United Kingdom: Cartels

The two principal pieces of legislation that govern cartel activity are the Competition Act 1998 and the Enterprise Act 2002, both as amended by the Enterprise and Regulatory Reform Act 2013. Chapter I of the Competition Act, which is modelled on Article 101 of the Treaty on the Functioning of the European Union (TFEU), prohibits agreements, decisions or concerted practices between undertakings that may affect trade in the UK, and have as their object or effect the restriction, distortion or prevention of competition. There is an exemption under section 9 of the Competition Act (equivalent to Article 101(3) TFEU), which broadly applies where efficiencies flowing from the agreement outweigh the anticompetitive effects. However, it is highly unlikely that cartel conduct (such as price fixing) would ever qualify for such an exemption. It is also a criminal offence under the Enterprise Act for an individual to agree or implement certain prohibited cartel activities (price fixing, market sharing, limitation of production or supply and bid rigging). This is subject to certain defences and exclusions (e.g. it is a defence if the individual did not intend for the arrangements to be concealed from customers or the Competition and Markets Authority (CMA), or if the individual sought legal advice regarding the agreements prior to their implementation).

Until 31 December 2020, the UK competition authorities and courts were also entitled to apply Article 101 TFEU pursuant to Regulation (EC) No.1/2003, but that is no longer the case following the UK’s withdrawal from the EU and the end of the Brexit implementation period. Any investigation into suspected cartel activity initiated by a UK competition authority after 31 December 2020 will be on the basis of the Competition Act and the Enterprise Act (if applicable). Further information on Brexit is provided below.

Cartel conduct can constitute an infringement irrespective of whether it had an anticompetitive effect on the market. Individuals can be criminally prosecuted under the Enterprise Act for agreeing to implement prohibited cartel activities (whether or not they actually took place).

The Chapter I prohibition applies if the agreement, decision, or practice is or is intended to be implemented in the UK. Similarly, the criminal cartel offence will apply to an agreement outside the UK if it is, or is intended to be, implemented in whole or in part in the UK.

The Competition Act is enforced by the CMA and the sectoral regulators for communications, electricity and gas, water and sewerage, civil aviation, health, railway services and financial services. The CMA is the first port of call for leniency applications, including those in the regulated sectors. Unless otherwise stated, for ease of reference the rest of this chapter focuses on the CMA. The CMA is the only competition regulator with the power to investigate criminal cartels, and shares its powers of investigation and prosecution with the Serious Fraud Office (SFO). The SFO is the intended prosecutor of the offence in England, Wales and Northern Ireland in cases that involve complex fraud. In Scotland, the CMA and the National Casework Division (NCD) of the Crown Office cooperate to investigate and prosecute criminal cartel cases.

The CMA will open an investigation if it has reasonable grounds for suspecting a breach of competition law, e.g. following a complaint by a third party or an individual whistle-blower, through the CMA’s own market monitoring system or by an application for leniency. The first formal milestone in an investigation is generally for a case initiation letter to be sent to the parties. This outlines the conduct being investigated, the relevant legislation, the expected timetable and key contacts. The CMA also typically publishes a notice of investigation on its website, briefly summarising the suspected infringement. The CMA will typically issue information requests to the parties under investigation to inform its investigation. Parties under investigation are kept updated either by telephone or in writing, and are able to meet members of the case team at periodic ‘state of play’ meetings. At the conclusion of the investigation, the CMA may: (i) close the investigation due to administrative priorities; (ii) decide that there are no grounds for action; (iii) accept commitments relating to future conduct; or (iv) issue a statement of objections that the parties’ conduct infringes competition law. The parties then have the opportunity to inspect the CMA’s file (using data rooms and appropriate confidentiality rings) and are entitled to make representations orally and in writing, following which the CMA may issue an infringement decision, impose fines and direct the anticompetitive conduct to end.

The key investigative powers in relation to Chapter I investigations are as follows:

(i) Information requests

The CMA may, where it has reasonable grounds to suspect that there has been cartel conduct, give written notice requiring any person (including third parties) to provide specified documents or information that it considers “relates to any matter relevant to its investigation”. Refusal to comply with a formal information request without reasonable excuse is punishable by a fine, and it is a criminal offence to provide false or misleading information or to destroy, conceal or falsify documents.

(ii) Dawn raids

The CMA may conduct announced or unannounced inspections to search for relevant documents or information evidencing cartel conduct. Dawn raids are typically used at the outset of an investigation (and sometimes later on in the process) where the CMA suspects there is a risk that evidence might otherwise be destroyed. During a raid, the CMA may require the production of documents, take copies of relevant documents and require on-the-spot explanations of any such document. If the raid is carried out pursuant to a court warrant, the CMA will also be able to use reasonable force to obtain entry, and will be entitled to take away originals of documents, hard drives, mobile phones and other electronic devices. The CMA has recently resumed dawn raids as the UK emerged from COVID-19 restrictions.

(iii) Interviews

The CMA has the power to require individuals connected to a business which is a party to an investigation to answer questions (in the form of a compulsory interview). Any information obtained by virtue of the exercise of this power will not be able to be used against that person in a criminal prosecution, except in certain limited circumstances.

The key investigative powers in relation to criminal cartel investigations are broadly as above, albeit with some additions. For example, in a criminal cartel investigation the CMA may carry out intrusive (covert) surveillance in respect of residential premises and private vehicles. The CMA is also authorised to obtain access to communications data (such as records of telephone numbers called) in criminal investigations. If the SFO is involved, it may use its (broadly equivalent) powers of investigation under the Criminal Justice Act 1987.

The power to require the production of information under both Chapter I and the Enterprise Act is subject to legal privilege and also the privilege against self-incrimination. In the UK, legal privilege broadly comprises two types of communications: (i) communications between a lawyer and client made for the purpose of seeking or giving legal advice; and (ii) communications between lawyers and clients, or communications between a lawyer or client and a third party, for the dominant purpose of being used in connection with actual or pending litigation. In the UK, external and in-house lawyers are treated equally for these purposes.

When there is no pre-existing investigation, the first undertaking to apply for leniency to the CMA (which acts as the single port of call for leniency applications, including in the regulated sectors) will gain so-called ‘Type A immunity’ – full immunity from civil fines and criminal immunity for all current and former employees and directors that cooperate with the CMA. Cooperating individuals should also avoid director disqualification. If there is a pre-existing investigation, the first undertaking to apply for leniency may be eligible for ‘Type B immunity’. The CMA will retain discretion as to whether to provide civil immunity to the undertaking and criminal immunity to employees. Type B immunity will not be available when the CMA already has, or is in the course of gathering, sufficient information to bring a criminal prosecution. If the CMA decides not to grant Type B immunity, it may still provide ‘Type B leniency’ – a reduction from any financial penalty imposed under the Competition Act and also immunity from criminal liability on a blanket or individual basis, depending on what the CMA considers to be in the public interest. Cooperating individuals should avoid director disqualification under both Type B immunity and Type B leniency. For an undertaking to be eligible for Type A immunity, Type B immunity or Type B leniency, it must satisfy the following key conditions: (i) accept that it participated in cartel activity in breach of law; (ii) provide the CMA with all information, documents and evidence available to it regarding the cartel activity; (iii) maintain continuous and complete cooperation throughout the investigation and until the conclusion of any action by the CMA; (iv) refrain from further participation in the cartel activity from the time of disclosure (except as may be directed by the CMA); and (v) not have taken steps to coerce another undertaking to take part in the cartel activity.

Subsequent undertakings that provide evidence of cartel activity before a statement of objections is issued may be eligible for ‘Type C leniency’, which usually results in a reduction of 25 to 50 per cent. of the financial penalty that would otherwise have been imposed. The CMA is entitled to exercise its discretion in awarding immunity from criminal prosecution for specific individuals. Cooperating individuals should also avoid director disqualification. For an undertaking to be eligible for Type C leniency, it must satisfy the conditions set out at (i)-(iv) in response to question 8 above.

An undertaking’s legal advisers may make an initial approach to the CMA on a ‘no names’ basis to secure a preliminary marker, protecting the applicant’s place in the queue for leniency. The adviser must confirm to the CMA that the undertaking has a ‘genuine intention to confess’ and must ensure that there is a ‘concrete basis’ for suspecting cartel activity. The CMA must be provided with sufficient details to determine whether there is a pre-existing investigation. If the CMA confirms that Type A immunity is available, the adviser must identify the undertaking and provide details of the suspected infringement and evidence to support this. A similar approach may be made to obtain a marker for Type B immunity, although in Type B cases it is possible to ask whether immunity is available without a requirement to make an immediate application if the CMA confirms that it is.

A senior representative of the applicant must sign a letter indicating a commitment to continuous and complete cooperation throughout the CMA’s investigation and enforcement. CMA guidance notes that the approach to leniency should be a genuine effort to assist the CMA in investigating and enforcing against cartel conduct. If the CMA becomes concerned with an applicant’s cooperation, the matter will be raised with the applicant by the case team.

Type A immunity results in full criminal immunity for each of the undertaking’s existing and former employees and directors who cooperate with the CMA. If the Type A applicant is an individual, their employer undertaking and other employees are not protected by Type A immunity, but may be eligible for Type B immunity or Type B lenience. The CMA retains discretion as to how to apply criminal immunity under Type B immunity, Type B leniency and Type C leniency.

Yes. If an undertaking is cooperating with an investigation in respect of one cartel, and comes forward with information resulting in full immunity in respect of separate cartel activity, it will receive a reduction in the fine imposed in respect of the first cartel (in addition to any reduction it would have received for its cooperation in relation to the first cartel alone).

The CMA will consider settlement as long as it believes that the evidential standard for giving notice of its proposed infringement decision is met. Settlement discussions can be initiated either before or after the statement of objections is issued. The CMA retains broad discretion in considering which cases to settle. In particular, the CMA will consider factors such as the likely procedural efficiencies and resource savings that can be achieved through a settlement process, as well as the prospect of reaching settlement in a reasonable time frame. The CMA’s formal settlement procedure has been used in several cases, the first of which was in 2015.

Settling parties will be granted a discount of up to 20 per cent. (if pre-statement of objections) or up to 10 per cent. (if post-statement of objections), in addition to any leniency discount. Once a case is settled, there will be a streamlined administrative procedure, including scaled-back access to file arrangements with no written representations on the statement of objectives (other than in relation to factual inaccuracies), no oral hearings, no separate draft penalty statement and no appointment of a case decision group.

However, the CMA will usually require a settling party to make an unequivocal admission of liability in relation to the nature, scope and duration of the infringement, which could clearly have a detrimental impact on the party’s position before other authorities and (potential) civil claimants. Following a recent case where a settling party made an unsuccessful appeal to the Competition Appeals Tribunal (CAT), the CMA’s guidance now states that settling businesses must accept that the CMA’s decision will remain final (even if challenged by another addressee) and that they will not challenge or appeal the decision to the CAT.

The UK is party to mutual assistance arrangements relating to competition law enforcement with several countries, including the United States, Australia, Canada, and New Zealand. The CMA also has a memorandum of understanding with Scottish authorities for cooperation in criminal cartel cases over which Scottish courts may have jurisdiction. Until recently, the CMA cooperated extensively with the European Commission (EC) and the national competition authorities of the EU Member States through the European Competition Network (ECN). The CMA is no longer a member of the ECN following Brexit. However, the EU–UK Trade and Cooperation Agreement provides a preliminary basis for cooperation on competition law matters, including the option to enter into separate more detailed agreements on cooperation and coordination. Information supplied as part of an application for leniency will not be passed to an overseas agency without the consent of the provider. Prior to Brexit, an exception to this general provision applied to disclosures made by the CMA within the ECN in accordance with the provisions of the ECN’s Notice.

The CMA may impose a fine of up to 10 per cent. of the infringing undertaking’s worldwide turnover in its last business year. The CMA can also apply to the High Court for the disqualification of a director for up to 15 years, a power which it is increasingly exercising following the publication of new guidance in February 2019.

If convicted in a magistrate’s court, an individual found guilty of a criminal cartel offence may be imprisoned for up to six months and receive a fine of up to £5,000 for offences committed before 12 March 2015 and an unlimited fine for offences committed on or after 12 March 2015. If convicted in the Crown Court, an individual may be imprisoned for up to five years and receive an unlimited fine.

The level of the sanctions imposed are determined by the nature of the anticompetitive arrangements, the impact on consumers and whether parties have applied for leniency. Under its revised guidance as to the appropriate amount of a penalty, issued in December 2021, the CMA will have regard to (among other things) the seriousness of infringement and the turnover of the relevant undertaking, the duration of the conduct and the need for deterrence. There are also several aggravating factors (e.g. delaying the CMA’s investigation, the role of the undertaking as instigator of the infringement and the involvement of directors or senior management in the infringing activity) and mitigating factors (e.g. acting under duress or genuine uncertainty as to whether the agreement constituted an infringement, termination of the infringement following CMA intervention and cooperation with the enforcement process) which can affect the level of fine imposed.

To date, the largest single fine that the CMA has imposed for cartel conduct is £58.5 million on British Airways in connection with a price-fixing agreement with Virgin Atlantic in 2012. Most fines have been significantly lower, but fine levels may increase now that the UK has withdrawn from the EU if the CMA tackles larger cases that were previously the natural domain of the EC. For example, in 2021 the CMA imposed fines totalling £260 million for a combination of abuse of dominance and cartel conduct against a number of companies in relation to the supply of hydrocortisone tablets.

The conduct of a subsidiary may be imputed to a parent company where the subsidiary carries out in all material respects the instructions given to it by the parent company. For wholly-owned subsidiaries, there is a rebuttable presumption that a parent company exercises decisive influence over the subsidiary.

A private action for damages may be brought in the High Court or the CAT. Actions may be brought in either forum where an infringement decision has already been issued (a ‘follow-on’ action) or where there the infringement is alleged (a ‘standalone’ action). A representative action can be brought before the CAT on behalf of two or more consumers by any person who proposes to be the representative in those proceedings. The regime applies to both follow-on and stand-alone cases, and is available to both consumer and business complainants. Proceedings may only be commenced if the CAT grants a collective proceedings order authorising the person to bring proceedings as class representative, providing a description of the class of persons whose claims may be included and specifying whether the proceedings will continue on an opt-in or opt-out basis. A 2019 Supreme Court ruling has lowered the threshold that a proposed class representative needs to overcome when seeking authorisation for collective proceedings to proceed. This represents a significant development for the UK’s collective proceedings regime although the longer term impact will depend on how the Supreme Court’s findings are implemented by the CAT.

Damages are usually calculated with the intention of restoring the victim to the position they would have been in had the infringement not occurred.

Decisions made by the CMA and sectoral regulators under the Competition Act may be appealed to the CAT on points of law, points of fact or as to the amount of the fine. There is a further, narrower right of appeal from judgments of the CAT, on a point of law or as to the amount of the fine, to the Court of Appeal, with the possibility of a subsequent appeal to the Supreme Court on a point of law or public importance. Appeals may be made by a party to the agreement or by a third-party that can show sufficient interest. As explained in the response to question 15, settling parties can no longer appeal decisions.

A notice of appeal summarising the issues in dispute and the relief sought must be filed with the CAT registrar within two months of a decision.

In October 2019, the CMA announced that it had fined three companies £36 million for engaging in a cartel in relation to the supply of precast concrete drainage products to the construction industry. The CMA found that the companies had agreed to fix and coordinate prices, share the market by allocating customers, and had regularly exchanged competitively sensitive information. The CMA found these arrangements had lasted around seven years and had involved meetings between senior executives from the companies. One of the companies appealed to the CAT which, in December 2020, upheld the CMA’s decision to impose a £25 million fine on that company. In March 2021, the CMA also secured legally binding disqualification undertakings from two directors involved in the anticompetitive behaviour, under which the former directors have undertaken not to act as a director of any UK company for 12 and 11 years respectively.

The CMA has recently conducted cartel investigations in a wide variety of sectors, including pharmaceuticals, construction and musical instruments. Financial services have also received close attention from the CMA, and the relevant sectoral regulators with concurrent competition powers, namely the Financial Conduct Authority and the Payment Systems Regulator, who issued their first competition decisions in February 2019 and January 2022 respectively.

As set out in the responses to questions 17 and 24, the CMA is continuing to deploy its director disqualification powers, having updated this guidance in February 2019 and secured a number of disqualifications in 2021. It is also likely that the collective action litigation regime will continue to grow following the Supreme Court’s decision to lower the threshold for proposed class representatives (see question 20).

The CMA’s recent practice demonstrates that it is prepared to balance its competition enforcement objectives with other public policy considerations. In response to the COVID-19 pandemic, the UK Government introduced a number of ‘public policy exclusion orders’ to temporarily relax the Chapter I prohibition for certain types of agreements relevant to the pandemic response, subject to a notification procedure. Similarly, in September 2021, following a surge in fuel prices, the CMA temporarily exempted fuel suppliers from certain competition rules, allowing them to share information in order to ensure effective supply to petrol stations. The following month, the CMA took similar measures to help combat a shortage in the supply of carbon dioxide.

In April 2022, the government announced several reforms to competition and consumer protection policy in the UK. Amongst a wide range of changes, the reforms include new measures to strengthen the CMA’s evidence gathering abilities, greater powers to sanction companies refusing to comply with investigations and a reduction in the minimum turnover threshold for immunity from financial penalties from £50 million to £20 million. The government also intends to amend the Chapter I prohibition so that it can apply to agreements, concerted practices and decisions which are implemented outside of the UK, depending on the effects of the conduct within the UK.

The CMA has also stated in its 2022-2023 Annual Plan that it will focus on the following themes:

• protecting consumers from unfair behaviour by businesses, during and beyond the COVID-19 pandemic;
• fostering competition to promote innovation, productivity and long term growth right across the UK;
• promoting effective competition in digital markets;
• supporting the transition to low carbon growth, including through the development of healthy competitive markets in sustainable products and services; and
• delivering its responsibilities and strengthening its position as a global competition and consumer protection authority.