Out-Law News 2 min. read
29 Jun 2016, 3:25 pm
The Competition and Markets Authority (CMA) has called for UK competition laws to be amended in a way which would increase businesses' potential exposure to fines for anti-competitive behaviour engaged in by trade bodies they are members of.
Its call was made in response to a UK government consultation on refining the UK competition framework and follows the CMA's recent investigations into the conduct of trade associations.
"The CMA would like to explore the possibility of amendment to the [Competition Act] to clarify that, where it fines associations of undertakings, their members are jointly liable for the fines in appropriate circumstances and that the penalty can take account of the turnover of the association’s members as well as that of the association itself," the CMA said (27-page / 421KB PDF).
Changing the law in this way would help "to effectively deter anti-competitive conduct", it said.
The CMA said: "The conduct of trade associations has been an issue in a number of recent CMA Competition Act investigations – see the recent ophthalmologists and property sales and lettings investigations. Such associations may have limited resources, but may have members with substantial turnover, and, to effectively deter anti-competitive conduct, it is important that the levels of fine that can be imposed and recovered where trade associations break the law take account of this."
"Such powers would be consistent with those of the European Commission, and indeed the recent European Commission consultation on empowering national competition authorities to enforce competition law effectively noted this as one of the areas where convergence across the EU could strengthen effective enforcement," it said.
Under the UK's Competition Act "undertakings", including trade associations, are prohibited from entering into agreements, decisions or practices with others that have as their object or effect the prevention, restriction or distortion of competition within the UK. Organisations engaged in activities which breach these provisions can be fined up to 10% of their global turnover.
As it stands fines for anti-competitive behaviour by trade associations can only be imposed on the bodies themselves and are calculated on the basis of their turnover alone,which tends to be relatively low.. Trade association members are not jointly liable for competition law infringements by the association and nor is their turnover taken into account for the purposes of calculating the fine to be served on the trade body.
"Under the CMA's proposals trade associations and their members would, for the first time in UK law, be potentially jointly liable for competition law penalties imposed on associations," competition law specialist Tim Riisager of Pinsent Masons, the law firm behind Out-Law.com, said. "In addition, if members' collective turnovers are taken into account by the CMA when calculating those fines, as the authority intends, then the potential penalties members could face are likely to be much higher than penalties calculated on the turnover of the trade association alone."
Riisager said that it is not yet clear whether the UK government would adopt the proposals. Although the CMA has referenced how its suggested change in the law would bring its powers into line with the European Commission's, it remains to be seen whether the UK's vote to leave the EU would influence the UK government's appetite to retain such close alignment between the UK and EU competition regimes, he said.
EU legislation states that companies can avoid being held liable for competition law breaches by trade associations they are members of if they do not implement anti-competitive decisions taken by trade bodies either due to being unaware of, or by actively distancing themselves from those decisions," he said.
"It is already vital for companies in the UK to take such steps where they have concerns about activities they are involved in and these potential new powers would amplify the importance of this practice," Riisager said.
The UK government last month committed to giving competition authorities in the UK new powers to combat anti-competitive behaviour and subsequently set out a package of reforms to "encourage faster decisions" in competition cases, and reduce the burdens of the existing regime on businesses and individuals.