Enforcement powers and procedures

Overview

Introduction

This section describes the CC’s enforcement powers during and after the merger or market investigation.

During a merger investigation, interim undertakings may be accepted, and/or orders made, to seek to prevent the parties taking any action that might prejudice the outcome of the investigation.

After publishing its report on a reference, the CC will go on to implement its decisions on remedies. Its actions must continue to be such as it considers are reasonable and practicable to remedy, mitigate or prevent:

• the substantial lessening of competition and its resulting adverse effects (mergers); or

• the adverse effect on competition and its resulting detrimental effects on customers (markets).

These actions must be consistent with the CC’s report unless there has been a material change of circumstances since the preparation of the report or other special reason. In taking such further action, the CC must continue to have regard to the need to achieve as comprehensive a solution as is reasonable and practicable; and to the effect of any proposed remedies on any customer benefits.

The CC will have the choice of seeking undertakings from the persons that are to be the subject of the measures or of making an order. Relevant considerations in determining which form to use will be the parties’ willingness to negotiate and agree undertakings in the light of the CC’s report and the number of parties concerned, and the scope of the CC’s powers and whether the remedy that it considers appropriate falls within those powers.

The CC’s order-making powers are set out in the Act. Schedule 8 sets out the types of provisions that could be included in an order and Part 1 of Schedule 9 sets out provisions enabling the CC to modify, by order, licence conditions in various regulated markets. While the content of any orders made by the CC is limited by the Act, the subject matter of an undertaking is not similarly limited. The process of negotiation that is involved with undertakings and the fact that their content is not limited to the matters contained in Schedule 8 may be advantageous in terms of flexibility and suitability. If, however, in a regulated sector the CC decides to modify licence conditions in connection with Part 1 of Schedule 9, to give effect to or take account of any provision of a proposed remedy, it will make an order.

In general the CC’s decision as to which form of remedy to use will be determined by issues of practicality. When the particular circumstances of the case point to the need for action to be taken speedily, the CC may choose to implement the remedy by way of order to avoid delay while undertakings are negotiated. However, the CC will generally prefer to proceed by accepting undertakings.

The Act allows the CC to require the OFT to negotiate undertakings but with the CC retaining the final say on whether the undertakings should be accepted. The CC has decided that in practice it will take responsibility for negotiating and implementing remedies with support from the OFT.

Undertakings, once accepted by the CC, and orders are enforceable in the courts by civil proceedings. Any person to whom an undertaking or order relates owes a duty of compliance to any person affected by a contravention of the undertaking or order. Any person who has sustained loss or damage through a company’s contravention of the undertaking or order may bring an action before the courts. The CC and the OFT may also bring proceedings for the enforcement of undertakings and orders accepted or made by the CC.

Functions of the OFT

The OFT is required to keep a register open to inspection by the public which must include, among other things, the provisions of any final undertakings and final orders, any variation, release or revocation of them, and any consent given by the CC to continue steps towards integration or acquire shares (see below). The CC has a duty to supply that information to the OFT.

It is the duty of the OFT to monitor the implementation of final undertakings and orders and to advise the CC about further action such as variation, release, negotiation of a new undertaking, revocation of an order, or enforcement of a final order or undertaking in the courts.

CC's enforcement powers: mergers

During an investigation

The CC has the power to prevent pre-emptive action during the course of an investi-gation which might prejudice the outcome of a merger reference or impede the CC from taking action later that may be justified by its decisions on the reference.

To this end the CC may accept from the parties concerned interim undertakings to refrain from doing things which would constitute preemptive action (action which might prejudice the reference concerned or impede any remedial action which may be justified by the CC’s decision on the reference). In the absence of receiving suitable undertakings it may also impose interim orders to achieve the result it seeks. These provisions for interim undertakings and orders apply after the merger has been referred and may continue after the report is made until final remedies are implemented. Interim undertakings and orders have no notice requirements, but the CC is bound to consider representations about variation or revocation as soon as it can.

During the course of an investigation into a completed merger, the Act prohibits the merged parties from taking further steps to integration without the CC’s consent if no initial or interim undertakings or orders are in force. During the course of an investigation into an anticipated merger, the Act prevents the merging parties from acquiring any interest in shares in a company to which the reference relates without the CC’s consent if no interim undertakings are in force.

After an investigation

The CC’s decisions on remedies will be in the final report. The merger guidelines describe the various types of remedies available and the factors that may be relevant to the CC’s decision when deciding on the appropriateness of taking action and the action to take.

The CC has powers to vary or release undertakings on its own authority and to vary or revoke orders when advised by the OFT that this is appropriate.

There are a number of circumstances in which the CC may make an order even though it has previously accepted undertakings. These include circumstances when parties do not comply with an undertaking or when the CC considers that materially false or misleading information has been given in relation to the undertaking. When the CC intends to make such an order, it may also make a supplementary interim order to prevent any action in relation to that undertaking which might prevent the CC making a final order. Such an order has no notice requirements, but the CC is bound to consider representations about variation or revocation as soon as it can.

CC’s enforcement powers: market investigations

During an investigation

The CC has no power to prevent pre-emptive action during the course of a market investigation.

After an investigation

After it has published its report but before the reference has been finally determined, the CC has the power to prevent preemptive action—that is, action which might impede the taking of final action in relation to the investigation. It may do so by accepting from the parties concerned interim undertakings to take such action as the CC thinks is appropriate or by making an interim order. Such undertakings and orders have no notice requirements, but the CC is bound to consider representations about variation or revocation as soon as it can.

The CC’s decisions on remedies are in the final report. The market guidelines describe the various types of remedies available and the factors that may be relevant to the CC’s decision when deciding on the appropriateness of taking action and the action to take.

The CC has powers to vary or release undertakings on its own authority and to vary or revoke orders when advised by the OFT that such a variation or revocation is appropriate.

There are a number of circumstances in which the CC may make an order even though it has previously accepted undertakings. These include circumstances where undertakings given by the parties are not being complied with or when the CC considers that materially false or misleading information has been given in relation to the undertaking.

The CC has no powers to make a supplementary interim order in market investigations.

Enforcement procedure after report for merger and market investigations

Schedule 10 to the Act provides the procedural framework applicable when the CC is accepting undertakings and making orders. For mergers only, paragraph 9 allows the CC to dispense in special circumstances with the checks and balances normally followed. The CC will only accelerate the procedure with good reason and will explain its reasons to the parties and the public. The procedures are summarized in the following paragraphs.

Requirement to give notice

Before accepting an undertaking or making an order to which the schedule applies, the CC must give notice of the proposed undertaking or order and consider any representations made but not withdrawn. Schedule 10 prescribes the information that must be included in the notice. The notice must be published and, when the CC proposes to make an order, served on any person identified in the order as a person on whom a copy of the order should be served. (Any such person will also be served with a copy of the proposed order.) The Act specifies that the minimum period in which representations may be made is 15 days from the date of publication of the notice in respect of proposed undertakings and 30 days in respect of an order.

The CC may not accept the undertaking, nor make the order, with material modifications unless it has given notice of the proposed modifications and considered any representations made in accordance with the notice and not withdrawn. There is a period of not less than seven days starting with the date of publication of the notice relating to proposed modifications within which representations may be made.

If the CC, after giving notice of a proposed undertaking or order or of a subsequent modification, decides not to accept the undertaking or make the order, it must give notice of that decision.

If the CC decides to proceed it must, as soon as practicable after accepting an undertaking or making an order, serve a copy of the undertaking on any person by whom it is given or serve a copy of the order on any person identified in it as a person on whom a copy of the order should be served. It must also publish the undertaking or order.

Before releasing an undertaking or revoking an order, the CC must give notice of the proposed release or revocation. Schedule 10 specifies the information which must be included in the notice and the minimum period in which representations may be made. In the case of undertakings, the period may not be less than 15 days starting with the date of publication of the notice, and in the case of orders, the period may not be less than 30 days.

The CC must, as soon as practicable after releasing the undertaking or making the revoking order, serve a copy of the release of the undertaking on the person who gave the undertaking or serve a copy of the order on any person identified in the order being revoked as a person on whom a copy of the order should be served. It must also publish the release or the revoking order.

If the Commission, after giving notice of a proposed release or revocation, decides not to proceed, it must give notice of that decision. Such notice is given by serving notice that the release or revocation is not to be proceeded with on the person who gave the undertaking being released or the person identified in the order being revoked as a person on whom a copy of the order should be served, and by publishing the notice.

The Secretary of State has similar powers to implement and enforce his decisions in merger public interest and special public interest cases and market public interest cases.