New fining powers for UK competition authorities proposed as part of regime reform

The watchdog currently has to apply to the High Court for an enforcement order to make the company comply with its commitments.

The new fining power is part of a package of reforms put forward by the government to "encourage faster decisions" in competition cases, and reduce the burdens of the existing regime on businesses and individuals. It comes two years after major reforms to the UK competition law regime, and the setting up of new watchdog the Competition and Markets Authority (CMA).

Other proposals set out in the consultation paper include giving the CMA the power to prosecute criminal cartel cases under the 2005 Serious Organised Crime and Policing Act (SOCPA), changes to the jurisdiction of the Competition Appeals Tribunal (CAT) and increasing the maximum fines available to the CMA for companies that do not cooperate with its investigative procedures. The government is also seeking views on a number of potential options for speeding up CMA market investigations.

Any legislative changes proposed once the government has considered the consultation responses will be included in a Better Markets Bill, which was announced as part of the Queen's Speech. The same legislation will also be used to take forward measures to increase competition and consumer choice, including the seven-day switching plans put forward for consultation last week.

Sajid Javid, the UK business secretary, said that opening up markets to more competition would "ensure consumers get the best deal possible for the services they need".

"The government is committed to stripping out burdensome rules and empowering people to make the best decisions available to them," he said.

The new fining power proposed by the government would apply where businesses breach the undertakings and commitments they have made to bring to a close CMA's investigations under the Competition Act 1998 or the Enterprise Act of 2002 . Currently, the CMA must apply to the High Court for an enforcement order where breaches occur, non-compliance with which can only be penalised through contempt of court proceedings.

"Although this is a significant penalty, with imprisonment and an unlimited fine available to the High Court, it is a lengthy process to get to that stage, during which time the original competition breach may continue, harming businesses and consumers," the government said in its consultation.

Allowing the CMA to issue fines for these breaches "on the civil standard of proof" would "increase the deterrent effect" and help to improve enforcement, it said.

The CMA announced that it would review the way in which it conducts market investigations earlier this year, following criticism from public spending watchdog the National Audit Office (NAO). In a report, published in February, the NAO raised concerns about both a relative lack of CMA enforcement action compared to other competition authorities in Europe and the speed with which it undertakes investigations.

The government pointed out that the CMA has had to use the permitted six-month extension to the statutory timetable in both of its market investigations to date: into the energy market, and the retail banking market. In both cases, the CMA needed the additional time to "allow for more evidence to be gathered and for the consideration of possible remedies". To address this, the government is seeking views on three possible options: reducing the statutory timetable from 18 months to 12 months but retain the permitted extension, with approval from the CMA board; retaining the current 18 month time limit and remove the right to extend the timescale; and retaining the 18 month time limit while giving the CMA board more power to "determine the timeline of a market investigation linked to its scope".

Each of these three options would give businesses and consumers greater certainty about the timetable for a market investigation, although only option two would give "complete certainty", the government said. However, this option could also result in "all market investigations taking the full 18 months, even where they could be concluded more quickly". Option three would give the CMA board "greater accountability", but may "impinge on the independence of the inquiry groups".

The government said that retaining the ability to extend the statutory timescale would "allow CMA decision-makers to react to unforeseen circumstances". However, it should be accompanied by greater powers for the CMA board to "scrutinise and challenge the use of extensions" to ensure that they were only used "for truly special reasons", according to the consultation.