Civil Fraud Quarterly Round-Up: Q1 2021
In a report published on 5 February, the National Audit Office (NAO) congratulated the Competition and Markets Authority (CMA) for “significant progress” in improving how the UK’s competition regime works confirming that, it is now “more coherent than ever”. However, it called for further action to step up the flow of successful enforcement cases and the need for greater awareness amongst business of competition law. Flexibility of resourcing and greater co-operation to secure a coherent approach across the regime is called for.
The review examined: the cost of the regime – how well it coordinates its activities; how successfully the regime uses its competition powers; how the regime measures its impact on competition, productivity and growth, and how it uses this information to inform its work. It recognised that the CMA only came into being in 2014 and acknowledges the teething problems and resource issues that can arise.
Financial services in the spotlight
The report states that “historically, the UK competition regime has struggled to identify anti-competitive behaviour, notably in financial services”. The OFT and then CMA found only three breaches in financial services between 2010 and 2015, despite “serious and long-running problems”. That said, given that the Financial Conduct Authority, as a sector regulator, now has concurrent competition powers and the CMA confirms greater co-operation with the European Commission and US Department of Justice action may be stepped up in this area in the future. (See our related blog, "FCA flexes competition muscles")
In the pipeline
The review concludes that the UK competition regime faces big challenges to increase the low number of enforcement decisions to date. It confirms that the CMA and the regulators are acting to improve the detection of anti competitive behaviour and to build a pipeline of cases, but the system has so far failed to produce a substantial flow of enforcement decisions. The high level of fines in Germany (£1.4 billion) is offered as a comparison to the £65 million of competition enforcement fines in the UK. With that in mind, the reports calls for the CMA to continue to develop its understanding of how leading European counterparts manage their enforcement casework, and review its own approach in light of lessons learned.
The report argues that successful high-profile enforcement action “builds the credibility of a competition authority, clarifies the law and deters anti-competitive behaviour”. It notes the reputational impact on the CMA of losing high profile cases. The recommendation given to improve the system is for the CMA to assess the fundamental reasons for low enforcement case flow and consider the case for removing any legislative or institutional barriers.
The challenges of criminal enforcement
The review confirms that the CMA and, previously, the Office of Fair Trading (OFT), have found criminal enforcement against individuals for cartel offences “particularly challenging”. They cite the cause of this as the need for cases to be proved beyond a reasonable doubt and that for alleged crimes committed before April 2014, the competition authorities had to prove that agreements were entered into dishonestly. The review refers to the “Steel-Tankers” case and recalls the facts of the case. In 2012, a manufacturer reported being part of a cartel and sought immunity from fines and immunity from prosecution for its cooperating employees under the leniency programme. In January 2014, a director of one company pleaded guilty to price-fixing and other cartel activity between 2004 and 2012. In 2014, the CMA brought similar criminal charges against two other directors. However, these two directors were acquitted after a trial in which the CMA was unable to persuade the jury they had acted dishonestly. The defendant who pleaded guilty was given a suspended sentence in recognition of his guilty plea and cooperation with the CMA. Following this case, the CMA dropped two of its three remaining cases under the previous legislation.
The report confirms that the CMA used £3.5 million of additional funding in 2014-15 to enhance its criminal enforcement capability and to establish a digital forensics and intelligence team to help uncover cartels.
It remains to be seen whether such a boost in resources coupled with the removal of the requirement to prove dishonesty will lead to an increase in criminal enforcement proceedings in the coming years.
For further information, please contact Eve Giles or Maya Silva, or visit our page, Cartels, Competition and Price Fixing. You may also be insterested in our related blog, "The CMA warns of ‘substantial fines’ – big players, big fines - a sign of things to come in 2016?".
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