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Competition law enforcement: a new era

The Competition (Amendment) Act was signed into law in June 2022 and is expected to be commenced in the coming months. Laura McGovern and Jessica Egan give the team talk.

The long-awaited Competition (Amendment) Act 2022 transposes Directive 2019/1 (the ECN+ Directive), the aim of which is to empower national competition authorities of EU member states to become more effective enforcers of EU competition law. In Ireland, the Competition and Consumer Protection Commission (CCPC) is the primary enforcer of competition law, while the Commission for Communications Regulation (ComReg) has concurrent powers in the electronic communications sector.

The act is hugely significant, as it introduces an administrative enforcement regime for competition law. Under this new regime, the CCPC has the power to make a finding that an undertaking has breached competition law and to impose fines of up to €10 million or 10% of that undertaking’s worldwide turnover in its own proceedings, subject to confirmation by the High Court.

Under the existing legislation, the Competition Act 2002, the CCPC would investigate a suspected breach and decide whether to initiate either civil or criminal proceedings in the courts.

Only the Irish courts could make a finding that a breach of competition law had occurred. No fines could be imposed by the courts in civil proceedings or by the CCPC. Fines could only be imposed by a court following a criminal conviction.

The purpose of this article is to provide practitioners with a high-level overview of the new administrative enforcement regime that will apply to breaches of both Irish and EU competition law once the act is commenced, and to note some key takeaways.

This article focuses on the CCPC’s powers, but most of the act’s provisions apply equally to ComReg. The act also makes other amendments to the existing legislation for the purpose of transposing the ECN+ Directive and for bolstering the CCPC’s existing powers beyond the scope of that directive, but these changes are not discussed in this article.

Zalewski judgment

The changes introduced by the 2022 act will be of most interest to in-house counsel and competition law practitioners. However, the act has a much wider significance, as it is – to our knowledge – the first piece of legislation in Ireland providing for an administrative decision-making procedure published after the Supreme Court decision in Zalewski v Adjudication Officer and WRC, Ireland and the Attorney General ([2021] IESC 24).

In Zalewski, the Supreme Court considered a constitutional challenge to the Workplace Relations Commission (WRC), which adjudicates on disputes under employment legislation. A majority of the Supreme Court considered that the WRC was involved in the limited administration of justice pursuant to article 37 of the Irish Constitution.

Certain aspects of WRC procedure, however, were declared unconstitutional. These included the requirement that all hearings be held in private, and the absence of a provision requiring certain evidence to be given on oath, or any possibility of punishment for giving false evidence.

The administrative procedure provided for in the act has been carefully designed to give effect to the provisions of the ECN+ Directive, while at the same time seeking to achieve compatibility with the Irish Constitution, as interpreted in Zalewski.

Administrative sanctions

The act provides that the CCPC can initiate its administrative sanctions procedure at any stage during a competition investigation, where it forms the preliminary view that an infringement of competition law may have occurred and that the matter is not to be treated as a criminal matter. To do this, the CCPC issues the undertaking concerned with a ‘statement of objections’, which sets out the CCPC’s reasons for its preliminary view.

As soon as practicable thereafter, the CCPC must provide that undertaking with access to any material relied on by the CCPC for the purpose of issuing the statement of objections (although certain material may be redacted).

The undertaking concerned then has a right to make written submissions in response to the statement of objections, following which the CCPC must prepare what is called its ‘full investigation report’.

Where the CCPC forms a provisional opinion that an infringement has occurred and decides to proceed with enforcement, the CCPC is required to refer the matter for decision by an independent ‘adjudication officer’ and provide a copy of the full investigation report to the adjudication officer and the undertaking concerned.

Separation of functions

A fundamental requirement of the act is that there must be adequate separation between the CCPC’s investigative and adjudicative functions: that is, between the individuals investigating a suspected infringement and the individuals deciding whether an infringement has, in fact, occurred and imposing a fine or other sanction.

The act creates the new role of adjudication officers, who are nominated by the CCPC and appointed by the Minister for Enterprise, Trade and Employment. The act contains stringent requirements to ensure that adjudication officers shall be independent in the performance of their functions, including a requirement that they shall not be accountable or answerable to any person when performing these functions.

The act also requires the minister to make regulations providing that adjudication officers shall not be involved in any investigations into suspected competition-law infringements. Further requirements to ensure the independence of adjudication officers will be prescribed in secondary legislation, which (at the time of writing) has yet to be published.

Procedures

The act gives adjudication officers extensive powers to obtain additional information during the adjudication process if this is deemed necessary for deciding whether there has been an infringement.

Specifically, an adjudication officer may request further information from the undertaking concerned or from any other person, and may summon witnesses to appear before him/her at an oral hearing. At such oral hearings, an adjudication officer has the same powers, rights, and privileges as a judge of the High Court hearing civil proceedings.

The Supreme Court’s criticisms of the WRC procedures in Zalewski are addressed in the act, which provides that an adjudication officer may require a witness to give evidence on oath, and it is a criminal offence for such witness to knowingly provide evidence that is false or misleading in a material respect.

Further, the act provides that an oral hearing before an adjudication officer must be held in public, unless there are ‘special circumstances’, which include whether information likely to be given in evidence is commercially sensitive.

Where an adjudication officer finds that an infringement has occurred, he/she can impose a fine and/or structural or behavioural remedies (for example, requiring a company to divest a business or cease certain conduct). The decision of the adjudication officer does not take effect until it is confirmed by the High Court.

The undertaking can appeal the decision of the adjudication officer to the High Court within 28 working days. However, the grounds of appeal are expressly limited by the act itself. Where an undertaking does not appeal, the CCPC must apply to the High Court for confirmation of the adjudication officer’s decision before the decision may take effect.

Key points

The introduction of admin-istrative fines for breaches of competition law fills a significant gap in the existing enforcement regime. Although criminal sanctions may be appropriate and effective for deterring cartel activity, other types of anti-competitive practices (for example, abuse of dominance or anti-competitive vertical agreements) are rarely suitable for criminal prosecution, which requires the prosecution’s case to be proven to the very high evidential standard of ‘beyond reasonable doubt’.

Although the CCPC has challenged such practices in the past, it has been unable to impose effective sanctions on the undertakings concerned. The absence of civil or administrative fines has resulted in underenforcement of such practices, and little deterrent effect for undertakings engaging in them.

It seems highly likely that, following commencement of the act, public enforcement of competition law in Ireland will significantly increase, especially with respect to non-cartel practices, which will now be punishable with fines on satisfaction of a lower, civil, evidential standard of ‘on the balance of probabilities’.

Undertakings should ensure that they have in place comprehensive compliance programmes and regular training that cover the full spectrum of competition infringements – not only the most serious cartel breaches – and obtain specialist legal advice on business strategies that may give risk to competition-law risks (for example, undertakings with potentially dominant market positions or that operate distribution or resale networks).

This will be particularly important given that the act allows the CCPC to put in place leniency programmes for infringements other than cartels, which offer incentives for undertakings to bring such infringements to the CCPC’s attention. Indeed, in June, the CCPC consulted on a draft addendum to its administrative leniency policy that extends the scope of that policy to practices that constitute resale price maintenance.

Decision-making procedures

The provisions of the act that require a strict separation of the CCPC’s investigative and adjudicative functions create an enforcement regime that is not comparable to any other competition agency in the EU. In addition, other Irish regulators with administrative fining powers do not currently have comparable decision-making structures, or such detailed and stringent independence requirements, set out in their primary legislation.

There is, therefore, a degree of novelty in the new regime that inhibits the ability of practitioners and undertakings to ‘read-across’ the structures and procedures applied by other competition agencies or other relevant Irish regulators.

The early years of the new regime will provide important lessons for both the CCPC and practitioners advising undertakings under investigation, and the policies, procedures, and guidelines that will be adopted by the CCPC upon commencement may be subject to change as the regime beds in.

Additionally, the act provides for a raft of secondary legislation to be made, which may introduce further, more detailed requirements for ensuring the independence of adjudication officers or decision-making procedures.

Devil in the detail

The act is very prescriptive as to the procedures to be followed by the CCPC and the adjudication officers, several of which depart significantly from those adopted in many other jurisdictions.

For example, the ‘full investigation report’ (described above) is novel in this context, and the oral-hearing procedure envisaged in the act is more akin to a court hearing than the equivalent procedure under the European Commission’s competition enforcement regime. In addition, all decisions by adjudication officers must be confirmed by the High Court, either on appeal or by way of the ‘court-confirmation’ procedure set out in the act.

The requirements and procedures specified in the act seem unlikely to reduce the length of CCPC competition investigations, which in recent times have ranged between two and six years. In fact, the new adjudication process may extend the duration of competition investigations. In this regard, it is noteworthy that the act explicitly provides that no limitation period will apply to the referral of a matter to an adjudication officer for a decision.

The new administrative decision-making procedure under the act may also be more costly and resource-intensive than the present regime, both for those under investigation and the CCPC. Oral hearings that involve examination and cross-examination of witnesses under oath are expected to be highly adversarial and require significant legal resources and input.

There is also likely to be disruption to the client’s business, given that adjudication officers may summon witnesses and require the provision of information and evidence additional to that which has already been provided by the undertaking to the investigators prior to any referral to an adjudication officer.

Final thoughts

The act is an extremely ambitious, complex, and ground-breaking piece of legislation. The new administrative enforcement regime introduced by the act will greatly enhance the ability of the CCPC to enforce competition law effectively.

The existence of administrative fines for breaches of competition law is a significant deterrent, which should increase the incentives for undertakings to cooperate with competition investigations and, ultimately, promote a better compliance culture among Irish businesses.

However, the adjudication structures and procedures prescribed by the act are novel, very detailed, and require careful navigation. While the new era of administrative competition enforcement ushered in by the act is to be welcomed, it is still in its infancy, and we are likely to see further developments and refinements in the coming years, as experience of the new regime grows.

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