#Brexit, the CMA and competition enforcement
The competition regulator has recently published its 2020/21 Annual Report and Impact Assessment. It highlights the CMA’s successes over the last 12 months, estimating that its work resulted in consumer savings averaging at least £2billion of the year 2020/21 and £7billion between 2018/19 to 2020/21. It refers to a “record number” of competition enforcement decisions and a “significant jump” in director disqualifications. Other developments include its review of 600 mergers and acquisitions, the commitments secured to refund customers for holidays cancelled (due to the pandemic), and the securing of other formal commitments for consumer protection issues. The report outlines the steps taken in response to the Covid pandemic, and the market studies that have been published on a number of sectors.
There have been calls for reform at the CMA for some time now (see our related blog: Carrying on as we are is not a prudent option, says the Competition and Markets Authority), and the report addresses some of the changes in progress, including in relation to its work in the digital markets sector. Notably, the report outlines the steps taken in response to the advice of the Digital Markets task force (see below).
The Annual Report follows a report published in early July - by the Centre for Policy Studies in conjunction with the Policy Institute at Kings College London - which outlined concerns about the effectiveness of the regulator, suggesting policy changes and recommendations for improvement. That report, authored by Rt Hon Lord Tyrie (former Chair of the CMA from 2018 – 2020), set out a number of challenges facing the CMA and amongst other things, highlighted a “growing appreciation that traditional tools of competition policy… are ill-equipped to deal with the challenges posed by digital platforms, and that wide-ranging reform is probably needed, including regulation and ex-ante scrutiny.” Lord Tyrie’s report talked about the importance of getting the reform agenda over the line, noting recommendations for improvement (which includes new functions and powers for the CMA, including powers to investigate), some of which could only be brought through statutory reform.
One area undergoing reform is the CMA’s framework for digital markets. The Digital Markets Unit (DMU) was established within the CMA earlier this year and holds responsibility for enforcing the UK’s new digital regulatory regime. This followed an independent review on the state of competition in digital markets (commissioned by the Government in 2018), and subsequently the CMA’s own market study, with the final report published in July 2020. The CMA’s Annual Plan 2021/22 highlighted the risk of harm to consumers in this sector and that the DMU would enforce a new code to govern the behaviour of platforms that currently dominate the market (see our related blog: “A Global Competition Authority” The future of the CMA).
Whilst the DMU has begun work on a non-statutory footing, the Government has recently announced its consultation on proposals for a new pro-competition regime for this market and has committed to legislating when parliamentary time allows. Feedback is sought on a number of proposals, including the criteria and mechanisms to apply when identifying firms that fall within the scope of the regime (with proposals to designate digital firms with strong and entrenched market power as holding strategic market status (SMS)) and the objectives for the DMU. It considers the DMU’s approach to pro-competition interventions, and the powers that the DMU will need to ensure the new regime is effective: although the focus will be on resolving issues through engagement with firms, it will inevitably require sufficient powers to enable it to address non-compliance and to act as a deterrent.
Where it comes to information gathering tools, it is proposed that this will be similar to those currently held by the CMA. For example, it is proposed that the DMU will have powers to require the production of information (through the provision documents and/or attendance at compelled interviews), search and seizure powers, and the power to compel evidence collection. The power to impose significant penalties for non-compliance with these requirements is also proposed, and the paper addresses appeal requirements and asks what standard of review should apply.
It is expected that the DMU will have discretion when deciding whether to rely on a ‘participative’ approach as opposed to opening a formal investigation, noting that general guidance on this should be published. Financial penalties, along with other enforcement mechanisms (such as court orders and senior management liability) are also being considered. For businesses, clear guidance on what is expected by the DMU, its approach to investigating compliance and the enforcement mechanisms available is essential.
The consultation paper also notes the roles that existing regulators play in regulating digital markets, including the Information Commissioner’s Office (ICO), Financial Conduct Authority (FCA), and Ofcom, and the overlap between remits, interaction between regulators, and the need for effective coordination. It asks whether those existing regulators should also be afforded new powers to deliver elements of this new regime (where they are best placed to do so), or whether informal arrangements would suffice. In any event close regulatory coordination will be essential, although the paper warns against full concurrency powers in cases where functions are inherently cross-economy; to do so carries the risk of complexity and uncertainty for businesses.
Where it comes to international enforcement, it is anticipated that the DMU will work with regulators in overseas jurisdictions to ensure effective collaboration.
The Government is seeking views from a broad cross-section of organisations, including start-ups, charities and small businesses, technology companies of all sizes and descriptions, civil society organisations, and law firms and other professionals working in this arena. The consultation closes on 1 October 2021 and organisations can respond to the proposals here.
In the meantime, the DMU will be focussing on preparing for the new regime including formulating draft guidance, evidence gathering on digital markets, using its existing powers to investigate harm to competition and engaging stakeholders. We can expect to see significant further developments for those operating in this sector in the near future.
Kingsley Napley provides specialist advice for individuals and businesses subject to criminal and civil investigations relating to breaches of competition law.
For further information on the issues raised in this blog post, please contact a member of our criminal team.
Caroline Day is a Partner in our Criminal Litigation team. Caroline specialises in complex fraud and financial crime. She acts in cases of serious fraud, money laundering, corruption and cartels and has advised individuals and companies subject of investigations and prosecutions by various agencies including the Serious Fraud Office (SFO), the Financial Conduct Authority (FCA), HM Revenue and Customs (HMRC) and the Competition and Markets Authority (CMA) (formerly the OFT).
This last year has undoubtedly been a busy and challenging one for the Competition and Markets Authority (CMA). It has seen additional activity arising from its response to the Covid pandemic, the further responsibilities it has taken on post-Brexit (see our related blog: #Brexit, the CMA and competition enforcement), and its work concerning the design and implementation of a pro-competition regime in digital markets. This article looks at its recently published Annual Report and Impact Assessment, calls for change, and the work it has been doing in relation to digital markets.
Charities are not immune to financial crime, fraud or other wrong-doing; there are a number of ways in which charities may be exploited by criminals.
The Financial Conduct Authority (FCA), in its annual business plan published today, sets out its areas of focus for the year ahead. It is, as ever, essential reading for all those in the regulated sector.
In March 2021 the Chancellor announced the establishment of a taskforce to investigate those who may have fraudulently made use of government schemes set up to protect individuals and businesses against the economic impact of COVID-19 – such as the Coronavirus Job Retention Scheme (CJRS) (widely referred to as the Furlough scheme), the Self-Employment Income Support Scheme (SEISS) and the ‘Eat Out to Help Out’ Scheme.
Money launderers will look for any opportunity to take advantage of organisations with weak financial controls in order to launder their ill-gotten gains. Charities, trustees, employees and volunteers who knowingly or unwittingly assist money launderers, or who fail to report suspicions, may commit a criminal offence and find themselves liable to prosecution.
In the Budget 2021, presented to Parliament on 3 March, the Chancellor announced that HMRC will establish a taskforce to investigate those who have fraudulently made use of government schemes set up to protect individuals and businesses against the economic impact of COVID-19 – such as the Coronavirus Job Retention Scheme (CJRS) (widely referred to as the Furlough scheme) and the Self-Employment Income Support Scheme (SEISS).
FCA focuses on risks associated with unmonitored communications, including the use of unencrypted apps, such as WhatsApp, for sharing potentially sensitive or confidential information when working from home.
Over £30 million is reported to have been lost to pension scammers since 2017 according to complaints made to Action Fraud. The FCA and other regulators are advising savers to exercise caution in relation to pension fraud, in an effort to minimise the risk that consumers will suffer loss in the first place.
One of the impacts of the Covid-19 pandemic is that national income has fallen dramatically. In response to concerns from homeowners unable to meet their mortgage repayment requirements due to a drop in income, the Treasury and Financial Conduct Authority announced a ‘mortgage payment holiday’. This was the result of banks agreeing to allow mortgage-holders suffering from a drop in income to pause their repayments. A ban on home repossessions was put in place at the same time
The FCA announced on 5 November that it has banned three individuals from working in the financial services industry for non-financial misconduct.
The SFO’s entered into its ninth deferred prosecution agreement (DPA) earlier today, this time reaching a resolution of bribery allegations with a company called Airline Services Limited. With other corporate cases still on its books, we can expect to see more DPAs as these cases work through the system. So, what does that mean for companies which might be caught up in an investigation?
The Government announced its intention to introduce an Economic Crime Levy in the Budget 2020. This is designed to fund government action to tackle money laundering and help deliver the reforms committed to in the Economic Crime plan 2019-2020. It has since followed up on this - on 21 July - with the launch of a consultation as to how such a levy would operate.
Interviews are frequently conducted by office-holders with individuals previously involved with an insolvent company, such as directors and officers, employees, accountants, lawyers and other third parties. Such interviews will often provide key information regarding the company’s trading and dealings and the actions of its directors and employees, thereby assisting office-holders seeking to investigate potential fraud, misfeasance and other forms of misconduct.
Research recently undertaken by the FCA has found that 5.35% of the UK population hold (or have previously held) cryptoassets where in 2019 this figure was 3%. For several years now the Government, the Bank of England and the FCA have been consulting on and considering how best to regulate this burgeoning market.
The Financial Conduct Authority (FCA) has this week published its annual Business Plan. Unsurprisingly, the emergence of COVID-19 has significantly impacted the organisation’s ability to set out its strategic focus for the next three years. While the Plan sets out the areas of priority on which it intends to focus in this period, it recognises that it may be months before the FCA is able to focus fully on the activities set out in the Plan and that the issues to be addressed may change significantly over the coming months.
The last few weeks have seen a sharp rise in the number of reported cases of coronavirus related fraud. As of 20 March the UK’s national reporting centre for fraud and cybercrime, Action Fraud, had recorded at least 105 reports with total losses reaching almost £970,000. These figures will undoubtedly continue to grow given the likely timescale of the pandemic and the impact of COVID-19 on the economy.
The COVID-19 pandemic has already had a significant impact on all aspects of the financial services industry, including on firms, customers, regulators, capital markets and their participants. The Financial Conduct Authority (FCA) continues to engage closely with the sector as it seeks to respond effectively to the current crisis. This has included releasing a number of statements relating to various matters including scams, short selling, operational and financial resilience, and financial reporting.
In September 2019, HM Revenue and Customs (HMRC) published its list of businesses that have not complied with the Money Laundering Regulations 2017 (MLR 2017) for the tax year 2019 to 2020. Within this, it revealed that it has fined Touma Foreign Exchange Ltd £7.8 million for a wide range of serious failures under the Money Laundering Regulations.
Tucked in between the “reasonable worst-case” scenarios for food, trade and fuel is a stark one liner: “Law enforcement and information sharing between U.K. and EU will be disrupted”. The reduction in capability of law enforcement agencies that will come from a no deal will, according to government documents, be accompanied by an increase in cross-border crime.
The Serious Fraud Office (SFO) was established to investigate and prosecute cases involving serious or complex fraud, a mission that inevitably leads it to the corporate sector. In 2010, it was given two significant tools in dealing with companies: a simple route to corporate criminal liability for bribery cases in the Bribery Act 2010 (the stick); and a means of incentivising a company fixed with corporate criminal liability to co-operate with the SFO by entering into a deferred prosecution agreement (DPA) and so avoiding a conviction (the carrot).
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