U.K. Appeal Court Affirms CMA Powers to Request Information from Foreign Companies in Antitrust Investigations
In a landmark judgment delivered on 17 January 2024, the English Court of Appeal ruled on the jurisdictional scope of the U.K. Competition & Markets Authority’s (CMA) powers to request information from foreign companies under Section 26 of the Competition Act 1998. The judgment provides clarity on CMA’s authority to issue information requests beyond the borders of the United Kingdom. The case in question, Competition and Markets Authority v Volkswagen AG & BMW AG  EWCA Civ 1506 (judgment of 17 January 2024)), will have significant implications for companies with global operations.
The Competition Act 1998 was enacted to promote fair competition and prevent anti-competitive practices within the U.K. Section 26 of the Competition Act 1998 empowers the CMA to request information from entities it suspects may have engaged in anti-competitive behaviour. However, the geographical scope of the CMA's authority to issue such requests has been a matter of legal debate. This issue came before the Courts in the BMW case.
The BMW case involved allegations of anti-competitive conduct by BMW, a global automotive giant, in connection with alleged collusion in the vehicle recycling market. The CMA sought information relevant to its investigation from BMW AG, BMW’s parent company, which was not active in the U.K., and BMW U.K. subsidiary BMW UK Limited. BMW UK Limited complied, but BMW AG argued that the CMA lacked jurisdiction under Section 26 to request information from entities outside the U.K.
On 6 December 2022, the CMA imposed a penalty (the statutory maximum of a fixed penalty of £30,000 and a daily penalty of £15,000) on BMW AG due to its failure to comply with a formal request for information issued under Section 26 of the Competition Act 1998. BMW AG lodged an appeal before the Competition Appeal Tribunal (CAT) claiming that Section 26 did not have extraterritorial effect and the CMA had acted ultra vires by imposing a penalty for noncompliance with Section 26.
The CAT in its judgment sided with BMW, holding that the CMA's power to request information under Section 26 did not extend beyond the U.K.'s borders. Therefore, a limited company which did not have any presence in the U.K. (notwithstanding the presence of a U.K. subsidiary company from within the same corporate group) did not have to provide the CMA with information pursuant to its powers under Section 26. This judgment set alarm bells ringing within the CMA and the wider legal and regulatory community, as its effect would drastically limit the CMA's ability to investigate and address potential anti-competitive practices with an international dimension. The CMA appealed the CAT’s decision to the Court of Appeal.
Court of Appeal's Judgment
The Court of Appeal, in a unanimous decision, overturned the CAT's ruling and affirmed the CMA's extraterritorial jurisdiction under Section 26 of the Act. The court reasoned that the wording of the provision, coupled with the legislative intent, supported the interpretation that the CMA could issue information requests to entities operating outside the U.K. It emphasized the global nature of modern business and the interconnectedness of markets, highlighting the importance of empowering competition authorities to investigate and address anti-competitive practices with cross-border implications. The judgment underscored the need for a flexible and expansive approach to jurisdiction, in line with the evolving landscape of international commerce.
The Appeal Court rejected the notion that the Competition Act's jurisdictional reach was confined to companies which had activities within the physical boundaries of the U.K., recognizing that restrictive interpretations could hamper the effectiveness of competition law enforcement in an increasingly globalized economy.
The Court of Appeal’s decision in the BMW case reflects a commitment to ensuring the effectiveness of competition law in the face of complex, cross-border commercial activities. The judgment acknowledges the challenges posed by international markets and the necessity of providing competition authorities with the tools to address anti-competitive conduct that spans multiple jurisdictions. Furthermore, the court highlighted that cooperation among competition authorities globally was crucial for the effective enforcement of competition law. By affirming the extraterritorial jurisdiction of the CMA, the Court of Appeal contributes to the harmonization of competition law enforcement across borders.
Impact on Businesses
The judgment in the BMW case has significant implications for businesses operating in the U.K. and abroad. Companies with global operations should be aware that the CMA’s power to request information under Section 26 extends beyond the U.K.’s borders. This means that, irrespective of their location, entities may find themselves subject to information requests if the CMA suspects them of engaging in anti-competitive practices affecting the U.K. market. Multinational corporations must now navigate a more expansive regulatory landscape, understanding that national competition authorities may exercise their powers extraterritorially. This development underscores the importance of robust compliance programs and proactive engagement with competition authorities to address any concerns promptly.
The Court of Appeal’s judgment in the BMW case represents a pivotal moment in the interpretation of the Competition Act 1998 and the extraterritorial jurisdiction of the CMA. By affirming the authority of the CMA to issue information requests beyond the U.K.'s borders, the court has demonstrated a commitment to adapt competition law to the challenges of a globalized economy. This decision not only enhances the CMA's ability to investigate and combat anti-competitive practices but also reinforces the interconnectedness of competition law enforcement across jurisdictions. As businesses continue to operate on an international scale, the implications of this judgment will undoubtedly resonate beyond the confines of this case, shaping the future landscape of competition law in the U.K.