The Competition Appeal Tribunal (CAT) and High Court have issued a single ruling in Bayerische Motoren Werke AG v Competition and Markets Authority  CAT 7 relating to an appeal by BMW AG and an application for judicial review by Volkswagen AG, which both questioned whether the Competition and Markets Authority (CMA) has the power to require foreign-domiciled companies with no UK presence to respond to requests for information issued under the Competition Act 1998 (CA 98). Given the common issue for determination in the two applications, they were heard together with the claim for judicial review allocated to the President of the CAT to determine in his capacity as a Justice of the High Court. Both the appeal and the judicial review succeeded.
In March 2022, the CMA initiated an investigation into suspected anti-competitive conduct relating to take-back, dismantling and recycling of end-of-life vehicles involving a number of vehicle manufacturers and some industry bodies. In the context of the investigation, the CMA subsequently issued BMW (UK) Ltd and Volkswagen UK but also BMW AG and Volkswagen AG (both German parent companies) with Section 26 CA 98 notices, requiring these companies to produce certain documents and information. In December 2022, the CMA imposed a penalty on BMW AG for failure to comply with the information request notice. The amount of the penalty was the maximum permitted by statute, which is a fixed sum of £30,000 plus a continuing daily fine of £15,000. BMW AG decided to appeal the CMA decision, inter alia, on the ground that, as a foreign-domiciled company, it had no obligation to comply with the Section 26 notice. Meanwhile, Volkswagen AG sought judicial review of the CMA's Section 26 notice decision raising essentially the same question of the "extraterritorial" effect of the notice.
On 8 February 2023, the CAT and High Court found in the companies' favour concluding that the CMA’s decision to issue a Section 26 notice, and the decision to impose a penalty in respect of foreign-domiciled companies with no presence in the UK in relation to the production of specified documents and information held by those companies outside the jurisdiction was ultra vires Section 26 CA 98. The ruling characterises the CMA's interpretation as rendering Section 26 "aggressively extraterritorial" because the consequence of the interpretation was that "a single section 26 notice, addressed to an undertaking, would trigger an obligation to respond in every single legal or natural person within that undertaking, provided only that a single legal or natural person within that undertaking had a UK territorial connection".
In response to the ruling, a CMA spokesperson said that increasingly, the CMA's investigations involve cross-border, multi-national organisations, and that the ruling substantially risks undermining its ability to investigate, enforce against and deter anti-competitive conduct that harms consumers, businesses and markets in the UK. The CMA will therefore seek permission to appeal, which the CAT/High Court has said it would be minded to give.
It will be interesting to see what the outcome of this appeal, if allowed, will be. If the CAT/High Court ruling stands, this could have a significant impact on the CMA's ability to effectively conduct CA 98 investigations. Post-Brexit, the CMA no longer has powers to enforce the EU competition rules, including the prohibition on anti-competitive agreements, and it no longer forms part of the European Competition Network (ECN), which allows the EC and EU Member State competition agencies to cooperate with each other, including by exchanging evidence and other information on cases.
The UK and EU have also yet to conclude a competition law cooperation agreement, as envisaged by the EU-UK Trade and Cooperation Agreement. If concluded, such a cooperation agreement should allow the CMA and the European Commission, which is conducting a parallel investigation into possible collusion in relation to the collection, treatment and recovery of end-of-life cars and vans, to combine forces (to an extent), including by sharing confidential information and evidence relating to ongoing investigations.
We declare that no section 26 notice - whether directly or indirectly sent to BMW AG or VW AG - is effective. Any assertion of an obligation in these companies to respond is ultra vires section 26. There is, quite simply, no such power.