Results of survey on the Key Aspects of 'A World Class Competition Regime'

In July the Government published a White Paper on the reform of the UK competition law entitled “A World Class Competition Regime” (CM5233). The White Paper put forward a number of far reaching proposals for strengthening the legislative framework within which the UK competition authorities (in particular the office of fair trading) operate.

A survey was carried out by CMS Cameron McKenna on a few of the most important issues contained within the white paper in September 2001. The vast majority of the respondents were in-house lawyers from companies in a wide range of sectors including:

Pharma
Food and beverages
Oil
Insurance
Banking
Household goods
Construction
Financial services
Defence
Retailing
Building materials and general manufacturing
Communications
We have informed the DTI of the answers to this questionnaire on an aggregated basis.

The results of the survey were as follows:

Issue 1

This asked for views on whether the Competition Commission should be able to take decisions by simple majority where it recommends remedies against mergers which it considers might operate against the public interest. The majority presently required is two thirds. The consultees were fairly evenly divided on whether the Competition Commission should be given the ability to make decisions by simple majority. Most felt that simple majority voting was acceptable but believed it should only be permitted if there were a right of appeal against the Competition Commission decision.

Issue 2

This concerned the role of Ministers in the proposed market enquiries which are to take the place of complex monopoly investigations. Given that such enquiries would not have been triggered by a merger or particular act on the part of a single company but relate more to issues arising out of market structures in a particular sector, the Government believes that there may be a case for retaining some degree of Ministerial involvement, particularly where major divestment remedies were to be imposed. Again, the consultees were fairly evenly divided between those who thought there was a role for a Minister and those who thought there was not, but there was a small majority in favour of dispensing with any role for Ministers.

Issue 3

The consultees were asked whether they agreed that serious breaches of competition law should be made criminal. Some two thirds of the consultees believed that it was right to make participation in serious breaches of competition law a criminal offence. They were also asked whether only horizontal agreements (i.e. agreements between competitors) should be criminalised or whether vertical agreements (e.g. those between partners in a supply chain) should also be subject to criminal penalties. The question of criminalisation of vertical agreements was more controversial. A very small number of respondents felt that anti competitive vertical agreements should also be subject to criminal sanctions. A significant number of respondents believed that any additional criminal offence should be defined by regard to abuse of market power in the context of a vertical relationship. A number of respondents, although against criminalisation of any form of vertical agreement, believed that if it were introduced it should be confined to cases involving abuse of market power.

Issue 4

Respondents were asked to give their view whether, if infringements of competition law became criminal offences, corporate bodies as well as individuals could be prosecuted. Most respondents (including those, of course, who were against criminalisation generally) considered that criminality should not be extended to corporate bodies who are already at risk of fines and other penalties for infringing. However, a quarter of the respondents did believe that corporate bodies should be able to be prosecuted for competition law violations.

Issue 5

This concerned the awarding of damages for breaches of competition law and, in particular, the claiming of damages by representative bodies on behalf of groups or classes of consumers. A large majority of consultees did not agree with the concept of the makings of awards on behalf of an indeterminate class and putting any damages awarded in trust so that claimants might come forward. However, a significant number of respondents did say that any residual monies left after damages had been claimed and awarded should be put to purposes which benefit consumers of the product in question or those in a related market. Some respondents submitted that no damages should be awarded unless proved on behalf of a specific claimant.

Issue 6

The Government proposes to include in the legislation provisions enabling the OFT to obtain a disqualification order against directors where serious breaches of competition law have taken place. The Government intends that this new power should be within the scope of the OFT’s leniency policy so that the OFT would be able to hold out to whistle blowing directors the prospect that they will not be target for disqualification proceedings. A large majority of respondents believe that any disqualification power should be within the leniency framework, but it was also suggested that the OFT should only be able to offer a reduction in the period of disqualification and not no disqualification at all.

If you'd like to discuss any of the survey findings in more detail, or would like further information, please contact Richard Taylor by telephone on +44 (0)20 7367 2108 or by e-mail at [email protected].