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EXPLAINED: Creating competition and crushing "hardcore cartels"

EXPLAINED: Creating competition and crushing

Wednesday 01 March 2023

EXPLAINED: Creating competition and crushing "hardcore cartels"

Wednesday 01 March 2023

'Competition Law' may sound dry, but it's the thing that aims to keep islanders safe from suffering at the hands of monopolies, rigged bids and other mafia-like behaviour.

The island's courts and competition watchdog already have the power to root out and punish anti-competitive practices, but the government is now looking at tightening up even further, such as through the introduction of a ‘criminal cartel offence’ for the first time.

Express explores the proposed changes...

What changes are being proposed?

Amendments being proposed to the island’s 2005 law include a new framework for the control of mergers and acquisitions, giving more structure and weight to ‘market studies’ by the Jersey Competition and Regulatory Authority, and the introduction of a new criminal offence for cartels.

The Government wants to give the JCRA clear statutory powers to conduct market studies. At the moment, the ability is a power inferred in the law but not explicitly stated in it. It is also a power held by the Economic Development Minister rather than the JCRA itself.

The consultation proposes that this will “increase clarity and transparency in respect of the role and powers of the JCRA and ensure it is appropriately equipped to effectively and efficiently conduct market studies in the Island”. 

It adds: “The aim is furthermore to develop the framework so that it strikes an appropriate balance between flexibility and discretion for the JCRA, on the one hand, and adequate procedural checks and balances in respect of any findings and remedies that might be introduced, on the other hand.”

The proposed changes will also provide a “legal framework” for market studies. 

Under the proposed modernised regime, the JCRA would be able to examine markets where certain features may be affecting competition, but which may not be directly caused by Competition Law infringements, and then take steps to resolve market-wide problems.

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Pictured: The JCRA launched a market study into alcohol pricing and promotions in 2021.

The authority would have a formal power to collect information from firms, but it expects this would be used infrequently.

The consultation proposes that, at the end of a market study, the JCRA should be able to impose “legally enforceable behavioural and structural remedies”.

The JCRA had wanted to do this without Government interference, but the latter wants to maintain some powers to intervene in “clearly delineated sectors” in the economy.

The consultation proposes empowering the JCRA, when an uncompetitive behaviour is identified, to impose remedial action. This could involve forcing a company to sell part of its business,

It could also accept an “undertaking in lieu” from a market operator – effectively, a promise to resolve problem issues overseen by the JCRA.

Mergers and acquisitions

Jersey’s competition framework provides rules for the control of mergers and acquisitions based on the effect of a proposed transaction on the structure of competition in the Island. 

In particular, to prevent any harmful effects on competition in Jersey, the 2005 Competition Law provides that certain mergers and acquisitions must be approved by the JCRA before they can go ahead.

The consultation proposes a number of tweaks, including tighter definitions, clearer rules around joint ventures and new tests over when an M&A would trigger a JCRA investigation.

Appeals and compliance

The consultation proposes changes to the law to clarify and simplify the appeals process, introducing an “unreasonableness test” which the Royal Court can apply.  

It is also recommended that Jersey introduces a ‘commitment procedure’, which will provide the possibility for businesses to offer commitments to the JCRA that are intended to address any competition concerns that the authority has identified. 

If the JCRA is satisfied that the commitments offered adequately address its concerns, it may adopt a decision which makes them binding on the parties. This would not constitute a formal infringement of the law, therefore would keep the matter out of the courts.

Commitments could, for example, involve a business agreeing to stop or modify its conduct, terminating an arrangement, removing a particular clause from an agreement, withdrawing from a particular activity, or even divesting itself of part of its business.

Criminal cartels

It is also proposed to introduce a ‘criminal cartel offence’, which would seek to deter the most serious forms of anti-competitive arrangements, often referred to as ‘hard core cartels’.

These are anti-competitive arrangements between competitors that aim to rig bids, fix and raise prices, restrict supply and divide or share markets, thereby causing substantial economic harm.

The proposed criminal offence would be modelled on the UK law and, if introduced, could lead to a prison sentence of up to five years, unlimited fines, or both.

It is also proposed that the JCRA can apply to disqualify directors who are found to be deliberately breaching the Competition Law.

Islanders who would like to take part in the consultation can find out more information here. 

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