Following an inquiry in July 2017, the House of Lords’ European Union Committee published on February 2, 2018, a report titled – ‘Brexit: competition and State aid’ – on the future of the UK’s competition law regime after Brexit.

The House of Lords report provides a detailed account of the most pressing issues that the UK’s competition law regime is facing ahead of Brexit. It also shows the high levels of uncertainty that businesses operating between the EU and the UK face.

This uncertainty suggests that businesses should – at least for now – adopt a cautious approach, for example, when formulating their distribution and acquisition strategies in the UK.

Whatever the statutory changes to the UK’s competition law regime after Brexit are, EU law will still remain an important factor to consider when taking business decisions, especially because of the geographical proximity and close trading relationships between the UK and the EU. This means that going forward businesses need to have guidance.

Steptoe has years of experience in successfully advising businesses on their strategic decisions in the EU and the UK. Our experienced lawyers can help your business to successfully navigate the demands and potential opportunities of Brexit.  Continue Reading House of Lords Report on Brexit and Competition: What Does it Mean for Businesses?

In an open letter published shortly before the opening of the London Fashion week on September 12, 2017 (see here), the UK Competition and Market Authority (CMA) sent a strong reminder to creative industries that they are prohibited from engaging into price coordination and information sharing between competitors.

The CMA Letter: What’s In It?

The letter draws on the 2016 model agencies cartel case, in which the CMA fined five businesses and their trade association over £1.5 million for breaking competition law. According to the CMA, the agencies: (1) discussed prices for modeling services, and, in certain cases, agreed to fix minimum prices or to adopt a common approach to pricing, and (2) systematically exchanged sensitive information. As to the trade association, it circulated confidential information to the model agencies.

The case is currently under appeal. But, for the CMA, the take-away is already clear: creative industries must be reminded that the CMA takes price collusion very seriously and will not hesitate to take action if businesses operating in this sector break competition law.

A Serious Warning for Creative Industries

The CMA letter is a serious warning to the creative industry.

In its May 2017 decision regarding resale price maintenance in the light fitting sector, the CMA considered for the first time that failure to comply with competition law following receipt of a warning letter was an aggravating factor. Therefore, the regulator increased one of the investigated parties’ fines by 25%. The CMA justified this approach as follows:

“It is important that warning letters are taken seriously and that recipients read any such letters carefully […] the CMA considers that it is appropriate and proportionate to increase the penalty for the Endon infringement by 25% in this case for failure to comply with competition law following receipt of a warning letter”.

Based on this precedent, the CMA letter to those active in the creative industries should be taken very seriously, as any price collusion practices in the sector could well generate increased fines, due to the existence of a prior warning letter.

The CMA letter refers to the model agencies case. However, we assume that any business, engaged in the creative sector should be deemed included within the scope of the letter, given that it refers to the UK’s creative industries in very general terms. Also, given the timing of publication of the letter, we conclude that fashion industries are among the prime targets of the CMA.

On the Use of Open Letters to Ensure Compliance with Competition Law

This is not the first time that the CMA has sent an open letter to a wide range of industry participants. For instance, in June 2016, it published an open letter to retailers and suppliers regarding a particular practice, namely online resale price restrictions (see here). In December 2015, it warned medical practitioners about their obligations under competition law (see here).

The use of these letters is designed to achieve a greater level of UK awareness regarding the scope of competition law. The use of open letters allows the CMA to deal with an economic sector, in a didactic way and without first engaging in expensive sector-wide antitrust investigations, whilst at the same exposing those businesses who persist with non-compliant strategies to the risk of enhanced fines. Following Brexit, we expect the CMA to make increased use of this tool, in order to conserve its limited resources and given that it will face an increased workload in dealing with matters that might otherwise have been addressed by EU regulators.