This section is extracted from part 6 of the guidance document CC4: General Advice and Information (pdf, 817kb).

Procedures

The CC’s procedures are governed by the provisions of the Enterprise Act, Schedule 7 to the CA98, relevant regulatory legislation and the rules, which are binding on groups. Groups should also have regard to the Chairman’s Guidance to Groups (CC6), which gives advice to groups on the conduct of investigations .

Appointment of groups

When a reference is made to the CC, the Chairman selects members to serve on the group that will conduct that investigation. A group consists of a minimum of three members, one of whom acts as the Group Chairman. If the Chairman or a Deputy Chairman is appointed to a group, he or she acts as the Group Chairman. Groups of four or five members have been normal practice to date. The CC has a stringent procedure to ensure that conflicts of interest do not occur. The Chairman has the power to appoint a replacement for a group member if during the course of an investigation that member ceases to be a member of the CC, or becomes unable to perform his or her duties for a substantial period, or a particular interest of a member emerges which means that it would be inappropriate for him or her to continue.

There are three types of groups defined in paragraph 19A(9) of Schedule 7 to the CA98:

• merger reference groups;

• market reference groups; and

• special reference groups.

The CC has specialist panels of members (utilities and newspapers) from which one or more members must be chosen for some references (eg water licence modification references and newspaper merger references).

Subject to any particular provisions in the Act and to the rules, groups determine their own procedures

The Chairman of a group has the casting vote. Groups can consult other CC members with the Group Chairman’s permission, and the CC Chairman can give advice to groups.

Timetable

The CC must reach its decisions and publish its report within the following statutory time limits:

• Mergers: 24 weeks, with an extension of up to 8 weeks, if the CC ‘considers that there are special reasons why the report cannot be prepared and published within that period’. In this case it must publish a notice of the extension. Furthermore, if a relevant person does not appear as a witness or provide information or documents required by the CC, the CC can extend the investigation until such time as the order is obeyed or it publishes its decision to cancel the extension. In most cases the CC expects to complete its work in a shorter time than the maximum allowed.

• Market investigations: two years maximum (though it is expected that some investigations will be completed in a shorter time, probably 12 to 15 months).

• Regulatory references (other than Ofcom price control references): six months but one extension of up to six months (three months for airports) is permitted.

• Ofcom price control references: subject to any directions given by the Competition Appeal Tribunal, four months.

Following consideration of the views of the main parties, each group will draw up an administrative timetable for the stages of its investigation, which it has the power to revise, and publish it on the website.

Major stages of merger and a market investigations

An investigation begins when a reference to the CC is made by the OFT, a sector regulator or the Secretary of State, depending on the type of case. (The CC has the power to cancel the reference of an anticipated merger, should it find that the proposal to make arrangements of the kind mentioned in the reference has been abandoned and in this case must publish a notice of the cancellation.) The OFT has the power to vary a reference, following consultation with the CC. The CC is under a duty to publish a notice if there is a material change in circumstances affecting a reference.

The main stages of an investigation (which often overlap and do not necessarily take place in this order) are:

(a) gathering information, including the issue of questionnaires;

(b) hearing witnesses;

c) verifying information;

(d) providing a statement of issues;

(e) considering responses to the statement of issues;

(f) notifying parties of emerging thinking (market investigations);

(g) notifying parties of and publishing provisional findings;

(h) notifying and considering possible remedies;

(i) considering exclusions from disclosure; and

(j) publishing reports.

The flowcharts in Figure 1 and Figure 2 below indicate the stages of typical merger and market investigations.

FIGURE 1:
Typical shape of a merger inquiry (pdf,139kb)

FIGURE 2:
Typical shape of a market investigation (pdf,139kb)

Information gathering and handling

The CC requires access to detailed information regarding the companies and markets in question, in order to take its statutory decisions on the competition and remedies questions. Those affected, or potentially affected, by decisions made by the CC should also have the opportunity to put their views to the CC and for those views to be considered. The CC invites evidence from all parties likely to have an interest in the investigation. They include:

• the main parties to investigations (the merging companies in merger investigations, or companies that form a part of the market under investigation in market investigations); and

• third parties that might be affected (for example, competitors, customers, suppliers, government departments, expert bodies, and trade or consumer organizations).

The provision of evidence to the CC can be very time-consuming for the parties concerned and the CC aims to restrict its requests to the minimum consistent with carrying out its duties. The CC maintains regular contact with the main parties or their representatives to obtain and check information, and to inform them of progress.

At the outset of a reference, the CC has available to it the information already gathered by the OFT, to which it must have regard. The CC then collects further information in a variety of ways:

(a) Letters and questionnaires. When the reference is made, the CC writes to the main parties to the investigation, inviting submissions from them. It also contacts other interested parties to request their views. Questionnaires are sent to the main parties to an investigation and sometimes to third parties.

(b) Press notices, advertisements and website. The CC publishes press notices seeking information and places advertisements in relevant publications; a notice is also included on this website.

(c) Publicly available sources of information. Often, useful information regarding the companies or market in question is available in publications, on websites, or in analysts’ or consultants’ reports.

(d) Surveys. In some investigations, surveys (for example, of consumers) are commissioned to provide evidence about a particular market.

(e) Visits to the main parties. These help the group and staff to gain a first-hand understanding of the workings of the company and industry in question. They provide the opportunity for the parties to make presentations and for the members to ask questions in an informal setting.

(f) Commissioning of expert advice.

(g) Hearings with the parties (see Hearings).

The CC has long had powers to issue notices requiring a person to attend at a certain time or place, to give evidence, to produce documents, or to supply other estimates, forecasts, returns, or other specified information. The CC may also copy any document. The Act introduces a new sanction for non-compliance with such notices and another sanction for the intentional obstruction of the CC’s power to copy a document.In place of the former power to institute contempt proceedings in the courts, the CC may impose a monetary penalty. The CC will use this power flexibly. Depending on the circumstances and nature of the infringement, the penalty may be fixed (up to a maximum of £20,000) or set at a daily rate (of up to a daily maximum of £5,000) or a combination of both. (See the CC’s Statement of Policy on Penalties for further details.) Intentional provision of false or misleading information, or intentional alteration, suppression or destruction of any documents a person is required to produce, also constitutes an offence.The CC is not obliged to have regard to any information that it receives after the date reasonably specified for its receipt.

CC staff review the information collected. Some documents received are considered in their entirety by the group; others form the basis of papers written by CC staff, which summarize, analyse or draw out the implications of the information. The members of the group meet regularly with CC staff to discuss and analyse the evidence and findings presented in these papers. In this way, the group is able to gain an understanding of the market and companies in question, and therefore to make informed decisions on the competition and remedies questions.

Some of the evidence gathered will form the basis of the statement of issues sent to the main parties and published on the CC’s website. The statement indicates the main lines of inquiry the group is likely to pursue at the hearings with the main parties.

Hearings

Usually hearings are held with one party to the investigation at a time and are thus private. However, it is also possible to hold hearings that are open to the public, and joint hearings with more than one party. It is up to each group to decide on the most appropriate type of hearing for the investigation in question. It is also a matter for the group to decide which interested parties may be present, may be heard and may cross-examine witnesses.

A hearing can last anything from a couple of hours to a day. Normally hearings are held at the CC’s office in central London. A transcript is taken, and is checked with the party. Should the party wish to clarify or add to any point made in the hearing, they can write to the CC afterwards.

Hearings provide the members with an opportunity to explore in depth the key issues in an investigation, and to raise questions arising from the party’s written submission and answers to the questionnaire. Companies or their representatives are expected to be able to answer the CC’s questions about matters arising in the investigation including those raised in the statement of issues. Hearings are not conducted in an adversarial fashion, but rather in the spirit of gaining a sound understanding of the issues raised in the investigation.

Provisional findings

The Act imposes a duty on the CC to consult on its decisions on the competition questions and remedies. In the case of merger investigations, it must do so where it considers that the decision is likely to be adverse to the interests of a relevant party, and in the case of market investigations, it must do so where it considers the decision is likely to have a substantial impact on the interests of any person.The CC will publish provisional findings on a reference, to which parties are invited to respond within a period of not less than 21 days. These provisional findings may also contain proposals for remedies: if they do not do so, then remedies will be consulted on separately (see Remedies)

Following the publication of and consultation on the provisional findings, the group will meet to discuss responses to them, and consider whether or not, in the light of responses received, the provisional findings should be altered. This might necessitate a further hearing with one or more of the parties.

Remedies

Groups must reach decisions that there is an anti-competitive outcome by a two-thirds majority if they are to go on to consider remedial action. In the event of such an adverse finding-that is, that a merger does lead to a substantial lessening of competition, or that there is an adverse effect on competition arising from the features of a market-the CC must propose remedies to counter the adverse effects. The CC may consult the main parties on its proposed remedies when it consults the parties on its provisional findings on the competition questions, but will more often consult them soon after by means of a remedies statement. The remedies statement will be published on the CC’s website. The CC will normally hear parties’ views orally as well as seeking views in writing. The group’s final decision on remedies, including offsetting customer benefits, is taken by a simple majority.

Final decisions and reports

The CC’s final decisions on the competition questions and remedies questions are published in its final report, together with the reasons for those decisions and such information as the CC considers appropriate to facilitate a proper understanding of those questions and the reasons for the decisions.

Reports under the Act will be structured around the questions that each group is required to answer and the decisions the group has made in answer to those questions. The group’s decisions will be fully supported by appropriate analysis and argument, and annexes to the report will be included to the extent necessary to understand the decisions. A report may contain a statement of disagreement and his or her reasons for disagreeing by any group member who disagrees with any decisions contained in the report. Reports are published on the website; hard copies are also available.

Implementation of remedies

The report will contain sufficient detail on remedies to provide a firm basis for implementation by the CC through negotiating undertakings and/or imposing orders. The report may specify the timescale in which undertakings should be agreed before the CC considers imposing orders instead. The group is discharged only when negotiations have been completed and suitable undertakings have been received or orders imposed. Thereafter the OFT has the duty of monitoring undertakings and orders and recommending their variation or release to the CC. A single Standing Group of members will deal with those recommendations on behalf of the CC by a simple majority decision.

Special reference groups

Special reference groups are constituted in relation to regulatory statutes (for a full list see paragraph 19A(9) of Schedule 7 to the CA98). The procedures they follow are similar to the procedures for merger and market references, but:

• they are not obliged to publish provisional findings; and

• they send the final report relating to such investigations to the relevant sector regulator.

Disclosure and confidentiality of information

In the course of its work, the CC publishes some of the information provided to it: either in the final report as evidence on which the decisions are based, or sometimes as background information on the CC’s website. It may also disclose additional information to main parties or selected third parties. Parties who have provided information to the CC which is used as evidence for the decisions in a final report are generally invited to check its accuracy and for their comments on possible disclosure.

The Act provides that the CC should have regard to the following three considerations before disclosing any information relating to the affairs of an individual or a business which has not previously been disclosed to the public:

• the need to exclude from disclosure (so far as practicable) any information whose disclosure the CC thinks is contrary to the public interest;

• the need to exclude from disclosure (so far as practicable):

- commercial information whose disclosure the CC thinks might significantly harm the legitimate business interests of the undertaking to which it relates; or

- information relating to the private affairs of an individual whose disclosure the CC thinks might substantially harm the individual’s interests; and

• the extent to which the disclosure of the information included in the above categories is necessary for the purpose for which the CC is permitted to make the disclosure.

The question of disclosure will arise throughout the course of an investigation, in managing information, general correspondence, drafting the issues statement, giving the parties a fair opportunity to comment on the evidence of others, notifying and publishing provisional findings, notifying possible remedies and publishing the final report. The CC will invite those concerned to comment on the sensitivity of any information they supply. It may ask the parties early in the investigation to provide information in a form which can be disclosed. It will take its final decisions on disclosure of information which a person considers to be ‘sensitive’ by having regard to the three considerations above. The Act requires that the CC’s reports should contain the information necessary to understand its decisions and the reasons for those decisions. Ultimately the CC decides what information should be disclosed in a report and throughout the investigation in order to fulfil its statutory functions. For further information, see CC7: Chairman’s Guidance on Disclosure of Information in Merger and Market Inquiries.

The CC wishes to give parties an opportunity to make further representations if there is a dispute between a party and the group about whether or not a piece of evidence should be disclosed. In such cases, the party may write to the CC’s Chief Executive about these concerns. He will liaise with the group and the party about them.

Accountability and fairness

The CC aims to keep parties to investigations well informed and seeks to ensure that all information and arguments which it may rely on in reaching its conclusions are put to the relevant parties for comment. The CC also usually ensures that parties have the opportunity to check the factual accuracy of information it may rely on in reaching its decisions. The CC consults parties on certain decisions that might affect them. The CC makes extensive use of its website to publish issues statements, provisional findings and remedies statements, and will supplement that whenever possible with information provided by main and third parties, surveys and economic analyses.

Overall the CC’s objective is to provide all the information necessary to ensure fairness in its processes and decision making.

Appeals

Parties to an investigation who are aggrieved by any decision of the CC in relation to a merger or market investigation reference may apply to the Competition Appeal Tribunal for a judicial review of that decision (see Appeals page). For decisions in regulatory investigations, applications for judicial review lie with the High Court.