The government of the United Kingdom is seeking comments on proposals designed to strengthen and streamline the UK’s competition regime.

The proposed reforms of British antitrust enforcement are contained in draft legislation that the UK has released for public comment.

The proposed measures are among the revisions being contemplated as part of an overhaul of both civil and criminal antitrust enforcement in the UK.  One of the major changes will be the birth of a new consolidated competition watchdog agency – the Competition and Markets Authority (the “CMA”), which be launched next month and take over antitrust enforcement in April 2014.

According to Competition Minister Jo Swinson, “These measures are part of wide-reaching reforms to improve the UK competition regime, making sure the new Competition and Markets Authority has the tools in place to operate efficiently and effectively from day one.”

The proposals would give the CMA the power to coordinate antitrust enforcement among the UK’s economic regulators.  This means that the CMA would have the power to decide which regulator should pursue which case, although the government expects that the various competition agencies would generally agree on which enforcer should handle which case.

Enforcement would also be strengthened by extending the power to grant search warrants to the Competition Appeal Tribunal.  Currently, antitrust enforcers can get such warrants only from the High Court and Court of Session.  The government expects that expanding the ability of competition authorities to search premises will help streamline civil and criminal procedures for dealing with antitrust and cartel cases.

The United Kingdom’s Competition Appeal Tribunal is expressing serious doubts that the British government’s plan to streamline competition appeals will actually reform the process for the better.

The Tribunal expressed its doubts and criticisms in a detailed response to the government’s plan for “Streamlining Regulatory and Competition Appeals,” which was published by the Department of Business Innovation and Skills (“BIS”) in June.  In making this response, the Tribunal cited its central role in the private enforcement of competition law in the U.K.

The BIS proposal has the announced goal of simplifying and accelerating the appellate process for both government competition authorities and regulators.  The Tribunal, however, expressed doubts that the reforms would achieve these goals, and concerns that they would be inconsistent with the approaches taken by EU courts and competition policy.

According to the Tribunal, the BIS proposal “contains little, if any, analysis of the competition system; it appears not to appreciate the significance of current expectations and developments at the European level in relation to appeals in competition cases; and it threatens to undermine a key element of the government’s current reform of the competition system.”

Although the Tribunal agreed with the goal of speeding up competition appeals, it disagreed with the government’s suggestion that its current appellate rules encouraged meritless appeals or allowed the introduction of too much new evidence on appeal.  The Tribunal stated that “We do not believe that placing specific restrictions upon the admission of such ‘new’ evidence, or upon CAT timetables or other procedures is either necessary or sensible.”

The Tribunal also criticized the proposal to lower the standard of review in competition cases.  The Tribunal disagreed with the proposal’s view that a lower standard of review was justified by the EU’s General Court standard of review for antitrust decision of the European Commission.  According to the Tribunal, the proposal “fails to take account of the way in which the EU courts are developing their own appeal procedures to comply with the fundamental requirement of compliance with the [European Convention on Human Rights], in the light of widespread and growing concern about the more limited scope which has at times been attributed to the review carried out by the General Court in that context.”  The Tribunal stated that “at a time when pressure for more intense judicial scrutiny within the EU competition regime is increasing, the government appears to be contemplating the restriction of such scrutiny in the U.K. system.”

The Office of Fair Trading (“OFT”) in the United Kingdom has released updated guidelines for leniency in cartel cases that will eliminate demands for waivers of the attorney-client privilege as a condition of leniency.

The leniency guidelines will fine-tune the UK’s framework for leniency applications, which the OFT views as essential to the UK’s enforcement efforts against cartels.  Under the leniency program, businesses that come forward and report their involvement in cartel activity may avoid a financial penalty or have the penalty reduced substantially. Similarly, individuals involved in cartel activity may be granted immunity from criminal prosecution.

Previously, the guidelines provided that attorneys could be asked to waive legal professional privileges when representing leniency clients in criminal cases but not civil ones.  The new guidelines eliminate this possibility.

Jack Holland, the OFT official who oversaw the revision of the guidelines, explained why leniency programs are especially important in antitrust enforcement, stating that “[t]he secret nature of cartels and their damaging effects justifies a policy which rewards businesses or individuals who come forward to tell us about cartel activity that would otherwise have remained hidden.”  He further noted that leniency “also helps us bring successful enforcement action against the other cartel members or individuals involved to bring the harmful activity to an end, as well as deterring businesses and individuals more widely from engaging in cartel activity in the future.”

The European Court of Justice (“ECJ”) has held that neither a decision from a national antitrust court nor reliance on the advice of counsel protected a company from European Union (“EU”) antitrust liability.  

The ECJ made its ruling in Bundeswettbewerbsbehörde v. Schenker & Co. and Others, a case dealing with an Austrian freight company that joined 30 other freight companies to form a special interest group known as Spediteur-Sammelladungs-Konferenz (“SSK”).  The group sought to obtain better road and rail freight rates, and argued that consumers and shippers would benefit from its joint price agreements. 

In 1996, Austria’s antitrust court granted SSK’s application to register the group as a “minor cartel.”  In 2005, SSK retained counsel to advise it on Austria’s new cartel laws and to maintain its “minor cartel” status. 

In 2007, however, the European Commission launched unannounced inspections into the group’s members and found SSK in violation of the EU’s antitrust laws.  The Higher Court in Vienna weighed in and decided in favor of SSK, noting that SSK had relied on Austria’s antitrust court and on the advice of counsel.  The case eventually moved to Austria’s Supreme Court which asked the ECJ for its advice.

Despite the ruling of Austria’s Supreme Court, the ECJ found that a company that infringes EU antitrust laws may not escape a fine where the infringement results from the company “erring as to the lawfulness of its conduct on account of terms of legal advice given by a lawyer or of the terms of a national competition authority.”

In SSK’s case, the ECJ determined that SSK was aware of its anticompetitive conduct, and that it could not validly use reliance as a defense unless it had been given “precise assurances by the competent authority.”  The ECJ found that SSK could not rely on Austria’s antitrust court because that court did not have the power to adopt a “negative decision” or, in other words, to determine that infringement had occurred.  The ECJ added that “legal advice given by a lawyer cannot, in any event, form the basis of a legitimate expectation.”  The ECJ also noted that Austria’s antitrust court and SSK’s counsel appeared to address national law only, not EU law.

The United Kingdom is considering moving closer to the American class action system and several other reforms that would strengthen antitrust enforcement.

Under a plan announced by the U.K.’s Department for Business Innovation and Skills (the “BIS”), the U.K. would adopt an opt-out collective action system – similar to the American class action system – in an effort to make it easier for consumers and small businesses to obtain damages in price-fixing cases.

The BIS announcement stated that the government has decided to: (1) establish the Competition Appeal Tribunal (CAT) as the major venue for competition actions in the U.K.; (2) introduce a limited opt-out collective actions regime, with safeguards, for competition law; and (3) promote alternative dispute resolution as an alternative to court action.  Much of the proposal would require new legislation.

The British Courts would face significant changes under the plan.  Currently, private cases are heard by an inundated High Court making private litigation lengthy and expensive.  Between 2005 and 2008 judgment was reached in only 41 competition cases.

Under the proposed new system, the CAT would hear all private disputes.  The CAT would also continue to hear appeals of public investigations decided by the Office of Fair Trade.

“Since its creation, the CAT has built up its expertise in competition cases and has become familiar with competition litigation.  There is now a substantial body of CAT case law on many aspects of substance and procedure in this field.  The concept of a specialist competition tribunal or court is recognized internationally as a key strength of the UK regime,” the BIS stated.

Such use of the CAT would also enable a fast-track process to be created to encourage small and medium sized companies to bring cases.

The BIS recommended instating “opt-out” collective action in order to ensure that businesses or consumers affected by an anticompetitive action would receive redress unless they specifically opted out of such relief.

Pro-business interest groups have criticized the plan.  “The Government has let the litigation genie out of the bottle by adopting US-style collective actions.  By grouping potential claimants together indiscriminately these ‘opt-out’ actions fail the growth test and will fuel a litigation culture in the UK,” said Katja Hall, Chief Policy Director for the Confederation of British Industry.

Despite signifying a major change from current U.K. policy on class actions, the new system would maintain significant differences from the American system.  For example, the new British system would not adopt jury trials, treble damages, or contingency fees.  Collective action cases would only be permitted in competition litigation.