Table of Contents
- UK CMA Fines Banks For Exchange of Commercially Sensitive Information Via Chats
- EU Advocate General Confirms “Parallel Imposition Requirement” Applies in Exclusive Distribution Agreements
- UK Court Rules on Application of National Security and Investment Act
- UK CMA Publishes Guidance on Exclusion and Debarment From Public Procurement Procedures
UK CMA Fines Banks for Exchange of Commercially Sensitive Information Via Chats
On 21 February 2025, the UK Competition and Markets Authority (CMA) announced fines on four banks for infringing UK competition law by exchanging commercially sensitive information (CSI). Another bank was exempted from a fine because it alerted the CMA via the leniency policy. One of the fined banks applied for leniency during the CMA’s investigation and received a reduced fine.
The banks were found by the CMA to have exchanged information concerning aspects of the pricing of UK government bonds (known as gilts) on specific dates. The exchanges were related to three types of activity: the sale of gilts by the UK Debt Management Office via auctions on behalf of HM Treasury, the subsequent buying and selling — i.e., trading — of gilts and gilt asset swaps, and the selling of gilts to the Bank of England — known as “buy back.” The banks were competitors in relation to these activities.
The CMA found that the exchanges took place in five separate bilateral online Bloomberg chatrooms between individual traders at two of the banks. Not all banks were involved in unlawful exchanges in all three contexts, so five separate infringement decisions were issued. Although the unlawful acts only amounted to exchange of CSI, in accordance with long-standing precedent, each exchange was treated by the CMA as an “object” (or automatic) infringement of competition law as it was carried out between competitors.
The fines took into account the length of time that had passed since the end of the infringements (2013) and the extensive compliance measures that the banks implemented since then — some of which were in place before the start of the CMA’s investigation. The banks agreed to the fines under the CMA’s settlement procedure.
In the case of four of the banks, the CMA found that the information was exchanged by a single trader based in the UK. For another, the information was exchanged on different occasions by two traders based in the UK.
The case shows the ease with which the exchange of CSI, even by one rogue employee, can give rise to a competition law infringement and the need for businesses to continue compliance efforts that cover all ways in which competitors can communicate.
EU Advocate General Confirms “Parallel Imposition Requirement” Applies in Exclusive Distribution Agreements
On 9 January 2025, an advocate general (AG) at the European Court of Justice (ECJ), the EU’s highest court, provided her opinion on the protection an exclusive distributor in the EU must have in order for the distribution agreement to benefit from the vertical agreements block exemption regulation (VABER) under EU competition law. This is an important practical issue relevant to many distribution agreements in the EU.
An AG’s opinion is not binding on the ECJ but the ECJ will usually follow it. A block exemption provides for an automatic exemption from EU competition law if an agreement satisfies the requirements. The opinion concerned the previous VABER, but the new version (in force since June 2022) effectively applies in the same manner.
The case concerns Beevers Kaas, the exclusive distributor in Belgium of Beemster cheese, which it purchases from the Dutch producer Cono. Since 1993, Cono and Beevers Kaas had an exclusive distribution agreement for the distribution of Beemster cheese in Belgium and Luxembourg. The Albert Heijn supermarket chain buys Beemster cheese produced by Cono for markets outside Belgium and Luxembourg.
Beevers Kaas accused Albert Heijn of infringing honest market practices by engaging in activities that have the direct or indirect effect of infringing Beevers Kaas’ exclusive rights in Belgium. Albert Heijn denied this allegation and and argued that Beevers Kaas and Cono were attempting to impose a ban on active sales in to Belgium, which is generally prohibited under EU competition law except in some cases where the VABER applies. Albert Heijn argued that the exclusive distribution agreement does not require Cono to protect Beevers Kaas from active sales by other buyers. “Active sales” means approaching individual customers through advertisements, direct mail, visits and other means.
If its other requirements are met, the VABER permits a supplier to ban a distributor from making active sales into another territory or customer group that is exclusively allocated to another distributor (in the case of the new VABER, a maximum of five exclusive distributors). The related guidelines provide that the exclusive distributor in the other territory must be protected from active sales by all the supplier’s other distributors/buyers in the EU. This is the “parallel imposition requirement.”
The Belgian court referred to the ECJ the question of when an agreement between a supplier and its other distributors in relation to active sales into an exclusive territory is adequately established for the purposes of the VABER. This required the AG to consider the validity of the parallel imposition requirement, which is the first time the issue has been raised before the EU courts.
The AG proposes that the ECJ recognises that the VABER includes the parallel imposition requirement, despite the fact that that the VABER itself does not explicitly refer to such a requirement, and it only appears in the related guidelines. In the AG’s view, the provision is applicable only in relation to exclusive distribution agreements that genuinely encourage the exclusive distributor to invest in its sales activities in the exclusive territory. In adddition, the AG said that in her view all the other buyers must expressly or tacitly accept the prohibition of active sales into the exclusive territory.
As to the issue of when a suitable agreement is reached, the AG considers that the other buyers must show acquiescence through action or inaction. This requires the supplier to have explicitly or implicitly invited those other buyers to behave in a certain clearly defined manner on the market — i.e., not to engage in active sales in the exclusive territory — and for the buyers to have at least tacitly expressed their willingness to acquiesce to that ban, which is to be established on the basis of consistent coincidences or indicia.
In practice, a course of conduct will not provide sufficient certainty, so parties should make sure active sales bans are expressly set out in relevant distribution agreements. Distributors that have been allocated an exclusive territory or customer group likely will anyway insist their suppliers include an active sales ban in their other distribution agreements.
The AG also noted an important practical point on timing. The parallel imposition requirement is only met from the point that the other buyers have acquiesced or an express provision is in place. The supplier must be able to show that that condition is satisfied with respect to all its other buyers during the period for which it is claiming the benefit of the VABER.
UK Court Rules on Application of National Security and Investment Act
The High Court handed down the second ruling on the application of the UK National Security and Investment Act 2021 (NSI Act) on 7 February 2025. As with the first court ruling on 20 November 2024, the judgment confirms the government’s wide margin of discretion in these cases and the difficulty parties will have in challenging its decisions.
The NSI Act controls investment into UK entities and assets on national security grounds and in some cases gives rise to a mandatory filing and suspensory obligation before closing.
Following a review under the NSI Act, the court FTDI Holding (FTDIHL) to divest its 80.2% shareholding in Future Technology Devices International (FTDI), a semiconductor devices company specialising in USB technology. FTDIHL is a holding company beneficially owned by five limited partnerships based in China. The general partner is Beijing Jianguang Asset Management Co. (JAC), which owns a minority interest in the other partnerships. China Jiayin Investment, a state-owned investment company, owns 51% of the equity interests in JAC.
The court based its order on its concern for the risks to national security arising from UK-developed semiconductor technology and associated intellectual property being deployed in ways that are contrary to UK national security and the ownership of FTDI being used to pose a risk to critical national infrastructure which uses FTDI products.
FTDIHL filed a claim for judicial review of the order and applied for an interim injunction suspending the effect of the order pending the determination of that review.
As in the first case, the court allowed the government great latitude. Rejecting the request for an interim injunction, it stated:
“…where one of the interests [to be considered in such an application] is national security, the court must show great respect to the judgment of the executive about whether the relevant risk is made out and about the weight to be attached to it. This means that, subject to review on rationality or other public law grounds, both the existence of a risk to national security and the weight to be ascribed to it are matters for the executive. In many cases it may be difficult to find interests sufficiently weighty to outweigh the public interest in national security.”
This reasoning indicates that the bar for obtaining an interim injunction in NSI Act cases will be high.
The full judicial review hearing, likely to be heard in mid-April 2025, will consider arguments from FTDIHL including that the government called in the deal for review outside the statutory six-month limit for investments in sectors not subject to mandatory filing rules. The government argued that the period only starts when the secretary of state becomes aware of a deal.
The case will be of interest as guidance on that specific issue as well as the other points argued by FTDIHL on procedural fairness and failure by the government to provide adequate reasons for its decision.
UK CMA Publishes Guidance on Exclusion and Debarment From Public Procurement Procedures
From 24 February 2025, the new UK Procurement Act 2023 strengthens rules to exclude suppliers from taking part in public procurement when they pose particular risks. The changes impact businesses that engage in cartels and other anticompetitive activities. The CMA has published guidance that explains the new rules.
Under the act, in some cases a supplier is automatically excluded from procurement procedures. This is the case when it has been found to have broken competition law (inside or outside the UK) by taking part in cartel activity and the circumstances giving rise to that are continuing or likely to occur again.
Alternatively, a supplier may be excluded from a procurement procedure when the buyer “considers that” it has engaged in (inside or outside the UK) any infringement of competition law, including an anticompetitive agreement or abuse of dominance, and the circumstances giving rise to that are continuing or likely to occur again.
The act also establishes a debarment list, which a supplier may be placed on if one of those two exclusion grounds apply. If the supplier is on the debarment list due to a mandatory exclusion, it must be excluded from a procurement. If it is on the debarment register under the discretionary exclusion ground, a buyer may decide to exclude it from a procurement.
Cartel activity includes colluding with competitors to rig bids, fix prices or share markets. Bid rigging includes bid suppression, bid rotation and cover pricing. The CMA has a particular focus on bid rigging and uses advanced data science capabilities to detect suspicious bidding patterns in public sector procurement. This includes algorithms to spot unusual bidder behaviour and pricing patterns that may indicate bid rigging has taken place.
These capabilities have publicly been in place since 2017, but in January 2025, the CMA announced that it is trialling a new AI-backed tool. The tool uses AI to scrape large-scale data to spot anomalies and, according to the CMA, the trial had proved “quite successful.”
The new regime and the CMA’s expanded tools demonstrate once again the importance for suppliers engaged in public procurement bids to have in place a suitable competition law compliance programme. The programme should include internal audits, which may allow a business to take advantage of “self-cleaning” under the act.
Self-cleaning is relevant to the issue of whether an infringement is continuing or likely to occur again and therefore whether a mandatory or discretionary exclusion can be applied. If a supplier finds a concern, it should consider engaging in relevant self-cleaning measures, including paying compensation and taking steps to prevent the circumstances occurring again.
