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On 14 January 2016, the Competition and Markets Authority (CMA) published a database containing details of

warning and advisory letters it had sent to suspected competition law infringers. The data sheds light on what offences (as well as the markets within which the behaviour takes place) the CMA most often suspects but cannot pursue due to its limited resources and/or the need to prioritise certain cases. It is not in a position to chase every suspected infringement.

BackgroundThese letters do not amount to any legal findings of infringement and recipients do

Expertise | Competition law

A warning shot

CMA reveals increased use of warning letters

competition law Robert BellPartnerBryan Cave LLP

not suffer any immediate repercussions. Instead the letters are a warning shot from the CMA that it considers that the company’s activities may infringe competition law. The warning letter is the more severe of the two, as it may require the suspected infringer to write back to the CMA and explain what remedial action it will take. In the case of advisory letters, the recipient company is strongly encouraged to self-assess its conduct and satisfy itself that it does comply or make necessary changes.

If the CMA later decides to prosecute a company which has received either a warning or advisory letter and it is found that the company failed to act on the CMA’s warning, this will be considered damaging

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Expertise | Competition law

evidence against the

company and may result in an increase of any

penalty imposed.The CMA has more than doubled

the amount of letters it sent out between 2014 and 2015; 85 in 2015 compared to 37 the year before. It is unclear whether this increase was because of a rise in the suspected infringements, due to new intelligence, or whether the CMA was pursuing less formal cases and therefore dealing with more suspected infringements through these letters.

Purple Parking caseThe policy of sending out these letters was introduced some years ago. The Office of Fair Trading (as the CMA then was) was encouraged by the government and others to increase its use of warning/advisory letters to pro-actively intervene in cases where it was to take no formal action.

This followed the case of Purple Parking & Meteor Parking v Heathrow Airport Limited (2011) EWHC 987 (Ch). In that case Purple Parking (PP) and Meteor Parking (MP) brought a claim against Heathrow Airport (HA) alleging that HA had breached the Chapter II Prohibition of the Competition Act 1998 by limiting access to the Heathrow airport forecourts for parking companies which provided valet parking services.

Previously all three companies had offered valet parking services in the airport forecourt. However, HA, as the owner of the

airport, decided to amend that arrangement so that it, as owner,

was the only operator on the forecourt. This forced PP and MP to relocate to the airport carparks but with it they incurred an additional charge.

All parties accepted that HA had a dominant position at the airport due to its control over the access to the airport’s facilities. The High Court therefore had to decide whether HA’s actions amounted to an abuse of that dominance. In its judgment the High Court ruled that HA had breached the Competition Act as its actions placed PP and MP at a competitive disadvantage due to the fact that:

• HA was left as the only valet parking supplier on the airport forecourts

• Presence on the forecourt was extremely

advantageous to an operator due to the benefits it offered to customers over a carpark-based service

• The carpark operators would not be offering a similar product to HA so competition with HA on the forecourt was impossible

• There would effectively be a monopoly on the forecourts leading to risks and detriment for the consumer.

Therefore PP and MP were granted the requested injunctive relief by the High Court to restrain an abuse of a dominant position.

Initiatives to deliver remediesMany competition lawyers were highly critical. Here was a ‘clear’ case of a dominant undertaking ‘abusing its position’ and

foreclosing smaller rivals but the OFT had declined to intervene. The OFT defended its actions stating that it had a duty to prioritise its workload with its limited resources and this case was deemed not to be a priority.

SMEs, trade associations and other pressure groups were also highly critical of the OFT’s role in this case and made a compelling case to the government for the greater availability of remedies. In particular it highlighted the need for mechanisms through which SMEs and other complainants, which did not have deep pockets, could quickly obtain quick and effective relief from the anti-competitive behaviour of larger competitors. Often claimants in abusive foreclosure cases were forced out of the market. By the time a court had ordered a remedy many

companies found themselves in liquidation. They argued things had to change.

This pressure partly led to the government competition reforms in the Consumer Rights Act 2015. This legislation introduced the fast-track competition case process, collective actions, both before the Competition Appeal Tribunal and collective redress schemes to be policed by the CMA.

However, outside these legislative initiatives the CMA was encouraged to make greater use of warning and advisory letters. The warning and advisory letter route invariably

The CMA has more than doubled the amount of warning and advisory letters it sent out between 2014 and 2015;

85 in 2015 compared to 37 the year before

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expertise | competition law

Robert Bell

did produce results although no formal proceedings were taken. Therefore these initiatives were added to the CMA tool kit in dealing with competition infringements – their role being part enforcement and part competition advocacy.

Letters databaseWhat is most revealing about the database of letters sent is the behaviour the CMA most often targets and those that fly relatively under the radar. It also provides an interesting insight into the type of industries that allegedly indulge in the relevant offending practices. An extract from the warning letters database for 2015 provides examples of sample letters sent itemising the potential competition issues, as well as the relevant market sector (see below).

Full copies of the warning letter and advisory databases for 2014 and 2015 can be found on the government website.

The most common offence listed, perhaps unsurprisingly, is retail price maintenance. This is unsurprising as it is the anticompetitive behaviour most clearly linked to a rise or maintenance of profit levels. The

second most pursued offence is restrictions on advertising, a rather wide category. Interestingly a lot of the offences here seem to be in the distribution wholesale and service industries.

However, what is hardly, or not, on the list are any letters citing Article 102 of the TFEU/Chapter II Competition Act 1998 offences. The only abuse of dominance behaviour relates to a potential fidelity rebate in the pharmaceutical sector. This may be because these cases are rare, or because the CMA pursues abuses of dominance more often with formal proceedings.

Although no doubt these lists will be poured over and monitored by lawyers and the industry from this January, a note of caution should be sounded, in that the databases are only a blunt tool in analysing the CMA’s behaviour, akin to monitoring its website. Still, it will be interesting to return in a years’ time to see whether the number of letters sent has increased and what sectors and anti-competitive activities the CMA is being made most aware of.

Sample CMA warning letters

Potential issue Market sectorRestrictions on online advertising Retail and wholesale

Coordination of conduct and information exchange

Healthcare and medical equipment

Resale price maintenance Giftware, jewellery and tableware

Price fixing Distribution and service industries

Fidelity rebates Pharmaceuticals

Advertising restrictions Distribution and service industries

Price fixing Financial services

Resale price maintenance Chemicals

Resale price maintenance Household goods, furniture and furnishings

What is most revealing about the letters is the behaviour the CMA most often targets and those that fly relatively under the radar