CMA to be given new consumer and competition law powers that will affect the life sciences sector

CMA to be given new consumer and competition law powers that will affect the life sciences sector

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The Digital Markets, Competition and Consumers Bill, introduced into Parliament in April 2023, is intended to revolutionise the enforcement of consumer protection law in the UK, and will also evolve the UK’s competition law regime. Companies operating in the life sciences sector, particularly those with consumer operations, should be aware of the bill’s key features, set out below, before it is enacted as law, which is likely to happen in late 2023 or early 2024.     

Consumer protection law

What the bill will not do is significantly alter the content of consumer protection law. The UK already has a well-established body of consumer protection law regulating how traders are permitted to deal with consumers. The changes that will be made, for example a new prohibition on "inertia selling" (where a trader provides unrequested items to a consumer, and then attempts to make them pay for them), and new rules on consumer saving schemes are unlikely to be relevant to consumer life sciences companies. However, new rules governing subscription contracts and "cooling-off" periods could be relevant for some. 

What the bill will do is introduce new rules on how existing consumer protection law can be enforced by the Competition and Markets Authority (CMA), courts and other "designated enforcers". These rules appear to be designed to provide for maximum oversight and maximum impact and, in particular, the CMA will be given new powers to enforce breaches of consumer protection law directly, without having to go through the courts. 

The headline change is that breaches of consumer protection law could lead to fines of up to 10% of group global turnover. This is the same maximum level of penalty that can be imposed for serious breaches of competition law, for example participation in a price-fixing cartel. It exceeds the maximum fines that can be imposed for a breach of UK data protection law. 

In addition, the CMA and courts will have the power to order (or accept an undertaking) that "enhanced consumer measures", which can include the payment of compensation to affected consumers, are taken. Given these significant changes to the enforcement regime, companies with exposure to consumer protection law may choose to give greater emphasis to consumer protection law in compliance programmes. 

Competition law

The most significant changes to UK competition law are on merger thresholds. In particular, the bill introduces a new turnover threshold for "killer acquisitions". These are transactions where a large company acquires control of an innovative company without significant current turnover, but which might act as a market disputer in the future, and may be particularly relevant to corporate transactions in the life sciences sector. The threshold would give the CMA jurisdiction over transactions where one party has:

  • A 33% or greater share of supply of goods or services of any description in the UK or a substantial part of it, and
  • UK turnover exceeding £350m. 

In addition, the bill proposed to amend the CMA’s existing jurisdictional thresholds to review transactions. Currently, the CMA may have jurisdiction if:

  • The UK turnover of the target exceeds £70m (turnover test), or
  • The merger creates or enhances a 25% share of supply or purchases in the UK, or a substantial part of it (share of supply test).

The amended thresholds will be:

  • The threshold for the turnover test will be increased to £100m, and
  • The CMA will not have jurisdiction, unless a party to the transaction has UK turnover exceeding £10m, even if the share of supply test is otherwise met. 

The competition law provisions of the bill will also have the following key features:

  • The CMA will have increased powers during "dawn raids", particularly in relation to requirements to produce electronic documents.
  • In private actions for damages against cartel participants, exemplary damages may be awarded.
  • Certain procedural fines will be increased, for instance for failure to comply with certain directions issued by the CMA during a merger investigation. 
  • A new criminal offence related to the intentional destruction or alteration of documents required to be produced as part of a merger investigation will be introduced. 

Companies in the life sciences sector should be aware of the competition law amendments that will be made by the bill, and in particular the introduction of the "killer acquisition" merger control threshold, which may catch a wider range of corporate transactions in the sector. 

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