The enforcement of competition law in Ireland has been strengthened with the recent adoption of the Competition (Amendment) Act 2012. This legislation, which came into force on 3 July this year, aims to provide more effective deterrents to individuals or undertakings engaging in anticompetitive practices. The 2012 Act also increases the number of enforcement tools available to the Irish Competition Authority. In addition, the new law is designed to facilitate the taking of follow-on actions for damages by private litigants.
Legislative background
The 2012 Act is a step towards compliance with the Irish government’s commitment under the EU/IMF programme of financial support to strengthen the enforcement of competition law in the Republic of Ireland.
The principal Irish legislative provisions outlawing anticompetitive activity are contained in the Competition Act 2002 as amended. Section 4 of the 2002 Act generally prohibits and renders void arrangements between two or more undertakings that have, as their object or effect, the restriction or distortion of competition in the trade of any goods or services in the state, while section 5 of the 2002 Act prohibits the abuse of a dominant position in the state. Section 4 and section 5 are based, by analogy, on articles 101 and 102 of the treaty on the functioning of the European Union.
Whether the Irish or EU competition regime applies depends on the territorial impact of any arrangements. EU competition rules will apply where there is an appreciable effect on trade between EU member states, while the Irish rules will apply where there is an impact in all or part of the state. The Authority has extensive powers to investigate breaches of both Irish and EU competition rules.
Increased deterrence
The 2012 Act introduces a number of measures with a view to deterring companies and individuals from participating in anticompetitive activity, particularly cartels. These include increased penalties for infringing sections 4 and 5 of the 2002 Act, the non-application of probation legislation to competition offences, making a guilty party liable for the Authority’s costs and, finally, the extension of the directors’ disqualification regime.
The new legislation increases from five to ten years the maximum prison sentence for an individual convicted on indictment of a hardcore competition or cartel offence – specifically, arrangements relating to price-fixing, output restrictions and market-sharing. In addition, individuals and undertakings found guilty of any competition offence are now both liable on summary conviction to a fine of up to €5,000 (up from €3,000), or, on conviction on indictment, to a fine of up to €5m (up from €4m) or 10% of worldwide turnover, whichever is the greater.
However, the increased jail term must be seen in the context where nobody has, to date, been imprisoned for Irish competition law offences, although one individual was jailed for contempt of court regarding his failure to pay an €80,000 fine for participating in the Citroën motor dealer cartel. Indeed, this penalty – while it is the largest single fine imposed to date for cartel-related offences – is much lower than the maximum fine permissible. Indeed, even allowing for the fact that the companies involved typically have much lower annual turnovers than those involved in EU investigations, the level of fines imposed by the Irish courts are significantly lower than those imposed by the European Commission. It thus remains to be seen whether the increased penalties have any significant practical
effect on the sentences handed down by the Irish courts.
The 2012 Act provides that the relevant provisions of the Probation of Offenders Act 1907 will no longer apply to competition offences. Under the 1907 Act, a judge does not record a conviction in relation to a proven case. Thus, from now on, the conviction will have to be recorded and the guilty party punished. This reform will prevent the repeat of the Drogheda grain imports saga: in March 2003, the Authority secured summary convictions in Drogheda District Court against six farmers for breaches of section 4 of the 2002 Act arising from a blockade and a meeting, which had as its object the prevention of unloading a cargo of grain from the UK. The convictions were appealed and the case was heard de novo in Dundalk Circuit Court where, in October 2004, the three convictions were upheld but the 1907 Act was applied.
The new legislation introduces a provision requiring a convicted person to pay the Authority’s costs in relation to the investigation, detection and prosecution of the relevant competition offence unless the court is satisfied that there are “special and substantial reasons” for not doing so. The 2012 Act is silent as to what might constitute such reasons. Clearly, this concept will need to be addressed by the courts. It will also be up to the court to measure the relevant costs.
For these reasons, it is somewhat unclear how the relevant section will operate in practice. For example, how will the court apportion costs in a cartel case where there are a number of different defendants? Will the costs be split in equal shares or on the basis of the financial wherewithal, or the extent of the involvement, of the guilty parties? Despite the fact there are some potential issues to be clarified, this provision undoubtedly increases the scope of the potential financial liability of competition offenders.
Under the Irish Companies Act 1990, any person convicted on indictment for any offence in relation to a company will,without the need for further judicial intervention, be automatically disqualified from being a company director or from being in any way involved in the promotion, formation or management of a company for a period of five years from conviction. This provision thus applies to both hardcore and other indictable competition law offences. Under the 2012 Act, a person convicted of a non-indictable competition law offence may now be disqualified from acting as a company director. The High Court may decide of its own accord or following an application by the Authority to make the relevant disqualification order.
Increased enforcement tools
The 2012 Act aims to promote the Authority’s enforcement powers by establishing a process whereby the Authority can have commitments given to it by companies under investigation made a rule of court. By way of background, the 2002 Act does not allow the Authority to find that an infringement of EU/Irish competition law has occurred (only the Irish courts have this right). Accordingly, in investigations involving less serious breaches of competition law, the Authority may not wish to use its scarce financial and human resources in taking court proceedings.
Up to now, the Authority has accepted undertakings from companies who agree to desist from the activities under investigation or to act in a specified way (in return for the Authority agreeing not to bring court proceedings). Some of these cases are published on the Authority’s website in its enforcement decisions section. A difficulty with this approach lies in enforcing the relevant agreement if it is later breached.
Under the new provisions, the Authority will be able to apply to the High Court to have the settlement made a rule of court. A subsequent breach of the court’s order would constitute contempt of court and be punishable accordingly. Detailed procedural requirements apply to this new provision. The court must be satisfied regarding a number of matters before agreeing to make the settlement a rule of court, including that the undertaking involved has consented, has obtained legal advice and is aware that failure to comply with the order would constitute contempt of court. The Authority must also follow specific requirements in relation to the publication of the agreement before applying to the court. Furthermore, third parties have an opportunity to object within 45 days of the making of the order.
This new provision, while procedurally complex, should ultimately assist the Authority in imposing enforceable obligations on undertakings that breach competition law. One obvious difficulty is that the consent of the undertaking under investigation is required before any order is made by the court.
The 2012 Act also extends the period within which the Authority may be requested to return copies of books, documents and records seized during a dawn raid from 14 days to 35 days. This increase reflects the difficulty facing the Authority in processing vast amounts of documents and records in a short period of time.
Facilitating follow-on actions by private litigants
The Court of Justice of the EU has stated that any citizen or business who suffers harm as a result of a breach ofcompetition rules should be able to obtain compensation from the party who caused the harm. However, in the absence of an effective legal framework enabling those adversely affected by anticompetitive activity to exercise their right to compensation, victims of antitrust infringements have seldom obtained reparation for the harm suffered.
Ireland is no exception to this EU-wide trend. Indeed, a major obstacle for potential plaintiffs is the fact that collective actions are not possible before the Irish courts. Moreover, a plaintiff in a follow-on case is no different to a plaintiff in a standalone case in that both must prove the fact of the competition law breach (often a complex task).
The 2012 Act endeavours to facilitate follow-on actions by providing that where an Irish court has found that an undertaking has breached Irish or, indeed, EU competition rules, then, for the purposes of any subsequent civil proceedings, that finding shall be res judicata. The rationale therefore is that in a follow-on action, a plaintiff will not be required to prove that a competition infringement has occurred.
However, a litigant will need to show causation (ie that the relevant competition law infringement caused him or her harm) and address the issue of quantum. In theory, this should facilitate follow-on actions by private plaintiffs who obviously do not have the same investigative powers and expertise as the Authority. One obvious issue is that this provision will only apply where there have been prior proceedings (generally enforcement proceedings by the Office of the Director of Public Prosecutions or the Authority). However, despite some notable successes (particularly in the area of cartels), the public enforcement of competition rules in the state is somewhat patchy. Accordingly, private litigants will continue to face a significant evidentiary burden in situations where there is no prior court decision.
Overall assessment and next steps
The next legislative priority will be the statute amalgamating the Authority and the National Consumer Agency and providing for a combined and revised competition and consumer code, in addition to revamping the media merger control regime. Accordingly, the 2012 Act represents an evolution rather than a revolution in the enforcement of competition rules in the state.
Public enforcement powers are somewhat enhanced, although the Authority’s repeated request for the adoption of a civil fines provision was not heeded. The increases in penalties demonstrate the seriousness with which breaches of competition law are viewed by the Irish parliament. However, it remains to be seen whether legislative intent will be reflected by the Irish courts who have, thus far, not imposed anywhere near the maximum prison sentences or fines. That said, the real issue in Irish competition enforcement is not the adequacy of the available penalties or investigative tools but rather the actual level of public enforcement where the Authority has seen reductions in both its staff and resources.
Contributed by Cormac Little
Reference
The Competition (Amendment) Act 2012, available at
www.irishstatutebook.ie
This article originally appeared in Competition Law Insight (31 July 2012).
