What has the body responsible for enforcing UK competition law achieved in the year since it was established?
Today marks one year since the Competition and Markets Authority (CMA) replaced the Office of Fair Trading (OFT) as the primary body responsible for enforcing competition law in the UK. So, one year on, what has the CMA achieved and where does it appear to be heading?
The CMA certainly seems to have got off to a good start. In addition to inheriting ongoing civil competition investigations from its predecessor, it has opened several of its own and has launched a number of wide-ranging, sector-specific inquiries – most notably in the energy and retail banking sectors.
Perhaps more significantly, on the criminal side, the CMA has brought its first charges under section 188 of the Enterprise Act 2002. Three individuals were charged last year with operating a cartel in relation to the supply of galvanised-steel tanks. One defendant has pleaded guilty and the remaining two will be tried later this year. The CMA is also conducting a related civil investigation into whether the businesses involved have infringed civil competition laws.
Although the galvanised-steel investigation pre-dates the CMA, the criminal charges are significant because they are the first to be brought since the collapse of the British Airways/Virgin price-fixing trial in May 2010. That trial, which was the first contested prosecution of the cartel offence, collapsed when it emerged that a large quantity of material potentially helpful to the defence had not been disclosed.
The steady string of senior recruitments into the CMA’s Cartels and Criminal Group - and more in the pipeline - strongly suggests that the agency sees cartel enforcement work as a strategic priority. Indeed, it has publicly stated that it is looking to take an increasingly proactive approach to cartel detection and to reduce its reliance on the leniency programme (whereby immunity from prosecution or fines may be available for individuals or businesses who come forward with information).
One of the ways the CMA wants to do this is to invest in more sophisticated digital forensics and intelligence capabilities.
But it remains to be seen whether the CMA will become the ‘mainstream criminal enforcement agency’ that its executive director of enforcement, Sonya Branch, envisages. The galvanised-steel trial - currently scheduled for June 2015 - could be a defining moment. The CMA cannot afford to suffer the same high-profile defeat as its predecessor.
The agency is no doubt feeling bolstered by the guilty plea already secured. However, as the price-fixing agreement in question was made before the criminal cartel offence was amended in April last year, an essential element of the conduct alleged against the remaining two defendants is that they acted dishonestly. The same will apply to the CMA’s ongoing criminal investigation into the supply of products to the construction industry, in the event that charges are brought.
Future cases, where the conduct post-dates 1 April 2014, will not present that hurdle. However, whilst the removal of the dishonesty element makes the cartel offence easier to prove and brings it more in line with equivalent offences in other jurisdictions, it should not be taken for granted that it will lead to any significant increase in the number of successful prosecutions.
The lack of prosecutorial activity to date can be attributed to a number of factors, not least of which are the inherent tensions between individual interests in criminal proceedings and corporate interests in civil settlement.
Many of those tensions remain and may prove to be as much a challenge for the CMA as they were for the OFT.
Elly Proudlock is counsel at WilmerHale