Focus on dawn raids, international cooperation, private damages and sustainability

A ‘new dawn’ for dawn raids

2022 saw a surge in the number of dawn raids conducted by antitrust authorities across the globe, continuing a trend that commenced in the second half of 2021. After an unsurprising lack of raids during the height of the Covid-19 pandemic, it now appears that authorities are keen to get back to ‘business as usual’. Notably in the UK, the Competition and Markets Authority (CMA) Director for Enforcement has warned cartelists “the days of the CMA having to refrain from dawn raids are over”.

Of the 30 jurisdictions surveyed, 22 (73%) confirmed that the regulator had carried out dawn raids during the course of 2022, conducting in total more than 155 raids.

Within Europe, the European Commission (EC) carried out unannounced inspections in several Member States at the premises of companies active in a number of different sectors, including natural gas, online food delivery, water infrastructure and fashion. The inspections were conducted in conjunction with the national antitrust authorities. In addition, the EC and CMA conducted same-day dawn raids of associations active in the automotive sector in the EU and UK. These were the first parallel dawn raids since the completion of the UK’s withdrawal from the EU. Several individual European jurisdictions saw record numbers of dawn raids in 2022, while activity in APAC increased towards the end of the year.

A further significant development in 2022 was the extension of inspections to domestic premises, prompted by the shift to home and hybrid working arrangements. For the first time in many years, the EC raided the home of an employee at the same time as it searched the offices of their employer. Announcing the development, an EC official warned that the EC is likely to use this power more frequently in the future, although it will not issue press statements in order to protect individual privacy. Other antitrust authorities (including in France) have also been carrying out domestic raids. In the UK, the government announced plans to give the CMA “seize and sift” powers when carrying out raids at domestic premises on the basis that relevant documents are more likely to be located in private homes.

International cooperation proves fruitful for authorities

Cooperation between antitrust authorities is not a new concept, and there are numerous well-established venues for interaction between antitrust enforcement officials, such as the International Competition Network and the OECD’s Competition Committee. Building on developments from 2021 and the launch of the EU-U.S. Joint Technology Competition Policy Dialogue, these types of collaboration efforts look set to deepen.

In February 2022, a new working group was announced between the ‘Five Eyes’ antitrust authorities (the UK, U.S., Australia, New Zealand and Canada) in response to concerns about higher prices resulting from supply chain disruption across the global economy. The working group will meet regularly to develop and share intelligence to detect and investigate anti-competitive behaviour.

The EC already regularly shares information it receives with other antitrust authorities. For example, a recent Spanish Competition Authority (CNMC) investigation into steel producers over suspected information exchange was initiated after the EC passed on an anonymous complaint received through its whistleblower tool. The CNMC ultimately imposed fines of EUR24.0m in 2022.

UK leads the way in private damages actions in Europe

The continued resilience of the UK as a leading jurisdiction for both standalone and follow-on antitrust claims was reinforced in 2022. The combination of a well-regulated jurisdiction for commercial litigation, specialist competition judges and tribunals, and wide-ranging disclosure regimes has attracted numerous antitrust claims before the English courts. There is, however, a growing incentive for defendants to settle claims out of court due to significant cost liabilities, especially where the action is based on a prior competition infringement decision.

The so-called ‘continued competence’ provisions under UK law mean that it is not possible to bring a follow-on claim in respect of an EC investigation commenced after 31 December 2020. However, that potentially still leaves a considerable tail of EC investigations capable of giving rise to claims in the UK courts. The CMA has also indicated in its latest draft Annual Plan that it plans to step-up its investigation of the UK part of cases that were previously within the remit of the EC. It may be that we see an increasing number of claimants issuing claims in the UK Competition Appeal Tribunal that are follow-on, by virtue of a CMA decision, as well as standalone claims with respect to conduct that has been the subject of an EC decision. That said, it remains to be seen whether this will be possible in the long term, or whether the CMA will eventually change its focus such that in future there is less overlap between CMA and EC decisions.

Looking ahead to 2023, a major area of recently completed and ongoing CMA investigation and enforcement which could be fertile ground for follow-on claims is excessive and unfair pricing abuses by pharmaceutical firms. Consistent with the trend towards private claims in relation to unilateral conduct, this could lead to an increased volume of follow-on damages cases in this sector. The CMA and the EC have also launched twin investigations into Meta’s and Google’s online advertising, indicating that the information technology space will also be a priority for the CMA (with follow-on claims possible in the years to come).

Spotlight on sustainability

Antitrust authorities have continued to grapple with the interplay between ensuring antitrust compliance and avoiding the stifling of sustainability initiatives.

Legislative updates

In 2022, the EC published draft updated guidelines on horizontal cooperation agreements (the EU Horizontal Guidelines) setting out conditions for a “soft safe harbour” for sustainability standardisation agreements, along with examples.

In terms of EU Member States, the Netherlands continues to be at the forefront of driving change – the Dutch Authority for Consumers and Markets (ACM) applied its draft guidelines on sustainability agreements this year to give the antitrust green light to a sustainability standardisation initiative between soft drink suppliers, including Coca-Cola, to reduce their plastic usage.

In addition, several other European antitrust authorities, including those in Greece, Austria and the UK, have identified sustainability as a priority, with Austria enshrining environmental considerations within its national antitrust legislation. In 2022, the CMA published advice to the UK government on environmental sustainability and competition law. The CMA has also established a cross-organisational “sustainability taskforce” and published draft guidance on the application of competition law to environmental sustainability agreements in February 2023.

Similar developments are taking place in APAC, with the Japan Fair Trade Commission publishing extensive sustainability guidelines in January 2023, illustrated by 75 real and imagined scenarios and covering topics including joint engagement in R&D, data sharing and standardisation.

In contrast, the chairperson of the U.S. Federal Trade Commission confirmed last year that “there is no such thing” as an “ESG exemption” under U.S. antitrust law. Market participants in the financial services sector have accordingly adopted a cautious approach to ESG initiatives, with the Net Zero Insurance Alliance dropping their plans to exit certain coal insurance policies this year, following receipt of U.S. antitrust advice that this may be construed as market allocation. BlackRock has similarly been warned by 19 state attorneys of the potential antitrust risk of their ESG efforts alongside other large investors to achieve net zero emissions across all assets under management, but have defended their efforts as being motivated by “achieving the best long-term value” for companies and shareholders.

Consumer benefit: a fair share for whom?

In determining whether the restrictive effects of an anti-competitive agreement are outweighed by objective economic benefits, and thereby whether the agreement can be exempted, antitrust authorities must decide whether consumers have received a “fair share” of these benefits. The UK CMA has summarised the two positions adopted by antitrust authorities on the “fair share” assessment as the “broad” and “narrow” interpretations:

1. The “narrow” interpretation. The same group of consumers who are harmed by the allegedly anti-competitive agreement must be fully compensated by the proposed sustainability benefits.
2. The “broad” interpretation. In some circumstances, wider societal benefits can fulfil the “fair share” criterion, even if the group of consumers harmed by the allegedly anti-competitive agreement are not fully compensated, where the harmed consumers are also part of the broader group of consumers that receive the societal benefits.

The EC appears to favour the “narrow” approach in their EU Horizontal Guidelines, which state that “collective benefits” can be taken into account provided that: (a) the benefit accrues to “substantially the same” group of customers as are harmed by the restriction on competition; and (b) the benefits are “significant enough” to compensate those consumers.

In contrast, the UK CMA's draft guidance indicates that it intends to follow the “broad” approach, considering the “full benefit to UK society” of climate change-related agreements, provided that those benefits are “substantial and demonstrable” and the consumers in the relevant market form part of the benefitting wider group of consumers. In a bolder statement, the Netherlands ACM has opined that not only should “out of market” benefits be considered, but that full compensation of directly harmed consumers should not be required, only “appreciable objective advantages”.

Confidence through consultation

Several antitrust authorities have encouraged an open dialogue with businesses on the antitrust compatibility of their sustainability initiatives, through existing communication channels or by establishing new sustainability-specific platforms.

For example, the UK CMA established a “Sustainability Taskforce” in 2022, which has been assigned with, amongst other matters, reviewing requests from businesses for informal guidance on specific initiatives. Similarly, the Greek Competition Commission’s “sustainability sandbox” allows for early review of business proposals with a view to providing legal certainty for companies seeking to make “green investments”.

Other regulators, including the EC and the Netherlands ACM, have used existing forums to provide an informal early review of proposed green initiatives, with the ACM giving the antitrust green light this year to a proposal for Shell and TotalEnergies to collaborate in the sustainable storage of carbon dioxide.