On 30 June 2017, the CMA launched its consultation relating to a new proposal for handling leniency applications. The proposed guidance would make the CMA the “first point of contact” for leniency applicants, in an effort to make the existing system clearer for businesses in regulated sectors.
Leniency applications in the UK
Sector-specific regulators have powers in their respective areas to enforce UK and EU competition law, in the same way as the CMA (known as concurrent powers). This means, for example, that the Financial Conduct Authority (FCA) can enforce the prohibition on anti-competitive agreements and abuse of a dominant position in the financial services space; or Ofgem in the energy space. Concurrent regulators also have the power to impose financial penalties for breaches of competition law, similarly to the CMA.
Leniency applications are made when an informant or whistle-blower approaches the CMA or relevant sector-specific regulator with information to expose, or to assist with the investigation of, cartel activity. By their very nature, cartels are difficult to uncover and competition authorities around the world rely on leniency applications to expose anti-competitive behaviour.
Currently, applicants for leniency only need to make one application for leniency to one authority (a "single queue"), irrespective of which authority ultimately ends up taking the case forwards. Under the current system, applicants can apply for leniency directly to the relevant sector-specific regulatory body or to the CMA directly. However, this naturally leads to some confusion - it may not always be clear at the time when an application is made which authority might be best placed to receive it.
The CMA’s proposed new guidance
The CMA’s proposed guidance seeks to centralise the current system with the CMA becoming the official “first point of contact” for those wishing to apply for leniency. This would be the same for any type of application for leniency or reduction.
The new guidance intends to:
- Provide greater clarity for potential leniency applicants operating in regulated sectors.
- Make it fairer for those applying for leniency. Some types of application require the applicant to be ‘first in’, so the system should not give a ‘second chance’ to applicants who have waited to see how their fellow cartelists will act by applying to another regulator.
- Strengthen the CMA’s criminal immunity and the management of investigations powers. The CMA is the only regulatory body that has jurisdiction over the criminal cartel offence and is therefore the only body that can grant immunity from the criminal process.
The proposals will not alter the more general case allocation process which is still governed by the Competition Act (Concurrency) Regulations 2014; the CMA’s concurrency guidance; and the memorandums of understanding between the CMA and sectoral regulators. As the proposals only apply to the UK, any applicant will still need to apply to the European Commission or other relevant non-UK jurisdictional regulator, as required, in order to obtain protection under the applicable leniency regimes of those authorities.
Comments and next steps
We welcome the clarity that the CMA’s proposed guidance would provide, if it were adopted by the CMA and this guidance goes some way to making interactions with competition authorities more streamlined for UK companies.
However, this new proposed guidance does not detract from any regulatory obligations placed on businesses and it is not clear how businesses are to comply with overlapping obligations - for example, the proposed guidance does not address how an application for leniency to the CMA as a first point of contact fits with the disclosure requirements in Principle 11 of the FCA Handbook (which requires that firms report any material competition law breaches to the FCA). It would be helpful if the CMA considered how to address these overlaps and conflicts going forward, possibly with new proposed guidance.
The CMA’s consultation on its draft guidance closes on 28 July 2017.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.