Let's talk antitrust - UK competition regime in need of reform? The standard of review, fines and regulatory appeals

Video | May 2019 | 09:24

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Let's talk antitrust - UK competition regime in need of reform? The standard of review, fines and regulatory appeals
Mark Simpson Richard, I thought we might talk today about the so-called Tyrie letter, a letter that the CMA published a few weeks back now. Now, this is a letter from the relatively recently appointed CMA Chairperson, Lord Tyrie, former MP, Chair of the Treasury Select Committee for a while, a letter he sent to the Secretary of State for Business, Greg Clark, in which he sets out various legislative and institutional proposals that might be made to the competition regime. Now, it’s wide-ranging, it’s 40 pages in length if you consider the Annex, it covers a number of areas. I just wondered what you thought of this and, specifically, are we looking at a very wide-ranging review of the competition regime here in the UK? Or are we looking at something less? And does this mean a shift away from the, what we might call, more orthodox approach to competition enforcement here in the UK to something else?
Richard Whish QC Well, I think that it’s a very interesting letter. I think there is a difference between the tone of the letter and then the Annex with its eight chapters of specific proposals, and I think when you get to the specific proposals it’s clear that quite a lot of work has been done by a team of people at the CMA and they are not in themselves explosive I wouldn’t say. We will talk in a moment about appeals and judicial reviews, which is perhaps the most controversial part of it, but I don’t think it’s about a root and branch reform of the system. And I don’t think that it’s anything that is going to happen very quickly, by any manner of means. The Annex, section by section often refers to the need for further work to be done, further research to be done, so you know there could be significant changes, but it’s not going to happen any time soon – I don’t think.
Mark Simpson Absolutely. What I wanted to focus on was some of the changes around the review process that is currently undertaken by the Competition Appeal Tribunal as the appeals court and the suggestion that there might be changes made to expedite court scrutiny of CMA decisions. Now it sort of falls into three areas I think that we might touch on. Firstly, about the standard of review that is applied when the Tribunal reviews infringement decisions. Secondly, about penalties and fines. And, thirdly, we might briefly touch on regulatory appeals and that specific jurisdiction the CMA has. Now, turning to the first subject, what do you make of the suggestion that the Competition Appeal Tribunal might have its jurisdiction somewhat reduced so it can only overturn an infringement decision of the CMA on more limited grounds, potentially judicial review grounds or some more limited non de novo full appeal ground?
Richard Whish QC Well, a couple of things I would say. One is I just remind myself that when the Competition Bill received Royal Assent in 1998 on the same day the Human Rights Bill received the Royal Assent, importing the duty to ensure access to a fair and impartial tribunal, and I remember it all very well. And establishing the CAT as a court that could hear the case on appeal on the merits was a part of satisfying Human Rights Act considerations, so I just remind myself of that. Secondly, of course, we did go through this in 2013 when there was a review of this very issue, I think by BIS in those days rather than BEIS. And, in the end, there were reforms in relation to telecommunications or electronic communications, but the proposal to change the appeal standards to judicial review in competition cases was dropped. But here we are in 2019 discussing it again. I feel some anxiety about this I must say because, you know, fines can be huge and infringement decisions can lead to damages claims and so on and in the future, post-Brexit, one assumes that CMA will be doing much bigger cases with presumably much bigger fines. And it seems to me that if the European Commission is fining Google €4.34 billion, there has to be some effective scrutiny of that kind of decision and I note that the General Court now seems to be conducting a much more intrusive judicial review than they used to do, so I do find myself wondering whether this is the right time to downgrade the appeal to judicial review in this country. A different point I would make is, I rather feel that over time there have been a few times in history when perhaps the Competition Appeal Tribunal was going a little bit too far with its own jurisdiction and it was corrected on appeal by the Court of Appeal. Football kit – on hub-and-spoke – being a very good example of that, and I dare say the CMA is rather offended by the judgment of the CAT in Pfizer and Flynn where, personally, I think I would have been inclined to defer to a certain extent to the margin of appreciation of the CMA, in a case on excessive pricing – if ever a thing is about judgment by a specialist authority I’d have thought that that was it. Well, I could imagine the CMA, which has been given permission to appeal by the Court of Appeal on 20 December, I could imagine the CMA winning that case on appeal. My instinct is that, insofar as the CAT oversteps the mark, there are processes in place to deal with that.
Mark Simpson We’ll watch out as to how this one develops. But what about the proposals on fines, what rationale does the CMA have here for making this proposal?
Richard Whish QC Well, I have to say, I have a lot of sympathy for the CMA here, to be perfectly honest, that on numerous occasions the CAT has upheld the CMA on liability and then changed the fine. I remember an early case, I think it was Aberdeen Journals, where the CMA fined Aberdeen Journals £1.3 million and the CAT says, oh we don’t think that is quite right, we think £1 million. Well, hello, I always thought that that and subsequent cases were very strange because basically it is encouraging firms to appeal. And I think at the very least perhaps one needs a tighter system, maybe more specific guidelines that are binding on the CAT, as well as on the CMA. And I think perhaps if the CAT is going to change the CMA’s fines in the way it has done, maybe it should be put under a tougher duty to explain the how and why, so I have sympathy with that part.
Mark Simpson And there is also a proposal suggesting, maybe, statutory tariffs as an alternative, which I take to mean similar to sometimes applies in the US, a standard set of corporate fines, is that right?
Richard Whish QC I wouldn’t go for that. I just think these cases are extremely difficult. You know from your experience, one cartel is never like another cartel, so the idea you would have a menu of fines – I am not persuaded by that. I think this is about the amount of deference that the CAT should pay to the CMA, so I think there are ways of dealing with that.
Mark Simpson Thirdly, I said I would touch on the regulatory appeals framework. So, what the CMA appears to be proposing there is effectively offloading one of its functions, which is that where it considers appeals on price controls and other decisions by the sector regulators, whether it’s OFCOM or OFGEM or OFWAT etc, and handing that to the courts in the Tyrie letter. Do they mean the Competition Appeal Tribunal there and is that just getting rid of a function so they can redeploy resources?
Richard Whish QC Firstly, should CMA shed it? Secondly, who should have it? On the shedding of it, I have to say I have got sympathy with the CMA again here. They have got a tough job to do, they’ve got Brexit and all the aftermath of that to deal with and every authority has limited resources. And MIRs, I can see why the CMA would do that because that is about competition and so on, but the regulatory appeals they are, I know we are not allowed to speak Latin anymore, but they are sui generis and I don’t particularly see why the CMA is a suitable body to do that. And getting rid of them, and I think there are going to be lots of them in the future especially in the energy sector, getting rid of them I can see the point of that. Where do they go to? Well, the CAT does look like a natural forum, it has several other functions of that kind already, but I am open minded about that.
Mark Simpson Thank you, Richard.