The Digital Markets, Competition and Consumers Act – Strengthened Investigatory & Enforcement Powers for the CMA

• Penalties available for failure to comply with an investigative measure (e.g. failing to comply with an information request, supplying 'false and misleading' information and concealing, falsifying or destroying evidence) are increased significantly, to bring the UK in line with other European jurisdictions. These changes apply across the range of CMA tools (competition investigations, mergers and market studies/investigations). Fixed penalties of up to 1% of a business’ annual global turnover will be available (up from the current maximum of £30,000), as well as additional daily penalties of up to 5% of daily global turnover while non-compliance continues (up from the current maximum of £15,000).

• For the first time, natural persons (e.g. company directors) will also be able to be fined for failure to comply with the CMA's investigative measures: fixed penalties of up £30,000 are available, as well as additional daily penalties of up to £15,000.
  
  
• Penalties for breaches of CMA directions, orders and undertakings, or commitments across the range of CMA investigations will also be introduced, up to a maximum of 5% of annual global turnover (plus daily penalties of up to 5% of daily global turnover).

The Act confirms that notices requiring the production of information and documents will be given extraterritorial effect such that notices can:

• be issued to persons outside of the UK (where the 'person' is party to a merger or subject to a competition investigation, or has a UK connection), and
• require the production of documents and information held outside of the UK.

This amendment is not unexpected, and seeks to shore-up an area of ambiguity which was recently explored in the Court of Appeal's recent ruling in BMW v CMA.

Similarly to the CMA's power to obtain information and documents held outside of the UK, the Act clarifies the scope of the CMA's jurisdiction to investigate anti-competitive agreements made abroad.  

The Act removes the existing requirement for agreements to be implemented in the UK in order to fall under the UK Chapter 1 prohibition. It will be sufficient, in line with the EU position, for the agreement in question to have an effect on trade within the UK.

It remains to be seen just how much this change shifts the dial in practice: although one can imagine it will ease the CMA's burden in proving jurisdiction in the context of increased globalisation, for example a cartel implemented in another part of the globe which relates to products that are imported into the UK.

Abuse of dominance investigations are left unchanged in the UK – the business carrying out the conduct must still have a dominant position within (a part of) the UK.

The Act adopts a raft of measures to strengthen the CMA's (and concurrent regulators') powers to investigate. These serve to underline the need for firms to have robust and clear protocols in place for competition law investigations and dawn raids with staff and IT teams – including vis-à-vis cloud storage and those staff working from home.  Set out below are some key examples.

• Duty to preserve documents. The Act introduces a new duty to preserve evidence, underpinned by civil penalties. There will now be a general duty for businesses to preserve evidence where it is known or suspected that an investigation is, or is likely to be, carried out (rather than just where the evidence falls within the scope of an active information gathering notice or other investigative measure, as is the case currently). This is a significant obligation, bearing in mind the CMA's newly enhanced penalties for procedural infringements.
  
  
• Domestic seize-and-sift powers. Powers to ‘seize-and-sift’ evidence when inspecting domestic premises under warrant (as is currently the case for inspecting business premises under warrant) will be introduced. These changes have been brought about by increasingly flexible working patterns post-pandemic.
  
  
• Data/documents need not be physically on the premises for seize and sift. In order to deal with increasing use of cloud-storage systems, warrants may be granted, and effected, on the basis of documents that are "accessible" from the premises (and not only documents "on" the premises). This is a key clarification for the CMA, given businesses' IT systems have increasingly become cloud based in recent years.

With the aim of enhancing efficiency, appeals against interim measures decisions in Competition Act cases will be on judicial review grounds, rather than the current "on the merits" standard. Interim measures decisions will therefore only be set aside on the grounds of illegality, irrationality or procedural unfairness – a high hurdle for a successful challenge.

Up-to-now, it has been very rare for the CMA to impose interim measures during an investigation. Query whether the CMA will now have greater confidence that any interim measures it imposes will withstand judicial scrutiny, such that those measures will be more commonly imposed going forward.