The Competition and Markets Authority (CMA) has published a consultation document setting out its draft Guidance and Rules of Procedure for investigation procedures under the Competition Act 1998 (the Guidance and Rules of Procedure). The document is part of a wider consultation about how the CMA will work in practice and how it will interact with businesses and individuals when it takes over the functions of the OFT on 1 May 2014. A previous blog post discussed the draft prosecution guidance on the criminal cartel offence.

The Guidance and Rules of Procedure largely mirrors the current OFT guide to investigation procedures in competition cases, but in addition covers a series of new powers granted to the CMA under the Enterprise and Regulatory Reform Act 2013. These include:

• Giving the CMA the power to interview individuals;
• Replacing the current criminal sanctions for failing to comply with investigations with civil financial sanctions;
• Giving the CMA the express power to publish a notice of investigation, which may name a party or parties to an investigation;
• Lowering the threshold for the CMA to impose interim measures; and
• Introducing new statutory factors to be taken into account in fixing a penalty.

The most controversial of these powers is the new power under section 26A of the Competition Act 1998 to require any individual who has a connection with a business which is a party to an investigation to answer questions on any matter relevant to the investigation. The OFT has said that the new power is designed to make the CMA’s investigations more robust and efficient by enabling it to obtain information orally that it would otherwise either not be able to obtain or only be able to obtain through written requests. However, concerns have been raised that it will be used to carry out ‘fishing expeditions’ for information during investigations and that individuals’ rights may not be adequately protected.

The CMA must provide both the person and the undertaking with a formal notice which will ordinarily state the time and place at which the person must be available for questioning. However, the Guidance and Rules of Procedure state that in certain circumstances the CMA may interview an individual using its formal powers immediately after giving the notice. This is likely to be during a dawn raid where the CMA is of the view that a delay in conducting the interview may compromise the investigation.

A person being formally questioned may request that a lawyer be present. The CMA will only permit a legal adviser who is also acting for the undertaking under investigation to attend the interview if it is satisfied that this will not risk prejudicing the investigation (for example because it would increase the risk of destruction of evidence or reduce the incentive for individuals being questioned to speak openly and honestly). If this is the case, then the person can request another lawyer and the CMA will delay questioning for a reasonable time to allow a legal adviser to attend. However, the Guidance and Rules of Procedure define “a reasonable time” as such period of time as the officer considers is reasonable in the circumstances. The wide discretion granted to the relevant CMA officer raises the possibility that people may be formally interviewed without a lawyer present or without being fully aware of their rights.

The definition of connected individuals is also very wide, covering not only directors and employees, but also consultants, volunteers, contract staff and professional advisers.

The consultation closes on 11 November

On 8 July 2013, the UK’s Office of Fair Trading (OFT) published its final revised Guide to applications for leniency and no-action in cartel cases. The Guide, which took effect on publication, follows two consultations on the draft revisions, the second of which specifically addressed the issue of waiver of legal privilege in leniency applications (covered in paragraphs 3.15 to 3.23 of the Guide).

The OFT has announced that it will no longer require leniency applicants in cartel cases to waive legal privilege under any circumstances. The existing policy is that while waivers are not required in civil competition investigations, they may be in certain circumstances in criminal cases. Applicants may still be asked if they are willing to waive legal privilege, but a refusal to do so will not have any adverse consequences for the leniency application.

The decision not to insist on waiver of legal privilege has been made primarily due to concerns that any requirement would act as a disincentive to potential leniency applicants. In particular, if applicants feel unable to make full and frank disclosure to their legal advisers then it is difficult for them to obtain proper advice in order to make an informed decision about action to take in relation to any cartel activity, especially given that leniency is not usually confirmed until late in the process.

The OFT has also taken into account that many other competition authorities, such as the European Commission and the United States Department of Justice Antitrust Division, do not require waiver as a condition of leniency, and the fact that the Government has confirmed that waiver of legal privilege will not be a condition of the proposed Deferred Prosecution Agreements.

While this change has been overwhelmingly welcomed, the introduction of a new independent counsel to which applicants may be required to submit material over which they are claiming privilege for assessment as to whether that claim is justified, is more controversial.

Critics have pointed out that the disclosure of materials to the independent counsel could result in a waiver of legal privilege over those documents in some jurisdictions, in particular the US. The OFT did not consider these concerns relevant because they deal with considerations outside of the UK legal framework. It remains to be seen whether companies, especially those with wide-ranging international interests, will consider this risk significant enough to deter them from taking part in the leniency process. There are also concerns that an appeal by a leniency applicant against a decision of the independent counsel that privilege does not apply may adversely affect the OFT’s view as to whether the applicant is complying with its obligation of continuous and complete cooperation under the leniency programme. The OFT has said that this will be dealt with on a case by case basis.

Despite these concerns, the decision by the OFT to change its policy and cease to require leniency applicants to waive legal privilege in both civil and criminal proceedings is a significant step forward, and demonstrates the results that robust responses to official consultations can achieve.

The OFT has also published two new Quick Guides to cartels and leniency, one for businesses and one for individuals.