IFLR Competition Law Forum 2016: key takeaways

Author: IFLR Correspondent | Published: 10 Nov 2016
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Keynote address: UK competition enforcement – progress and prospects

  • The UK’s Competition and Markets Authority (CMA) is making changes to increase its case flow, boost transparency and make decisions faster
  • It has taken on board criticisms from, among others, the National Audit Office, which said earlier this year the CMA is not doing enough
  • It will now focus its attention on online marketplaces and pharmaceutical companies, particularly those that supply to the NHS to ensure pricing is fair
  • Market participants are encouraged to come forward and blow the whistle if they see or hear of anything suspicious, or are a victim of anti-competitive practices
  • The regulator’s work is largely shaped by the cases that come to it
  • Smaller businesses, among which competent knowledge of competition law can be limited, should know they are not beyond the reach of enforcement if in breach

Industry’s response to the Brexit result

  • In-house panellists are determined to see Brexit as an opportunity – it would be short-sighted not to spot the chance to reshape the legal and regulatory environment
  • State aid rules will continue to be exist but there’s a particular opportunity in that space
  • The WTO deal if struck would be 'dreadful’ and lobbying is highly likely – despite most trade associations being pan-European trade associations
  • The fundamentals of competition law are the same throughout the world, so market participants do not foresee a significant divergence between the EU and UK
  • There could however be divergence in application, potentially duplicating the amount of work required of businesses – what would have once been a pure European merger for example with one regulator would now cross at least two jurisdictions

FCA competition enforcement

  • The FCA has an overarching objective to ensure financial markets work well, protect consumers and enhance the integrity of the system. Its competition powers are fairly new
  • Promoting competition is a good thing, but it’s not the FCA’s job to control it to the degree of a perfectly efficient market
  • For the regulator it’s not about picking winners but helping new players find a route in where there would have been barriers
  • Ongoing work includes reviewing: big data in insurance, credit cards, mortgage markets, asset management
  • The regulator has officially opened its first competition case, but all further detail is confidential
  • Awareness remains a challenge. In a world where compliance culture prevails, competition compliance lags behind

Lessons learned from the financial services sector in competition enforcement

  • The FCA in a unique position where it has a suite of tools available for communicating with the market, including 'soft’ tools
  • It’s looking more at bilateral engagement rather than rushing in to use its competition powers so far
  • There’s value added from a public policy perspective in combining the FCA’s powers with competition. But for firms the benefit isn’t as clear – no one wants to face more enforcement action than they have to
  • Leniency procedures are still relevant whether it’s the CMA or FCA, but it can sometimes be a headache knowing which regulator to go to and what exactly constitutes a 'significant issue’
  • Digital innovation is a huge opportunity for the industry and often the best way is to form alliances with fintech partners – though that often introduces competition concerns. Project Innovate is helpful but progress has been too slow
  • The FCA should look to where it can shift the dial to improve behaviour rather than chip away at incremental changes

Managing competition investigations

  • Dawn raids are rarely at dawn. European officials tend to arrive at 9.30am. They also tend to take place on a Tuesday, having scoped the offices out on Monday
  • CMA and European Commission has the ability to inspect homes, cars and garages of employees, away from the headquarters
  • Receptionists, IT staff and cleaning personnel should be trained to deal with dawn raids, being, as they are, the first in line. Giving them guidance is not enough, they need to be trained in what they can and cannot do
  • When being questioned company employees should keep answers short and factual
  • Ensure you get your external counsel with you as soon as possible.  If your key relationship firm is based outside your headquartered city then arrange a local counsel

Competition litigation and private enforcement

  • Cartel decisions are often followed by damages actions. But deciding what the given price could have been without the cartel can be difficult and expensive
  • Because of this litigation funding has stepped in to fill the need and claimants often take on little risk as a result
  • In-house at Sainsbury’s Kate Botting offered lessons learnt from its successful £68.6 million case against Mastercard
  • She recommended rigorous cost-management, strong choice of witnesses – Sainsbury’s offered up its CFO and CEO -   and understanding that disclosure is an ongoing process
  • Competition litigation is also seeing an increased use of economists, in all parts of the process

Merger control: recent developments and post-Brexit prospects

  • The merger control review system in UK is voluntary, which means merging parties can decide whether they wish to file.  The EC’s system is mandatory
  • Under this voluntary system the UK regulator, the CMA, scans the market to see if mergers are taking place, using the media and trade press
  • The CMA’s rate of references for phase two is around 18% of all decisions. Those intervention rates are in line with merger control in UK for past six to seven years
  • The CMA has improved the ways in which it monitors at spotting anti-competitive mergers, looking at around 450 mergers in the past year and calling five cases
  • The CMA tries not to duplicate the requests for information that it puts out in phase one in phase two

Compliance challenges for companies with UK and EU operations

  • Companies should have a rationale for creating their compliance programmes, citing the jurisdictions they operate in where they think they may fall victim to corrupt practices
  • Companies should consider what they are trying to achieve with their compliance programme. They should get a message out that is understood by employees who will be buying and selling products
  • Lawyers should ensure they are not the gatekeepers over providing compliance work
  • In-house should only focus on borderline practices like public announcements for head office training, and those personnel working in those areas
  • Companies with one brand used throughout the entire group are more liable for reputational damage following a compliance breach in one jurisdiction, than those with multiple brands. If your company owns a single brand, there should be more consistency with the types of compliance programmes you run