CMA could cut competition fines by 20% for companies setting up voluntary compensation schemes

Businesses will be able to submit such voluntary schemes to the CMA, or to concurrent sector-specific regulators, for approval from 1 October 2015 as part of a wider set of changes to consumer law, included in the 2015 Consumer Rights Act. The CMA has now published final guidance on how businesses will be able to apply for approval of a scheme, how the competition authority will consider applications, its procedural framework for determining sufficient compensation levels and how approved schemes should operate.

The Consumer Rights Act will give the CMA and concurrent regulators new tools intended to make it easier, quicker and less costly for those who have suffered from breaches of competition law to obtain compensation. Affected consumers and businesses may still take action through the courts if they prefer, but will not be able to do so once they have applied for compensation under an approved redress scheme.

Competition law expert Ben Lasserson of Pinsent Masons, the law firm behind Out-Law.com, said that it was not yet clear whether many businesses would choose to set up voluntary redress schemes when considering how to handle the risks of litigation.

"Whilst there is obviously an attraction in trying to avoid the uncertainty of court proceedings, defendant businesses will also be mindful that the costs of setting up a redress scheme will likely be significant and, even if it is approved, there is no guarantee that claimants would choose to sign up to it," he said.

According to the guidance, those in breach of competition laws will be able to submit a voluntary redress scheme to the CMA or concurrent regulator for approval either during the course of an ongoing CMA/concurrent regulator investigation, or once the CMA or the European Commission has already made an infringement decision. However, the scheme will not be approved until any infringement decision is finalised.

The company will need to appoint a chairperson who will then appoint a board, consisting of an economist with "appropriate experience and knowledge of competition economics", an industry expert and a person who can represent the interests of those entitled to compensation. The chairperson and board are responsible for setting the terms of the redress scheme, including the level of compensation, before it can be submitted to the CMA or concurrent regulator for approval. 

Amongst other things, the submission must include details of the scheme, an estimate of how long it will take to determine applications for compensation, details of how the scheme will be advertised and those entitled to compensation notified, and information about an "independent complaints process" for those dissatisfied with the decisions of the scheme.

The CMA or concurrent regulator will be able to set conditions in relation to the scheme, but it will not be able to interfere with compensation awards once the scheme has been approved. It will have a discretionary power to enforce compliance with the scheme through the courts, while businesses and individuals will also be able to bring civil proceedings against a business that does not comply with the terms of a scheme.

Fine reductions of as much as 20% may be granted by the CMA or concurrent regulator if it decides to approve a redress scheme which has been submitted prior to it reaching an infringement decision, although it will only do so where "appropriate" and "there is no absolute right to a penalty reduction", according to the guidance. The total reduction will depend on factors including the terms of the scheme, the size of the penalty and the likely administrative costs of implementing the scheme. According to the guidance, it will not consider "the gravity of the infringement" or similar factors when making its decision.