27 March 2019

Is the CMA about to get some new teeth?

The government recently published proposals from the CMA for reforms to competition law and consumer protection law treformo “safeguard the interest of consumers and to maintain and improve public confidence in markets”. What reform is needed and what are the recommendations?

 

Why is reform needed?

BEIS has identified two key challenges which necessitate reforms of law and policy in these areas:

• the growth of the digital economy and the new forms of consumer detriment appearing
• a decline in public confidence in market competition.

 

What are the key proposals for the CMA?

• An overriding statutory duty to treat the interests of consumers as paramount and a statutory requirement to conduct investigations swiftly while respecting parties’ defence rights
• Greater powers to intervene early and to take robust action to deal with consumer issues
• Revocation or sharing of some of its other powers and functions to enable it to focus on its core purposes.

What new powers are recommended?

1. Market studies, investigations and information gathering

The scope of market studies and investigations should be aligned to ensure that they both assess adverse effects on consumers. The CMA should have extra powers to:

• impose binding remedies to address adverse effects on consumers (without requiring a link to adverse effects on competition)
• impose early interim remedies to protect consumers
• fine firms for failing to comply with remedies
• take undertakings and commitments from firms at any time, supported by fines for failures to comply.

Linked to the above, in respect of information gathering, the CMA should have the power to:

• issue turnover-based fines to firms who fail to provide information or who provide false or misleading information
• require information generally rather than only in respect of investigations.

 

2. Enforcing consumer protection law

The CMA should be granted powers to:

• decide and declare publicly when a breach has occurred
• order firms to cease infringing practices (including on an interim basis)
• impose fines for breaches.

 

3. Holding individuals responsible

The people directly responsible for misconduct are not affected by fines on their firms. The proposals recommend new CMA powers to:

• fine individuals for serious breaches of competition law
• disqualify company directors for serious breaches of consumer protection law
• implement changes to corporate governance to increase board-level responsibility.

 

4. Other recommendations

These include:

• greater compensation for whistleblowers and a requirement on courts to consider the impact of revealing their identity
• requirements on auditors to report suspected infringements
• a mandatory notification requirement for mergers above a certain threshold plus a “standstill obligation” until approval
• increasing inefficiency in the Competition Appeal Tribunal (CAT) process and requiring transparency in its decisions.

What powers may the CMA lose?

The proposals recommend that the reference and appeal of certain decisions made by sector regulators is taken away from the CMA, to allow its resources to be spent on investigating and addressing consumer detriment instead.

In addition, the responsibility for criminal prosecution of those involved in hard-core cartel activity should be transferred to an agency that routinely brings criminal prosecutions rather than the CMA.

 

Conclusion

It is early days for any of these proposals to be implemented. Some of the ideas are in the early stages of development and there is likely to be opposition as, in the CMA’s own words, they may be held “too wide-ranging and radical”.

 

What is clear, though, is that there is an appetite for reform in these areas and change will come in some shape or form in the future. We will keep you up to date with these proposals as they progress.

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About the Author
Kevin Mahoney, Solicitor
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