United Kingdom Competition Currents: September 2020
UK Competition and Markets Authority (CMA).
On Aug. 21, 2020, the CMA closed its investigation into breaches of competition law by various parties in the entertainment and recreation services sector. The investigation, which started in August 2019, concerned suspected anticompetitive agreements and abuse of market dominance involving unnamed parties. The CMA cited administrative priorities as its reason for closing the case.
On Aug. 24, 2020, the CMA cleared the $5.3 billion acquisition by Visa of Plaid, a startup platform provider focusing on infrastructure enabling interconnectivity between digital apps and individuals’ bank accounts. In the UK, Plaid provides payment initiation services (PIS) that enable consumers to make direct payments using links from a merchant’s app or website rather than paying online using a credit or debit card. The CMA’s phase 1 clearance decision found that Plaid would have presented increasing competition to Visa in this new but growing area in the future, but that the existence of several other equally strong PIS providers in the UK market will ensure sufficient competition to Visa after the merger. The CMA also decided that although Visa had a strong position in card-based payments, there were other card-based payment providers, so Plaid’s competitors would have a number of other opportunities to provide PIS services.
|CMA coordination with other regulations assessing same deal.|
On Aug. 21, 2020, the CMA issued a notice extending its deadline for deciding whether to accept remedies at phase 1 in order to clear Stryker’s acquisition of Wright Medical, one of Stryker’s competitors in the supply of ankle replacement devices. This notice extended CMA’s deadline by almost two months. The purpose of the extension is to enable the CMA to align the timing of its decision with the decisions to be issued by regulators in other jurisdictions who are also assessing this acquisition.
|Appeal against merger fine.|
The UK Competition Appeal Tribunal (CAT) has given JD Sports Fashion (JD) until Sept. 1, 2020, to submit an appeal against a £300,000 penalty imposed on JD by the CMA for breach of a “hold-separate” order relating to JD’s acquisition of competing sports footwear retailer Footasylum in 2019. As is permitted in the UK merger regime, JD did not obtain clearance in advance of the acquisition, but the CMA exercised its right to intervene post-acquisition and imposed an order requiring JD not to integrate Footasylum into JD or direct its operations unless and until the CMA issued a clearance decision. The penalty was imposed after Footasylum announced closure of one of its stores without being able to demonstrate that the decision had been made independently of JD. The CAT specified the Sept. 1 deadline after a dispute between the CMA and JD regarding the date of the penalty decision — important, as there is a 28-day deadline for appeal. The CAT found that the unsigned decision provided by the CMA to JD on July 29, 2020, was not the final decision, so that the deadline was not Aug. 25, but Sept. 1: i.e., 28 days from formal notification. JD’s completed acquisition of Footasylum was blocked by the CMA in May 2020 following a phase 2 review. This decision is also under appeal to the CAT.
On Aug. 13, 2020, the CMA published provisional findings and proposed remedies following its market investigation of funeral services in the UK, started on March 28, 2019. The CMA has the power to conduct this type of investigation and impose a wide range of remedies where it has concerns that a market is not working well — there is no need for suspected competition law infringement. The CMA’s provisional findings are that there is a low level of customer engagement in the market, caused by the challenging circumstances in which funeral services are purchased. In addition, information provided by funeral directors, including prices and quality of service, is not easily accessible, nor clearly comparable. Further findings are that there is no visibility to customers in relation to the quality of care of the deceased by funeral directors, there are high barriers to entry in the supply of crematorium services, and local crematoria are concentrated in the hands of few firms. The CMA has proposed a number of remedies for funeral directors and crematorium operators relating to transparency of pricing, service content, and ownership.
However, the CMA has concluded that, notwithstanding the need for reform of the sector, these remedies cannot be safely introduced in the current national emergency. It refers to the COVID-19 pandemic as having created “insurmountable obstacles” to designing and implementing suitable reforms, with the substantial increase in demand for funerals making it difficult to obtain information required for the investigation, and government restrictions on the type of funeral service permitted hampering testing of the proposed remedies and forecasting of future revenues. As the CMA has no power to suspend or extend the investigation, it proposes a supplementary investigation when conditions are more stable. In the meantime, the CMA proposes two measures: (i) CMA monitoring of the sector, based on key financial data which funeral directors and crematorium operators will be required to provide on a quarterly basis and (ii) an obligation on funeral directors and crematorium operators to provide customers with information, including prices, on the services and packages they offer.
|New developments and proposals.|
|CMA antitrust investigations procedure.|
On Aug. 5, 2020, the CMA published draft revised guidance to its investigation procedures. Key changes relate to increased transparency when the CMA opens a case and the provision of information on proposed penalties at the same time as the CMA issues its statement of objections setting out the case against the firms under investigation. The draft also clarifies the processes for disclosure of certain types of evidence, the process for settlement, and the scope of the Procedural Officer’s role. The draft remains open for consultation until Sept. 10, 2020 and could be finalized shortly after that.
|Cancellations and refunds as a result of COVID-19.|
On Aug. 28, 2020, the CMA issued a further publication confirming its view that consumers generally will be entitled to a refund when they have paid money in advance for services or goods that cannot be provided due to the pandemic. The publication addresses two different scenarios: lockdown laws and government guidance.
|—||Where contracts cannot be performed because of lockdown laws — for example, health protection regulations — the CMA expects customers to be offered a full refund. Where contracts are only partially affected by lockdown laws, customers may be entitled to a refund or price reduction depending on the circumstances and scale of the impact.
|—||Whether consumers are entitled to a refund because of government guidance depends on the specific circumstances. There are specific protections in place where package holidays in a particular destination are cancelled in light of government advice against travel to that destination. Where government advice does not necessarily mean that a contract cannot be performed, however, consumers may not be entitled to a full refund; where this is the case, businesses should treat their customers fairly and responsibly, including trying to find a mutually acceptable solution.|
|Package holidays and group travel.|
One issue the CMA has addressed recently is some package travel organizers’ rejections of claims for refunds from groups, on the basis that only individual travelers are entitled to make refund claims. In letters to individual companies, the CMA has made clear its view that the Package Travel Regulations cover both group and individual travel packages.
On Aug. 20, 2020, the English High Court issued an interim injunction against UK mail delivery incumbent Royal Mail Group (RMG). The injunction was awarded in proceedings brought against RMG by Preventx, which provides remote diagnostic testing services, partner notification, and onward clinical referral services for sexually transmitted infections (STIs). Preventx had arranged with RMG for Preventx customers to send their samples to Preventx for testing, using RMG’s Freepost service, which allowed customers to put their samples in a prepaid package and post it using any available postbox. According to the case report, in February 2020, RMG informed Preventx that the samples were classed as dangerous and that RMG terms and conditions required them to be sent using a much more expensive, tracked, mailing service, with the customer’s name and address and the word “Tracked” on the label.
Preventx claimed that these were unfair trading conditions: the requirement to use the word “tracked” on the label could deter customers from using its service on the basis that it might not be confidential, and the steep increase in postage costs, together with the short notice given to it, could result in samples being destroyed. It argued that this was an abuse of RMG’s dominant position in the market for untracked, outbound/return postal services for STI test kits and samples. The High Court found that this was a serious question to be tried in a full hearing. It further found that implementation of RMG’s demands in the meantime could cause harm to Preventx’s reputation and customer confidence in it, and that damages would be an insufficient remedy. Consequently, it ordered RMG to refrain until trial from refusing to continue providing the Freepost service to Preventx.
The UK formally left the EU on Dec. 31, 2019. EU law continues to apply in the UK during the transitional period agreed with the EU in the Withdrawal Agreement. This transitional period ends on Dec. 31, 2020; at that point the UK competition law system will operate independently of the EU system. This means that the UK will have separate jurisdiction to review large mergers that also qualify for EU review, and that the UK can investigate infringements of competition law in parallel with the EU. The UK government has allocated additional funds to the CMA and other competition regulators to provide for an increased case load. It has not, however, taken any public steps to implement proposals for reform of the UK competition regime, put forward by the CMA in early 2019. It appears unlikely that, if these proposals were to be progressed, they would take effect from Jan. 1, 2021.