17th February 2023
On 8 February 2023, the Competition Appeal Tribunal handed down its judgment in an important case concerning the CMA’s territorial reach. This was in the context of its information-gathering powers when investigating a suspected breach of UK competition law.
In finding in favour of BMW AG and VW AG, both companies incorporated in Germany, the CAT established useful precedent for multinational corporates who may be subject to a competition law investigation by the Competition and Markets Authority in the UK.
It’s well established that the two prohibitions found in the Competition Act 1998 (the Chapter I prohibition which prohibits anti-competitive agreements and the Chapter II prohibition which prohibits abuse of a dominant position) have a degree of extra-territorial application. Neither prohibition is limited in its application to entities incorporated in the UK, nor to conduct which takes place in the UK.
Section 26 of the Act allows the CMA, for the purposes of an investigation into a suspected breach of the Chapter I or Chapter II prohibition, to require any person to produce a specified document or specified information which the authority considers relates to any matter relevant to the investigation.
In March 2022, the CMA sent a letter to BMW UK and its parent company BMW AG (a company incorporated and domiciled in Germany, with no branch or office in the UK) informing them that the CMA had launched an investigation into suspected anti-competitive conduct relating to take-back, dismantling and recycling of end-of-life vehicles. This was followed by a notice issued under section 26 of the Act. It was addressed to BMW UK, BMW AG “and any other legal entities within the same undertaking”, requiring them to produce certain documentation and information. BMW UK complied with the notice, but BMW AG asserted that the CMA did not have the power to require it to respond.
In November 2022, the CMA fined BMW AG £30,000 plus £15,000 per day for failing to comply with the notice. BMW AG appealed the imposition of the penalty to the CAT.
In March and April 2022, the CMA issued a case initiation letter to VW UK and VW AG (a company incorporated and domiciled in Germany, with no branch or office in the UK) and carried out a dawn raid at the premises of VW UK. No steps were taken in respect of premises outside of the UK. As a result of the failure of the CMA to obtain the documents it sought at the premises of VW UK, the CMA issued a section 26 notice requiring the further production of documentation from VW UK and VW AG. VW AG sought judicial review of the CMA’s decision to issue the notice to it. As the issues raised were similar to those raised by BMW AG, the two proceedings were heard together.
The CAT held that the CMA could only direct a request for information under section 26 to a natural or legal person with a sufficient connection to the UK (for example, a company registered in the UK). Where a natural or legal person does not have a UK territorial connection, there is no obligation on them to respond to such a request.
On this basis, the CAT held that BMW AG should succeed in its appeal of the penalty, and VW AG should succeed in its claim for judicial review against the CMA. Any notice sent to BMW AG or VW AG under section 26 was ineffective and the CMA had no power to oblige the two companies to respond.
Subject to the outcome of any appeal by the CMA, this judgment has clarified that:
From the CMA’s perspective, the judgment would seem to curb its ability to investigate suspected breaches of UK competition law, particularly post-Brexit, where its looking to investigate more cross-border conduct and it no longer has the same ability to coordinate with its EU-based counterparts on investigations, including through sharing information.
Indeed, in response to the judgment, the CMA said:
“Increasingly, our investigations involve cross-border, multi-national organisations, and today’s judgment substantially risks undermining our ability to investigate, enforce against and deter anti-competitive conduct that harms consumers, businesses and markets in the UK.”
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