
Requests for information (EC)
- “Simple request” (Article 18(2) Reg. 1/2003)
- power to obtain all necessary information
- must be in writing
- must state the legal basis and purpose of the request
- no compulsion to reply
- Must state Article 23 penalties for intentionally or negligently supplying incorrect information (fine 1% worldwide turnover)
- Decision to require information (Article 18(3) Reg. 1/2003)
- formalities as above and must indicate Article 23 applies to non-supply of information and Article 24 periodic penalty payments
- National Panasonic Case 136/79 [1980] ECR 2033
Requests for information (UK)
- OFT may make enquiries without using formal powers
- Notice requiring information (s26 CA98)
- can require any person to produce documents or information which it considers relevant to the investigation
- includes information recorded in any form
- written notice must
- state the subject matter and purpose of the investigation
- Specify or describe the documents or information sought
- Set out offences for non-compliance
Dawn raids (EC)
- Undertaking has a positive duty to assist during raid - see SGL Carbon
Dawn raids (EC)(II)
- NCA to provide assistance – Article 20(5) and 20(6)
- Inspection of other premises e.g. homes, cars
- if reasonable suspicion exists that books or records are being kept there
- requires prior judicial authorisation – Article 21 and see SAS/Maersk Air
- NCA can carry out an inspection for another NCA – Article 22
- Rules on exchange of information between Commission and NCAs - Articles 11, 12 and 28
Dawn raids (EC) – what can officials look at/take?
- Article 20 Reg. 1/2003
- Examine books and other business records, including documents in electronic form, which are relevant to the subject matter of the investigation
- Entitled to take copies, not originals
- Power to seal any business premises and books or records for the period and to the extent necessary for the inspection
- Officials are not entitled to go on a general ‘fishing expedition’, but officials can examine books and business records in order to confirm that they do not relate to the subject matter of the investigation
Dawn raids (EC) – what can officials ask?
EC
- The officials can ask about the location of a document
- On-the-spot oral explanations of documents and of facts (EC raids only) related to the subject matter and scope of the investigation
EC Power to take statements (Article 19 Reg. 1/2003)
- with consent, no penalties for incorrect or misleading information
- NCAs must be informed and can attend
Offences relating to investigations (EC)
Periodic penalty payments up to 5% total turnover (Article 24)
- including for failure to submit to inspection ordered by decision
Offences relating to investigations (EC) (II)
- ON
- first decision imposing fine for breach of seal
- two day inspection by Commission
- separate decision
- found seal negligently or intentionally broken
- fine imposed of €38 million
- Failure to co-operate may be aggravating factor in substantive fine
- Professional Videotapes
- Sony employee found to have shredded documents
- Sony employee refused to answer questions
- Fine on Sony increased by 30%
Dawn raids (UK)
- OFT (Competition Act)
- Reasonable grounds for suspecting that the company has infringed the prohibitions set out in the Competition Act or Article 81/82 EC Treaty
- Without warrant (Section 27) or with warrant (Section 28)
- ‘Gentlemanly’ dawn raid – 2 days notice – occupier need not be suspected of an infringement
- OFT (Enterprise Act)
- Reasonable grounds for suspecting that a criminal cartel offence has been committed
- Warrant required
Dawn raids (UK) – what can officials look at/take?
Under Competition Act 1998
- Under written authorisation (business premises) (S27)
- Officials can take copies of any document produced which the officials consider relate to the subject matter of the investigation
- Under warrant (business premises) (S28)
- Officials can, in addition, take original documents if necessary to preserve the documents, prevent interference with them or if copying is not practicable at the premises. Officials also have criminal “seize and sift” powers
- Officials can take any other steps necessary for preserving the documents or preventing interference with them
- can include sealing premises
- Power to enter and search domestic premises under warrant (S28A)
- where reasonable grounds for suspecting that there are documents or information relating to the investigation on those domestic premises. Officials do not have criminal “seize and sift” powers
Dawn raids (UK)– what can officials look at/take? (II)
Criminal cartel raid under Enterprise Act 2002
- Warrant required to search premises
- no distinction is made between business and non-business premises
- Officials can take documents away under Enterprise Act and/or criminal ‘seize and sift’ powers
- if it is not reasonably practical to determine on the spot whether documents are relevant
- particularly relevant to information held on computer
Dawn raids (UK) – what can officials ask?
- UK (CA98)
- The officials can ask about the location of a document
- On-the-spot oral explanations of documents related to the subject matter and scope of the investigation
- UK Criminal cartel dawn raid Compulsory interviews
(Section 193(1) EA02)
- Individual cannot refuse to produce documents or to answer questions
- Officials cannot use the answers as evidence in civil proceedings against the company that employs the individual
- Officials cannot use the answers in criminal proceedings against the individual unless the individual:
- knowingly or recklessly made a false or misleading statement
- is prosecuted for an unrelated offence and makes a statement that is inconsistent with it
Dawn raids (UK) – what can officials ask? (II)
UK Criminal cartel dawn raid
- Voluntary interviews under caution
- Suspect given standard criminal caution before being questioned
- Told that the interview is voluntary; free to leave at any time
- Entitled to independent legal advice from a criminal lawyer
- Answers given can be used in civil investigations into companies involved in Competition Act infringements
- Answers given can be used against the person interviewed in a subsequent prosecution
Offences relating to enforcement (UK)
- Civil investigation (CA98)
- Criminal offences for failure to comply include fines and imprisonment
- Offences
- Obstructing officials
- Providing false and misleading information
- Destroying/falsifying documents
- Failure to produce or explain documents or to indicate their whereabouts
See Summary table at Section 7 of OFT404 for full details
Offences relating to enforcement (UK)(II)
- Criminal investigation (s201 EA02)
- Criminal offences for failure to comply include fines and imprisonment
Problems: self-incrimination
- No absolute right to silence Mannesmann-Röhrenwerke AG
- Undertaking cannot be forced to admit an infringement but
obliged to answer factual questions and provide documents even if this may be used to establish an infringement against them - see SGL Carbon and Recital 23 Reg 1/2003
- Limited privilege against self-incrimination – can refuse to answer questions requiring the admission of the alleged infringement but cannot refuse to hand over documents - see
Orkem and Solvay
- Applies to information requests and to inspections where Commission using compulsory powers – see Dalmine
- Right to silence in criminal cases – Funke and Saunders ECtHR
Problems: Legal Professional Privilege
- Protects confidential communications with lawyers
- LPP exists in EC law but is limited
- AM and S Europe Ltd
- Communications for purposes of legal advice on subject matter of proceedings / potential proceedings
- Excludes in-house lawyers unless repeating advice of independent lawyer
- Hilti
- Preparatory document prepared exclusively for seeking legal advice from lawyer in exercise of rights of defence
- Akzo
- Excludes lawyers not admitted to practice in EEA
- Akzo
- CFI should determine disputes over privilege
- pending appeal to ECJ
Summary of key differences between
UK and EC legal professional privilege
Penalties for infringement (EC)
Penalty for substantive breach
- Decision finding an infringement and requiring it to end
- Behavioural and/or structural remedies
- Proportional and necessary
- Fines – see Commission Guidelines on setting of fines (2006)
- Leniency applications
- Interim measures
- Monitoring – see Microsoft
Other methods of resolution
- Commitments (Article 9 Reg 1/2003)
- Settlement procedure but not for hard core cartels
- Regulation 622/2008
- Notice on conduct of settlement procedure
Penalties for infringement (UK)
Competition Act 1998
Infringement decision against undertaking
- Decision finding breach
- Such directions to end it as OFT considers appropriate
- Behavioural or structural
- Fines – see OFT 407 & 423
- Interim measures
Other methods of resolution
- Commitments
- Early resolution procedure
Penalties for infringement (UK): criminal
Criminal offence (s188 EA02)
- individual dishonestly participates in an agreement to fix prices, limit supply or production, share markets or rig bids
- agreement does not have to be implemented
- OFT, Serious Fraud Office and sectoral regulators
Sanctions
- 5 years’ imprisonment; and/or
- unlimited fines; and/or
- disqualification as a director for up to 15 years
Penalties for infringement (UK): criminal
- Leniency and no action letters
- Marine Hose Cartel
- led to first criminal convictions
- sentences reduced on appeal - R v Whittle and Ors [2008] EWCA Crim 2560 (14 November 2008)
- Passenger Fuel Surcharge case
- cartel Virgin Atlantic and British Airways
- Virgin Atlantic leniency applicant
- civil penalties imposed on British Airways
- British Airways executives charged with criminal offence
Private enforcement
Private enforcement
- What is private enforcement?
- When and where can a company sue or be sued?
- Who will bring claims?
- Relationship with public enforcement
- Case study
“There have been only a very limited number of successful damages awards for breaches of EU competition law in the last 40 years. That means that the comprehensive enforcement of the competition rules is not yet complete – not enough use is made of the courts. More importantly the victims of anti-competitive activity are not being compensated for their losses. And finally, underdevelopment of private enforcement means that deterrent effect of the competition rules is not as great as it should be”
Commissioner Kroes, March 2005
What is private enforcement?
- Policy Objectives
- Deterrence
- Compensation
- Supplement public enforcement
- UK
- Competition Act and Enterprise Act
- OFT Discussion paper (April 2007), Recommendations (November 2007) and Response to White Paper (July 2008)
- Civil Justice Council recommendations to Lord Chancellor (August 2008)
- EU White Paper
- compensation rather than deterrence
When and Where Can You Be Sued? (I)
Primary Actions (no infringement decision)
- High Court: Chancery Division
- 6 years after the loss was suffered
- Limitation period may be extended
- Rare
- Crehan v Inntrepreneur Pub Company [2004] EWCA Civ 637 (overturned on appeal)
- Arkin v Borchard Lines [2003] EWHC 687 (Comm)
- Secretary of State for Health v Norton Healthcare [2004] EWHC 609 (Ch)
When and Where Can You Be Sued? (II)
Follow On Actions (infringement decision)
- High Court: Chancery Division
- Bound by findings of fact by the OFT (s58 CA)
- Bound by infringement decisions of the OFT (s58ACA)
- Practically bound by infringement decisions of the Commission between same parties on same subject matter (Inntrepreneur Pub Company v Crehan [2006] UKHL 38)
- Competition Appeal Tribunal (CAT) (s47A CA)
- Bound by infringement decisions of the OFT or Commission
- 2 years from the later of the loss or when infringement finding is final
When and Where Can You Be Sued? (III)
Follow On Actions
- Likely to be common but many cases settle without litigation
- BCL Old Co Limited; Deans Food Limited
- Genzyme v Healthcare at home (interim damages)
- Emerson Electric Co and others v Morgan Crucible Company plc and others
- CAT – claimant friendly? CAT or the High Court?
Who is Likely to Bring Claims?
- Competitors
- Major Customers
- Consumers?
- Consumer claims in the CAT (s47B CA)
The Consumers Association v JJB Sports PLC
- Representative Actions in the High Court (CPR 19.6)
- Class action settlements
British Airways / Virgin Atlantic – fuel surcharges
Damages and other remedies
- Must demonstrate causation
- Calculation of damages
- Compensatory damages
- Restitutionary damages
- Devenish Nutrition v Sanofi [2008] EWCA Civ 1086
- Declaration
- Injunction
Relationship With Public Enforcement (I)
- Not possible to simultaneously pursue a complaint to the OFT and private litigation - see Synstar Computer Services v ICL [2001] UKCLR 585
- Advantages of public enforcement to complainant
- Costs
- Investigatory powers
- Better outcome where other remedies sought
- Disadvantages
- Time
- Loss of control
- No transparency
Relationship With Public Enforcement (II)
- Complainant likely to use public route where damages sought
- Complainant likely to go directly to the High Court where an injunction sought - see Network Multimedia Television v Jobserve [2002] UKCLR 184
- Leniency programmes – tension?
Private enforcement: case study
Virgin Media v BSkyB
- Stand alone claim in High Court
- Abuse of dominance claim i.e. Chapter II / Article 82
- Commercial negotiations on sale / purchase of television channels
- Parties disagreed on market definition, dominance and abuse
- Split trial ordered
- Case settled November 2008