UK Government publishes decision on competition and consumer law reform

The UK Government has today published its decision to proceed with a wide-ranging set of reforms to competition law and consumer protection in England & Wales and Scotland.?This follows on a consultation exercise in July 2021 which proposed, among other things, more active pro-competition strategy, rebalanced merger controls, stronger enforcement against anticompetitive conduct, and cross-cutting reforms to the?powers of the Competition and Markets Authority (CMA), together with strengthened enforcement of consumer protection laws.

This article, which follows up on this piece last year, discusses the key aspects of today’s decision as they relate to the proposed competition law and consumer enforcement reforms.

Market studies and investigations

The Government has decided to reform the market study and market investigation regimes by: (a) allowing more opportunity for binding commitments to be accepted during market studies and market investigations; (b) providing the?CMA?with greater flexibility to define the scope of market investigations; (c) removing the requirement to consult on a market investigation reference within the first 6 months of a market study; (d) enabling the?CMA?to require businesses to conduct trials to determine the final format of certain remedies; and (e) enhancing the?CMA’s ability to amend remedies in a 10-year period following its finding of an adverse effect of competition in a market investigation.

These reforms are significantly less far-reaching than had been proposed.?Notably, the Government has decided against unifying the market study and market investigation processes and has also decided not to empower the CMA to impose interim remedies in market investigations.

Merger control

The Government has decided to retain the UK’s voluntary and non-suspensory regime and has also decided to (a) raise the turnover threshold from ￡70m to ￡100m; (b) create an additional basis for review of so-called ‘killer acquisitions’ where at least one of the merging businesses has a 33% UK market share and UK turnover of ￡350m; and (c) introduce a small merger safe harbour, exempting mergers from review where each party’s UK turnover is less than ￡10 million.

Anti-competitive conduct

The Government has decided among other things to: (a) amend the Chapter I prohibition in the Competition Act 1998 (CA98) to apply to agreements, concerted practices and decisions implemented outside of the UK; (b) grant the?CMA?new evidence-gathering powers in CA98 investigations; (c) introduce a new statutory framework for confidentiality rings; (d) reduce the turnover threshold for immunity from CA98 financial penalties for breaches of the Chapter II prohibition from ￡50m to ￡20m; and (e) expanding the jurisdiction of the Competition Appeal Tribunal (CAT) to include the ability to grant declaratory relief and also allow the CAT and the courts to award exemplary damages for breaches of competition law.

The Government had signalled an intention to vary the standard by which the CAT determines appeals against infringement decisions in Competition Act cases, but has decided against this in light of feedback.?

Cross-cutting competition law reform

The Government has also decided to: (a) empower the CMA to impose fixed penalties of up to 1% of annual worldwide turnover (and additional daily penalties of up to 5% of daily worldwide turnover) for non-compliance with investigations; (b) introduce civil turnover-based penalties for non-compliance with orders imposed by, or undertakings or commitments accepted by, the?CMA across its competition enforcement functions; and (c) strengthen the?CMA’s powers to test and verify whether the use of algorithms by companies complies with competition law.

The Government had proposed to reform the CMA’s system of reporting panels by creating a smaller, more dedicated pool of panel members to help to speed up cases and revising the role of panel members but it has decided not to progress those reforms.

Consumer enforcement

The Government has decided to progress one of the most significant reforms of UK consumer law ever seen, by introducing an administrative enforcement model similar to that used for competition law.

Under the new model, the?CMA?will be able to decide for itself where consumer protection law has been breached.?This means that the?CMA?will be able to: (a) determine whether an infringement of certain consumer laws has occurred; (b) impose penalties of up to 10% of global turnover in respect of any breaches it has determined; and (c) give binding compliance directions requiring firms to comply with relevant consumer laws on pain of turnover-based and fixed penalties.?Decisions of the CMA will be subject to review by the High Court (Court of Session in Scotland), with more intensive scrutiny given to those imposing monetary penalties.

Next steps

Many of the reforms decided on by the Government will require legislation to implement and so it will identify the appropriate legislative vehicle or vehicles as Parliamentary time and priorities allow.