Modernisation of UK Competition Law
Comments from ACCA
July 2003
ACCA is pleased to comment on the Government�s consultation document on the future of exclusions and exemptions from the Competition Act in the light of EU Regulation 1/2003.
We restrict our comments to the discussion of competition scrutiny regimes in part 5 of the document and, specifically, to the following question posed on page 38 of the document:
The Government proposes to repeal the separate competition scrutiny regime for statutory audit services and consequential exclusion from the Competition Act. We would welcome your views on this proposal.
As we understand the position, the salient features of the new Regulation as it applies to the separate scrutiny regimes are set out below:
(i) The OFT and national courts will be required to apply the provisions of articles 81 and 82 of the Treaty of Rome to domestic competition law. This will mean, in effect, that, in determining whether an agreement has as its object or effect the prevention, restriction or distortion of competition, the OFT and the courts will have to take into account the implications for the agreement concerned not only on trade within the UK but on trade between the UK and other EU member states.
(ii) Agreements which are caught by the basic prohibition in article 81(1) � on which our current Competition Act is modelled � but which satisfy the exemption criteria set out in article 81(3) are not to be prohibited, no prior decision on this being required. This new system is referred to as one of �legal certainty�.
Accordingly, the rules of professional bodies will be compliant with the law if they do not impose restrictions on trade between member states. Even if they do, they may still be compliant if they satisfy the exclusion criteria set out in article 81(3). Assuming, then, that the rules of professional bodies are covered by articles 81 and 82, as the DTI believes is the case, provided that a body�s rules are covered by the exemption in article 81(3), those rules will be compliant with the law and no separate clearance procedure will be necessary.
The main issue then appears to be whether the OFT and the courts themselves are likely to view the rules of the RSBs/RQBs as being compliant or otherwise with wider EU competition law.
As the consultation document says, there is no requirement in the new Regulation for the separate competition scrutiny regime in the Companies Act to be dismantled. The consultation document also acknowledges that "it is not necessarily the case" that the rules of RSBs and RQBs would be considered to be anti-competitive, and also that they may well qualify for exemption under article 81(3).
In the specific case of the rules of the RSBs/RQBs, it will be recalled that the rules concerned are modelled on the requirements of Schedules 11 and 12 of the Companies Act 1989, which are themselves modelled on the requirements of the Eighth Company Law Directive. The whole purpose of the Directive is to impose minimum standards throughout the EU to the licensing of statutory auditors. In their rules, therefore, the RSBs/RQBs are taking necessary steps to enforce EU law on behalf of the UK Government. RSBs also comply separately with rules imposed by the Mutual Recognition Directive regarding the mutual recognition of national audit qualifications. In these circumstances, we see no case for an argument that the rules of RSBs and RQBs under the present framework prevent or distort trade either within or between member states.
In the earlier consultation document issued by the DTI in April, it was suggested that the OFT should introduce a system of extra-statutory written opinions in cases which raise genuine uncertainty. This would be in addition to the written opinions on questions of community public interest which the European Commission has agreed to issue. The OFT�s opinions would not, however, be binding on courts, thus bringing a degree of uncertainty to the new regime of so-called �legal certainty�.
We acknowledge that Parliament has already repealed Schedule 4 to the Competition Act 1998 and that the repeal of Schedule 2 might be seen as consistent with that move. The situation regarding Schedule 2 is, however, somewhat different in that this Schedule deals with rules which are operated by RSBs/RQBs on behalf of the Government (as opposed to rules which derive from powers which the bodies have under their own constitutions). The need for certainty on whether the rules comply with the law is, therefore, greater in this case.
We would, accordingly, prefer to see the current Companies Act clearance process continued on an exceptional basis. Although the new EU regime is referred to as one of �legal certainty�, the document�s discussion of whether or not the RSB/RQB rules are likely to comply with articles 81 and 82 cast significant doubt on the issue. In future, the OFT will, of course, be entitled (and required) to ensure, in any review of RSB/RQB rules, that they are compliant with EU law as well as UK law. But this should not require abolition of the scrutiny procedure itself.
If the current Companies Act regime were to be discontinued, we would wish the OFT to be prepared to issue, if not legally binding opinions, then at least very clear guidance on what elements should and should not be present in rules in order to ensure compliance. RSBs/RQBs are required to administer and enforce these delegated statutory powers in their dealings with their members, and these special circumstances require that a high element of certainty be attained.