U.K. Competition Watchdog Fines Foreign Undertaking for Failure to Comply with Information Request
In a ruling which could have widespread implications for foreign companies doing business in the U.K., the U.K. competition watchdog, the Competition and Markets Authority (CMA), hit Bayerische Motoren Werke AG (BMW AG) with a maximum fine for failing to comply with a CMA information request. The information request was issued in connection with a U.K. competition investigation into alleged collusion in the vehicle recycling market.
The parent company of the BMW Group, German-based BMW AG, was fined £30,000 for noncompliance and a recurring daily penalty of £15,000 until such time as the information request is fully complied with.
While BMW Group’s U.K. subsidiary, BMW UK Limited (BMW UK), complied and continues to cooperate with the CMA in so far as it relates to the U.K. investigation, that company contended that it does not have the ability to call on documents from its foreign parent BMW AG, which refused to accept CMA’s jurisdiction.
BMW AG has now 28 days to appeal to the Competition Appeal Tribunal against the imposition or nature of a penalty and its amount, as well as the date on which it is required to be paid.
On 15 March 2022, the CMA launched its investigation focusing on suspected anti-competitive agreements or concerted practices between undertakings involving the BMW UK, BMW AG and any other legal entities within the same undertaking (collectively referred to as the BMW Group) related to the recycling of old and written-off vehicles. The European Commission has also launched an investigation into this matter and conducted unannounced inspections (in coordination with the CMA) and sent information requests in March 2022.
The U.K. competition watchdog suspects that since at least 2002, the BMW Group has had in place anti-competitive arrangements in relation to the take-back, dismantling and recycling of end-of-life vehicles (ELVs) in the U.K., and suspects that important aspects of the arrangements were agreed abroad before being implemented in the U.K. It considered that relevant information is likely to be held by individuals employed by BMW AG (or its 15 non-U.K. subsidiaries).
Accordingly, on 1 April 2022 the watchdog issued a notice under Section 26 of the Competition Act 1998 (the Act) to the BMW Group specifying information and documents required to be produced, which it considered relate to any matter relevant to the investigation (the Section 26 Notice). Under Section 40A of the Act, failure to comply with a Section 26 request without a reasonable excuse may attract a penalty of such amount as the CMA considers appropriate subject to certain maximum levels. As an undertaking, the BMW Group is a "person" for the purposes of Section 26 of the Act and BMW AG forms part of that undertaking. The obligation on the undertaking to comply with the Section 26 Notice encompasses all legal persons forming part of the undertaking. Further, the BMW Group undertaking is present in the U.K. through BMW UK, so the issue of extraterritoriality does not arise. In any event the CMA contends that Section 26 has extra jurisdictional effect as long as the agreement or behaviour has an affect on trade and competition in the U.K. Therefore, the CMA has jurisdiction to serve a Section 26 Notice on a non-U.K. company or individual as long as there is the requisite affect within the U.K.
The CMA’s decision raises important issues about the extent of its jurisdiction to take enforcement action in relation to non-U.K. companies. Although following the U.K.'s exit from the European Union, the CMA no longer benefits from cooperation within the European Competition Network, this really is not the issue in the present case. The real issue at the heart of this case is whether Section 26 empowers the CMA to require undertakings that are wholly or partially based outside the U.K. to produce documents and information which the CMA considers relate to any matter relevant to a U.K. competition investigation.
Through the publication of this decision and the imposition of maximum penalties on BMW AG, the CMA has sounded a warning shot to all non-U.K. undertakings that it expects them to fully cooperate and fully respond to its information requests under Section 26 (whether or not they have a subsidiary or other presence in the U.K.) when it is investigating U.K. competition law infringements.