UK government plans to revamp holiday pay calculation for part-year workers
Out-Law News | 09 May 2022 | 11:06 am | 6 min. read
The Competition and Markets Authority (CMA) is to be given new powers that will enhance its ability to clamp down on illegal anti-competitive conduct and intervene faster to preserve competition in UK markets.
Significant reforms to the UK’s competition law and merger control frameworks were announced by the UK government alongside other planned changes to UK consumer protection laws. It follows a consultation exercise last year.
The UK government has confirmed it will move forward with some, but not all, amendments considered during the consultation that are intended to update and strengthen the CMA’s competition law enforcement regime.
Given “mixed evidence” received during the consultation, the government has stepped back from plans to give businesses immunity from private damages claims in cases where civil penalties are imposed for a breach of competition law. However, government “will keep the effect of the private damages regime on leniency programmes under review, as part of the UK’s commitment to the prioritise effective enforcement against cartel activity”.
The government has also decided against legislating specifically for the handling of whistleblowers in the context of competition law cases.
Appeals to the Competition Appeal Tribunal (CAT) against substantive infringement decisions in Competition Act 1998 cases will continue to be on the basis of a full merits review. However, a more challenging judicial review standard will apply to appeals against CMA interim measures issued in the context of Competition Act investigations. The judicial review standard already applies to appeals of CMA merger control decisions. ‘Access to file’ rules in Competition Act interim measures decisions will also be made more restrictive.
These changes are intended to make it easier for the CMA to use interim measures in Competition Act investigations, not unlike how interim enforcement measures (IEOs) are currently used in UK merger control cases.
The CMA’s evidence-gathering powers will also be enhanced as part of the reforms, including its scope to interview any relevant individuals as part of its competition investigations, regardless of their connection to a business under investigation. Of particular interest are the proposals to enhance the CMA’s powers when conducting dawn raids of residential premises under warrant. This gives the CMA powers to ‘seize and sift’ evidence when it inspects domestic premises under a warrant and also to obtain information stored remotely. This may increase risks for employees that regularly work from home and who may be suspected of involvement in competition law breaches.
A new duty not to destroy evidence in Competition Act investigations will also be enshrined in UK law, and a further new statutory regime for confidentiality rings in Competition Act cases is also to be established – with the prospect of fines for those that breach the confidentiality requirements, the government said.
The prohibition on anti-competitive agreements under Chapter I of the Competition Act 1998 will be extended to cover “agreements, concerted practices and decisions which are implemented outside of the UK, depending on the effects of the conduct within the UK”. Provisions on the abuse of a dominant position under Chapter II of the Act will not be extended.
In light of consultation feedback received, government decided against reducing the ‘small agreements’ and ‘conduct of minor significance’ exemptions for Competition Act cases only to companies with a turnover below £10 million. In Chapter I cases, immunity will continue to apply to agreements – except for price-fixing agreements – where the combined turnover of all parties to the agreement is £20m or less. However, the government has reduced the immunity threshold from £50m to £20m turnover for businesses that infringe the Chapter II prohibition, making it easier for smaller businesses to be investigated for abuse of a dominant position.
Government is considering modernising the CMA’s information gathering powers in relation to the interrogation of algorithms, by strengthening the CMA’s powers to test and verify whether the use of algorithms by companies complies with competition law.
Government also intends to review relevant secondary legislation and, if applicable, revise the existing CMA rules to allow the CMA greater autonomy to implement a robust and efficient settlement process.
The government intends to implement various proposed changes to enhance the CMA’s competition law civil sanctions regime, however it has refrained from adopting some proposals following concerns expressed in responses to the consultation.
The CMA’s information gathering powers will be underpinned by an updated sanctions regime that could see businesses fined up to 1% of their annual global turnover for failing to comply with statutory information requests, where they only do so in part, provide false or misleading information, or otherwise destroy, conceal, or falsify information and documents. Additional daily penalties of up to 5% of daily global turnover for continued non-compliance with information requests will be able to be imposed by the CMA. Individuals could also be fined up to £30,000 and £15,000 daily for continuing non-compliance in this context.
In a step that will be welcomed by business, the government has decided against making directors personally liable for their organisation’s responses to information requests issued by the CMA. It recognised such changes would increase the compliance burden for companies, especially smaller businesses.
Government intends to proceed with its proposals to introduce civil penalties of up to 5% of a business’s annual worldwide turnover for breaching commitments or undertakings, directions, orders or interim measures. In addition, a daily penalty of up to 5% of daily global turnover of a company’s corporate group can be imposed while non-compliance continues.
In a move that will impact private enforcement, government will extend the CAT’s jurisdiction to grant declaratory relief and give the CAT discretion to award exemplary damages; although exemplary damages will not be available in collective proceedings.
The government, however, will not introduce a new mechanism enabling the CMA to reclaim penalty discounts where a party fails to carry out a promise for which a discount was granted. This issue was already addressed by recent changes to the CMA’s penalty guidance.
The government intends to retain the current structural framework for market inquiries, under which the CMA may conduct market studies and market investigations. It also declined to give the CMA powers to impose interim measures during market inquiries.
While government will not pursue proposals that would replace the current two-stage regime with a single market inquiry tool, it supports certain changes that will allow the CMA to use the existing regime more flexibly. For example, the CMA will be able to accept binding undertakings from businesses at any stage in market studies and market investigations. Also, if the CMA already has reasonable grounds to suspect adverse effects on competition in a market, government would support the CMA more routinely consulting on a market investigation reference directly, without first conducting a market study as seen recently in the Motorola Airwave case.
Under the government’s plans, the CMA will be able to require businesses to ‘trial’ remedies before their final format is determined to help optimise their effectiveness. The CMA will also be allowed to amend remedies within a 10-year period after a finding of an adverse effect on competition, subject to an initial two-year cooling off period where CMA cannot instigate remedy changes of its own volition.
Some of the most significant changes will apply to the UK’s merger control regime.
The government had consulted on requiring businesses to notify the CMA of proposed mergers and acquisitions they intend to complete but it has decided to persist with the existing system that incentivises voluntary notification. It will, however, pursue legislative changes that will affect which corporate transactions the CMA is able to review.
Under the planned reforms, the UK turnover threshold will be raised from £70 million to £100 million. Deals involving target companies whose annual UK turnover is less than £100m will therefore generally fall outside the CMA’s jurisdiction. However, the alternative 25% share of supply jurisdictional threshold remains.
To improve the CMA’s ability to scrutinise so-called “killer acquisitions” in fast moving markets, government has said that it will legislate to give the CMA additional jurisdiction to review mergers where an acquirer has both an existing share of supply of goods or services of 33% or more in the UK or a substantial part of the UK; and annual UK turnover of £350m or more. In response to feedback received during consultation, these thresholds have been raised substantially from the levels originally consulted upon – 25% share of supply and UK annual turnover of £100m, respectively. However, the new ‘killer acquisition’ merger notification threshold would also include a “UK nexus” criterion “which will ensure only mergers with an appropriate link to the UK will be captured”.
Government said it will also continue to monitor the operation of the share of supply test more generally, and may consider further proposals on how to reform it.
A small merger ‘safe harbour’ is to be introduced to prevent the CMA from being able to review proposed mergers where each party’s UK turnover is less than £10 million.
The proposed reforms will also provide for the ‘fast tracking’ of some merger review cases, while the CMA will also get new powers to enable it to accept competition commitments from buyers to resolve other merger review cases before the case progresses to an in-depth review stage, as is the case currently.
Other changes include the introduction of an overarching new “statutory duty of expedition” for the CMA in relation to its competition and consumer law functions, as well as plans to enhance the CMA’s role as an economic adviser and enable the government to more regularly outline where it thinks the CMA should focus its regulatory resources.
21 Apr 2022
26 Jul 2021
UK government plans to revamp holiday pay calculation for part-year workers