Antitrust, Regulation & Foreign Investment Q2 2024 newsletter

Welcome to our second quarterly newsletter of 2024, where the Ashurst Antitrust, Regulation and Foreign Investment Team recaps some of the key developments of Q2 2024. 

This edition highlights:

• the UK Digital Markets, Competition and Consumers Act 2024 (DMCC Act) which received Royal Assent on 24 May 2024. The Act introduces widespread reforms to competition and consumer law, as well as a new regime regulating designated digital companies. Our series of briefings considers each pillar of the DMCC Act in more detail – in this newsletter, we cover the key changes to merger control and investigations under the Competition Act 1998 (CA98) and the markets regime.
• regulators continued interest in competition issues in labour markets. In April 2024, the Australian Government sought feedback on issues concerning non-compete, non-solicitation and non-disclosure (confidentiality) clauses, restraints during employment, and no poach and wage fixing agreements. In May 2024, the European Commission set out how it is likely to approach wage fixing and no poach agreements in its latest policy brief.
• the UK Competition Appeal Tribunal (CAT) approving a settlement distribution plan for the first time. With nearly 50 ongoing collective actions before the CAT and a clear statement from the CAT that there is a strong public interest in parties settling their claims, the decision provides welcome guidance for class representatives and defendants on key issues relevant to structuring collective settlements, such as take-up rates, legal costs and funders fees.

Digital Markets, Competition and Consumers Act 2024 recap

1. Royal Assent for the DMCC Act: what do you need to know? 

Over a year after it was first introduced in the House of Commons, the UK Digital Markets, Competition and Consumers Bill received Royal Assent on 24 May 2024. In this update, we provide an overview of the widespread changes to competition law and consumer law enforcement in the UK, as well as the new regime regulating designated Big Tech companies. The new digital regime includes tailored codes of conduct for designated digital companies and a bespoke merger control regime. While further rules and guidance are required, we expect the key reforms to enter into force this year. 

2. DMCC Act: Key changes to the UK's merger control regime

In this update, we consider the significant changes the DMCC Act will make to the UK's voluntary merger control regime. The reforms enhance the CMA's jurisdiction to review transactions, in particular so-called "killer acquisitions", where only one party has a significant presence in the UK and the share of supply test is not met. The DMCC Act also gives the CMA and merger parties more flexibility during the investigative process and significantly increases the CMA's ability to fine undertakings for failing to comply with statutory requests, undertakings or enforcement orders.

While the majority of the merger control provisions are not expected to enter into force until the Autumn, there are two exceptions: (i) the Secretary of State's ability to scrutinise newspaper enterprise mergers involving foreign powers which is already in force and has retroactive effect, capturing transactions that completed on or after 13 March 2024; and (ii) the provisions relating to Energy Network Enterprise mergers which will enter into force on 23 July 2024.

3. DMCC Act: Key changes to the CMA's investigatory powers

In our third briefing on the DMCC Act, we set out the key reforms to the CMA's investigatory powers when exercising its CA98 and market inquiries' functions. The DMCC Act includes amendments to the CMA's investigatory powers under the CA98 (Chapters 1 and 2), as well as changes to the CMA's process and investigatory powers when conducting market studies and investigations. The changes are designed to offer the CMA greater flexibility when conducting investigations. This is likely to significantly increase compliance risks for companies which are subject to investigations; both during an investigation and in respect of any commitments, undertakings or remedies resulting from an investigation. 

Notably, the DMCC Act gives the CMA the power to revoke, vary of supplement remedies imposed at the end of a market investigation and new powers to sanction companies up to 5% of global turnover for failing to comply with undertakings or market investigation orders.

Transactional developments recap

1. Australia's merger regime to become mandatory, suspensory and administrative

The Australian Government will introduce legislation that makes significant changes to Australia's merger control system, moving to a single mandatory, suspensory, administrative regime, with the Australian Competition and Consumer Commission (ACCC) as first instance decision-maker. The changes are intended to take effect from 1 January 2026.

Where a transaction exceeds specified filing thresholds (to be developed in consultation over the next 12 months), it will be mandatory to notify the ACCC and seek clearance. While this takes place, the transaction will be prevented from completing.

The ACCC is not necessarily expecting more transactions to be notified but expects these changes will help ensure the transactions that may raise competition law concerns will be the subject of review. These changes may mean higher costs (including application fees), less flexibility as to process and greater administrative burden on merger parties. They will also mean greater transparency (the ACCC will publish proposed transactions under review and reasons for its decisions) and possibly more certainty as to review timing. 

See here for our overview. 

2. Procurement Act 2023: "going live" on 28 October 2024 

The UK Procurement Act 2023 received Royal Assent on 26 October 2023. This creates a new public procurement rulebook in England, Wales and Northern Ireland. It is part of Government's strategy of overhauling EU-derived legislation following Brexit. The Act is not yet in force, but the Cabinet Office informally announced that it is "working towards a go live" date of 28 October 2024. 

Many aspects of the Procurement Act are based closely on the existing rules, but the Government has sought to simplify the regime by establishing a single regulatory framework for the award of public sector contracts and replacing the existing award procedures with fewer, more flexible procedures. See here for our overview. 

3. CMA adopts new Phase 2 merger process 

On 25 April 2024 the UK Competition and Markets Authority (CMA) issued updated guidance on its merger review process, which will apply to all new cases. The most significant changes are to the process for in-depth phase 2 merger reviews, which are designed to streamline the process, increase engagement with the Inquiry Group that determines the case, and encourage earlier discussions on remedies. See here for a summary of the key changes.

4. "Fine-tuning" the National Security and Investment Act 

On 21 May 2024, the UK Government published an updated statement on how it expects to use its call-in power under the UK National Security and Investment Act (NSIA) and updated market guidance. The updated section 3 statement includes additional guidance on the three risk areas (target risk, acquirer risk and control risk), as well as additional examples of how these may be considered in practice. The Government has also published updated market guidance which now includes guidance on when the NSIA may apply to outward direct investment and amended guidance for the higher education and research-intensive sectors. 

The Government also announced that intended to introduce a targeted exemption for the appointment of administrators, official receivers and liquidators in the autumn but this may be affected by the general election. 

See here for further details. Our updated Quickguide is available here.

Antitrust developments recap

1. Business implications of Issues Paper on employment restraint clauses released by Australian Government

On 4 April 2024, the Australian Government's Competition Taskforce released an Issues Paper on employment restraint clauses as part of its broad Competition Review. Currently, most employment-related restrictions are effectively "carved out" of the application of the competition law rules in the Competition and Consumer Act 2010, such as the prohibition on cartel conduct. If this changes as a result of reforms arising from the Issues Paper, employment restraints may fall under the oversight of the ACCC and attract the significant penalties applicable to competition law breaches.

The Issues Paper seeks feedback on issues concerning non-compete, non-solicitation and non-disclosure (confidentiality) clauses, restraints during employment, and no poach and wage fixing agreements. See here for our overview.

2. Wage fixing and no poach agreements: restrictions by object?  

On 3 May 2024, the European Commission published a policy brief setting out how it is likely to view wage fixing and no poach agreements. See here for our overview. This is the latest development in competition authorities' increasing interest in potential competition issues in labour markets in recent years. Regulators from the USA, EU and UK have issued guidance for employers on how to comply with competition law and opened investigations into alleged anticompetitive conduct. 

The European Commission's policy brief focuses on wage fixing and no poach agreements which it considers are likely to be "by object" infringements, meaning the European Commission would not have to prove that the agreement actually had an anticompetitive effect.

Enforcement action is expected to increase in the coming years, with the European Commission and other regulators worldwide indicating they are proactively looking for cases to investigate. Companies should therefore consider whether they have appropriate guidance in place for their HR teams and employees responsible for negotiating documents which may contain no poach provisions (for example, joint venture agreements and vertical supply agreements).

3. UK Competition Appeal Tribunal approves first significant class action settlement 

On 10 May 2024, the CAT approved a collective settlement in Justin Gutmann's collective action against Stagecoach South Western Trains (SSWT), which alleged that SSWT overcharged consumers by failing to make boundary fare tickets sufficiently available to customers. The CAT has approved a collective settlement of up to £25 million, plus costs and distribution expenses on the basis that the settlement was just and reasonable, which only requires SSWT to pay out actual claims (as opposed to a fixed sum).

The CAT's approval of the settlement provides welcome guidance to claimants and defendants on how the CAT will assess future collective settlements. See our update here.