Commercially Connected Shorts - 4 September 2024

This week we look at:

• UK accession to CPTPP by December 2024
• The UK’s CMA consults on its draft direct enforcement guidance and rules
• Which? report on loyalty pricing practices
• ECJ limits EU Commission’s Merger Control Remit

UK accession to CPTPP by December 2024

On 29 August 2024 the Department for Business and Trade (DBT) announced that the UK will accede to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) by 15 December 2024.

Following accession, the UK will benefit from tariff free trade for over 99% of its current exports to CPTPP countries. Current CPTPP members are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The DBT estimates that CPTPP area trade could boost the UK economy by approximately £2 billion per annum by 2040.

UK accession is now possible after Peru became the sixth CPTPP country to ratify UK membership, following Japan, Singapore, Chile, New Zealand and Vietnam. The CPTPP will come into force between the UK and these 6 countries initially, then subsequently with other CPTPP countries as they individually ratify the UK’s accession.

Businesses that trade with CPTPP signatories, or wish to expand operations to do so, should start planning how they can take advantage of this arrangement. The DBT press release directs businesses to the Export Digital Enquiry Service for further information on how the CPTPP may benefit them.

The UK’s CMA consults on its draft direct enforcement guidance and rules

With thanks to Matthew Gough, Louise Howarth and Eve England.

The Digital Markets, Competition and Consumers Act 2024 (DMCC) gives the Competition and Markets Authority (CMA) new direct enforcement powers for consumer law breaches. This is a significant change to the existing enforcement regime, where only the courts can determine whether consumer protection laws have been infringed.

The CMA has published a consultation inviting comments on its draft copies of the statutory guidance and rules that will underpin the way that the CMA will exercise its new enforcement powers. The closing date for responses is 11 September 2024.

What are the CMA’s new enforcement powers?

Chapter 4 of the DMCC sets out the new direct enforcement regime for the CMA. These apply in relation to the consumer protection laws that are listed in Schedule 16 of the DMCC. The new powers include the ability to:

• launch and conduct investigations into potential consumer law infringements
• impose provisional infringement notices (PINs), and thereafter final infringement notices (FINs), as well as the ability to issue interim and final online interface notices. The DMCC also provides for a penalty regime for failure to comply with these, and an ability to apply court enforcement
• agree undertakings with an infringer and to enforce them (including issuing penalties if they are breached)
• impose financial penalties for infringements (up to a statutory cap of 10% of global turnover), but subject to a settlement regime where a discount may be agreed for a person who admits to the alleged infringement

The CMA is required by the DMCC to issue these guidance documents and, once finalised, they will be legally binding on the CMA, unless a deviation from them is appropriate in specific cases.

A  separate court-based enforcement regime for certain other consumer law infringements also exists in parallel, which businesses will also need to be aware of.

Eve England, partner in the consumer law team comments: ”This represents a watershed moment for UK consumers, as, for the first time, the DMCC promises swift and effective recourse outside of the current courts system.”

What is the CMA consulting on?

The CMA is consulting on a number of aspects of the draft guidance and rules, particularly around how the processes applying to the different enforcement powers will work in practice. The questions set out in section 3 of the consultation ask respondents to provide comments on a number of areas including:

• Provisional Infringement Notices: the guidance provides detailed procedures around the issuing of PINs, stating that recipients will typically have 20-30 days to respond and to attend an optional oral hearing. It also sets out how new evidence may be submitted, how extensions may be requested, as well as how confidentiality is treated.
• Acceptance of undertakings: the general aim of the CMA’s powers is to promptly address any issues identified by the CMA. On this basis, undertakings will be more likely if they can be implemented effectively and quickly. The CMA has suggested that repeat offenders will find it more difficult to agree undertakings. The CMA has also set out a number of factors that it would consider when deciding whether to accept, vary or release undertakings.
• Settlements: the settlement regime could lead to a reduction of between 25-40% of any monetary penalty imposed on a person who admits consumer law infringement.
• Reasonable excuse for non-compliance: the drafts provide an overview of the factors that would be considered in these cases. These situations would mean that a person would not be subject to a monetary penalty.
• Monetary penalties: the CMA proposes that its starting point for a monetary penalty could be up to 30% of UK turnover for the most serious breaches, but subject to the statutory cap of 10% of global turnover. The guidance provides a stepped calculation process: first determining the level of harm (from Category 1 “major” harm, down to Category 4) and by considering so called “Escalating Factors” (including where there has been any impact on vulnerable consumers or where infringement involves products of an essential nature such as day to day necessities). The CMA will then consider deterrent effect, mitigating/aggravating factors and any adjustment to ensure the penalty is proportionate. Finally any settlement discount will be applied.

Louise Howarth, partner in our regulatory disputes team comments: “The CMA’s new powers are a step change in consumer enforcement. We expect to see the CMA taking early and decisive action under the new regime to demonstrate its commitment to protecting consumers from harm and tackling unfair behaviours.”

Matthew Gough, head of the ES consumer practice, comments: “The stronger enforcement powers including CMA fines of up to 10% of global turnover represent a step change in UK consumer law enforcement. This brings the UK in line with much of Europe where regulators have strong powers to enforce consumer protection laws. We are receiving a lot of interest from clients who are keen to understand where they might have potential exposure under the new regime. This is one area where prevention is much preferable to cure!”

Which? report on loyalty pricing practices

In July we reported on the Competition and Markets Authority’s (CMA) update on its review of loyalty pricing. Loyalty pricing is where a retailer offers a “two-tier” price for certain products, with the cheaper price being available to members of its loyalty scheme.

This continues to be a hot topic for the consumer sector, with consumer group Which? issuing a press release at the end of August setting out its findings from research into loyalty pricing practices. Its key concerns were evidence of pricing promotions where the non-member price had not applied for long before the promotional price started, or where the non-member price was much higher than the price charged by other retailers. These practices have the potential to mislead consumers because they make the loyalty price seem like a better deal than it actually is.

Which? is now calling for guidance on pricing promotions to be revised to make it clearer how to comply with the law when running loyalty pricing promotions in order to avoid misleading consumers.

The Chartered Trading Standards Institute (CTSI), which is responsible for producing guidance, responded to the Which? report by saying that it is considering reviewing its Guidance For Traders on Pricing Practices.

We are expecting the CMA’s full report on this topic in November, so it may be that the CTSI will hold off on issuing revised guidance until that report is published. It is also worth noting that the CMA update in July suggested less cause for concern than the Which? press release, although the CMA’s investigations are still continuing.

Retailers in the consumer sector should ensure that they are complying with the law when running pricing promotions, with price reductions being genuine and not misleading, and should review the CMA report and any revised CTSI guidance when available.

ECJ limits EU Commission’s Merger Control Remit

With thanks to Marjolein de Backer, Peter Harper, Clare Morgan and Annabel Borg.

On 3 September 2024 the EU Court of Justice (ECJ) issued a significant judgment overturning the General Court’s judgment in the Illumina/Grail case. This is a significant blow to the European Commission (EC), as it:

• leaves the EC with an enforcement gap; it limits the EC’s ability to scrutinise mergers that do not meet the EU or national merger thresholds
• affects the impact of the merger information provisions in the EU Digital Markets Act, as the EC cannot encourage Member States to refer any of those cases using Article 22 of the EU Merger Regulation, particularly so-called “killer acquisitions”

Overall, the judgment reinforces the need for clear jurisdictional boundaries and provides greater legal certainty for businesses. It may, however, prompt a reassessment of merger control policies within the EU.

For more information, see our Flash update.