Unfinished Reform of the Institutions Enforcing UK Competition Law

Chapter 8 on institutional reform written by Bruce Lyons notes that the period since 1998 has seen major changes in competition law, including: public interest was replaced by promotion of competition as the primary duty; anti-competitive agreements and abuse of a dominant position were prohibited, with significant penalties for breach; and the minister withdrew from case decisions, making the institutions determinative. There were also major organizational changes, including merger of the OFT and the Competition Commission to form the Competition and Markets Authority, and establishment of the Competition Appeal Tribunal as a specialist appeals body. In the chapter, Lyons considers the evolution of these institutions from the perspective of how they frame and influence the quality of first instance determinations. Institutions are hostages to their history, and he traces some of the problems faced by the CMA to its institutional roots. New challenges beyond its control are also identified. Reform is needed. The chapter concludes that some of the CMA’s suggestions for legislation are misguided, particularly in replacing its competition duty with ‘the consumer interest’ and reducing the standard of review by the CAT. Alternative proposals are appraised, including a potential change to a prosecutorial system. Lyons argues convincingly that genuinely independent decision-making within the CMA should be preferred and would permit a more limited standard of review.

The Quiet Decline of the UK Cartel OffenceA Principled Victory in the Face of Practical Failure

In Chapter 13, Angus MacCulloch focuses on criminal enforcement. The UK Cartel Offence was introduced in the Enterprise Act 2002 to challenge hard-core cartels and enhance the deterrent effect of the UK competition regime. In its initial phase of operation there was some success. However, a number of significant cases failed to secure convictions. This damaged confidence in the ability of the UK competition authorities to bring successful prosecutions, and ultimately questioned the usefulness of the Cartel Offence. This chapter examines the problems that beset the original Cartel Offence and the lessons learned from the small number of prosecutions brought before the courts. It goes on to examine the reforms in 2013, that removed the controversial ‘dishonesty’ element from the offence, and replaced it with carve outs for openness and publication. Alongside the practical issues in relation to the development of the UK Cartel Offence consideration is also given to a parallel process which saw a form of consensus developing in the academic literature as to the nature of the wrong at the heart of individual cartel activity. It is suggested that this greater understanding can be used to direct efforts to rebuild confidence in the reformed UK Cartel Offence going forward. Increased importance should be given to the securing of good evidence of individual culpability in relation to cartel activity during the investigation phase. It argues that once good evidence is secured, better prosecution cases can be built on the basis of the new narrative of wrongfulness for hard core cartel activity.

Vertical Agreements

Alison Jones looks at vertical agreements in Chapter 3. This chapter charts the development of UK competition law and policy towards vertical agreements over the 20 years since the Competition Act 1998 came into force. It traces how UK policy has evolved, before examining the UK jurisprudence that assesses the compatibility of vertical agreements with competition law. It notes that although many UK cases initially focused on resale price maintenance, more recently a number have analysed vertical restraints affecting online selling, which have proliferated since 2000 with the rapid growth of e-commerce. The chapter also considers how the law could, or should, develop in the future, especially now the transition period following the UK’s departure from the EU has ended. An important issue considered is whether, post-Brexit, the UK authorities should continue to follow EU competition law in this sphere, which has in significant respects been influenced by internal market considerations, or whether it should take a different course.

Exclusionary Abuses

Chapter 4 deals with exclusionary abuses under the Competition Act 1998, covering both public and private enforcement cases. The analysis concerns the approach to dominance as well as tests for abuse, focusing on retroactive rebates and bundled discounts, exclusion in multi-market settings, exclusivity, most favoured nation and equivalent clauses, discrimination, and exclusionary abuses in the pharmaceutical sector. This chapter argues that, in its second decade, modern UK competition law continued a trend that was already clear in the first decade: the prohibition of abuse of dominance is applied in a more economically robust and commercially reasonable way than it is by the EU institutions - the Commission and the EU courts - and in certain other Member States. The chapter notes that the third decade of the Competition Act 1998 will see the UK develop its competition policy free from the constraints of EU law and may allow for some divergence in the approach to exclusionary abuses in the future.

Towards a World Class Regime—An Overview of Twenty Years of UK Competition Enforcement

Chapter 1 provides an excellent and informed general backdrop for the remainder of the chapters. It explains the objectives of the competition law regime introduced from 1998 to 2002 and the problems that led to the reforms of 2013. It reviews how the regime has performed in each aspect: antitrust, markets, mergers, the appeal system and private enforcement, ministers and the public interest, and concurrent application by regulators. It discusses exit from the EU and the ‘digital challenge’ and it comments on the recent reform proposals from the then chairman of the CMA. It gives an overall assessment and considers the way forward, including the possible effects of the Covid-19 pandemic. It is a must-read for anyone wanting to understand the core aspects and direction of travel of UK competition law in one chapter and sets the scene beautifully for the chapters which follow.

The Emerging Contribution of Director Disqualification in UK Competition Law

Peter Whelan assesses a developing and increasingly significant enforcement tool in the UK competition authority’s armoury in Chapter 11. In it, Whelan notes that the enforcement of UK competition law is deterrence-focused and comprises both criminal and non-criminal (i.e. civil/administrative) elements. The chapter concentrates on the non-criminal enforcement apparatus that has been developed over the last twenty years. More specifically, it critically evaluates a particular enforcement mechanism that has been gaining increasing importance throughout the recent development of UK competition enforcement practice: the use of director disqualification. It first establishes the normative role of director disqualification in the UK’s armoury of non-criminal antitrust sanctions (i.e. its complementing of the deterrent function of corporate antitrust fines), following which it highlights their potential for performing this role effectively. It then outlines the legal basis for the use of director disqualification within the UK and evaluates the policy and enforcement practice to date with respect to such orders, before proceeding to outline some of the insights that the UK director disqualification regime can provide to other jurisdictions. Ultimately it concludes that, on the basis of the promising, albeit nascent, UK experience to date, director disqualification should be seriously considered by jurisdictions that wish to operate a robust competition law enforcement regime.

Competition Law and the Digital Economy in the UK and Beyond

In Chapter 14, Liza Lovdahl Gormsen considers the contemporaneous debate on how best to address aspects of the interaction between competition law and the digital economy. She stressed that data is the pinnacle of the digital economy. It has fuelled amazing innovations in all sectors of the economy, but the accumulation of data in the hands of a few global companies may lead to lock-in, bottleneck issues, and leverage. The chapter notes that according to the report Unlocking Digital Competition, which was prepared for the UK Treasury, competition policy will need to be updated to address the novel challenges posed by the digital economy. Some of these updates can happen within current powers, but legal changes are important to ensure that this job can be done effectively. The Competition and Markets Authority’s market study on Online Platforms and Digital Advertising recommends establishing a Digital Markets Unit and ex ante regulation as a possible way forward. Building on the outputs from the Furman Review, the government asked the CMA to lead a Digital Markets Taskforce. In December 2020, the latter published its advice, A New Pro-competition Regime for Digital Markets, where it sets out the role of the Digital Markets Unit and an overview of its proposed regulatory framework for digital firms. This chapter looks at some of the challenges for UK competition policy in digital markets, in particular in relation to data, enforcement, and regulation. It also touches upon some of the potential issues that the UK faces in the digital economy following Brexit.

UK Merger Control

In Chapter 7, David Reader observes that the introduction of the Enterprise Act 2002 formally ended a much maligned public interest approach to merger control in the UK, oft-criticized for the uncertainty permeated by ministerial decision-making. In its place came a new competition-based test to be applied by independent competition authorities with new powers and resources at their disposal. Despite encountering some teething problems as the authorities sought to interpret their respective roles at Phases 1 and 2, the reforms have proven largely successful in delivering one of the most transparent and predictable merger regimes in the world. This chapter reflects on the evolution of UK merger control under the Enterprise Act, observing that a combination of major—and finer-tuning of the competition authority’s Phase 1 enforcement powers has enabled it to effectively deliver upon its mandate. New challenges lie in wait, however, and Reader stresses that the CMA must be allocated the resources and statutory remit to contend with the increased workload implications presented by Brexit and the novel theories of harm associated with mergers in the digital sector. Of further concern are recent reforms to extend the national security public interest ground, which risk a return to the ‘dark ages’ of opaque ministerial decision-making if further safeguards are not implemented.

‘Jack of All Trades, Master of None’: The Ever-increasing Ambit of the Market Investigation Regime

Chapter 6 allows Christian Ahlborn, together with Will Leslie, to revisit his earlier analytical critique of market investigations in UK competition law (published in Ten Years of UK Competition Law Reform, Dundee University Press, 2010), in a chapter entitled, ‘ “Jack of All Trades, Master of None”: The Ever-increasing Ambit of the Market Investigation Regime!’ Whereas the beginning of the decade saw the National Audit Office criticizing the market investigation regime’s low profile, market investigations had figured amongst the Competition and Markets Authority’s most high-profile interventions by the end of it. This chapter considers the extent to which this unique UK competition policy instrument has simultaneously undergone significant legislative reform as well as a slew of judicial challenges. These events have undoubtedly matured the regime and put its procedures on a firmer statutory footing. However, the same question posed in 2010 has not yet been fully answered: as set out in this enlightening chapter, in the authors’ view, it still remains unclear just what market investigations are actually for.

Human Rights and the UK Competition Act

In Chapter 9, Arianna Andreangeli discusses the approach adopted in the UK towards questions of human rights compliance in UK competition enforcement processes. It examines the nature of competition proceedings in light of Article 6 of the European Convention on Human Rights and the implications that that issue has for the fairness standards applicable to those proceedings. It is argued that while the recognition that competition cases may have a ‘criminal nature’ does not justify the wholesale extension of all the safeguards that the Convention reserves to criminal cases, it nonetheless means that investigated parties are entitled to some basic protections that Article 6 ECHR enshrines. The chapter explores the Competition Appeal Tribunal’s powers of review of infringement decisions and suggests that at the root of the conferral of a power of scrutiny ‘on the merits’ is the need to ensure that the public enforcement competition proceedings are ‘human-rights proofed’. It concludes that, while demands of effectiveness in the application of the UK competition rules cannot be overlooked, maintaining the CAT’s rigorous review role for competition decisions is indispensable for compliance with human rights standards and for the integrity and reputation of the UK competition framework.