In a judgment issued yesterday, the UK's Competition Appeal Tribunal (CAT) has ruled that the investigative powers of the Competition and Markets Authority under the Competition Act 1998 do not extend to ordering persons without a connection to the UK to produce documents.
Background to the dispute
Section 26 of the 1998 Act provides that, for the purposes of an investigation, "the CMA may require any person to produce to it a specified document, or to provide it with specified information, which it considers relates to any matter relevant to the investigation". Section 59 of the Act provides that the expression 'person' used in Part 1 of the Act (in which s.26 is located), "includes any undertaking".
In 2022, in connection with its investigation into suspected anti-competitive conduct relating to take-back, dismantling and recycling of end-of-life vehicles, the CMA issued s.26 notices to BMW and Volkswagen requiring the production of certain documents and information.
The BMW and VW notices were expressed in similar terms. The BMW notice was addressed to both BMW (UK) Ltd (BMW UK) and Bayerische Motoren Werke AG (BMW AG). The body of the notice describes it as being issued to: "BMW (UK) Ltd (company number 01378137) (“BMW”), its ultimate parent company, Bayerische Motoren Werke AG, and any other legal entities within the same undertaking (together, “BMW Group”)".
BMW UK asserted in response to the notice that it did not have the ability to access or call for any documents held by BMW AG or any other group company domiciled outside of the UK that are the subject of the s.26 notice. BMW AG for its part refused to respond to the s.26 notice because it had been advised that the CMA did not have the power to require it to do so. Volkswagen AG responded in similar terms.
Both BMW AG and Volkswagen AG challenged the legality of the s.26 notices addressed to them in the Competition Appeal Tribunal.
The CAT judgment
The key question for the CAT to resolve (as it saw it) was whether section 26 of the 1998 Act should be construed as having extra-territorial effect, so that it could be applied to persons (such as BMW AG) with no connection with the UK. In approaching that question, the CAT had to bear in mind the 'presumption against extra-territoriality', i.e., the presumption that, unless the contrary intention appears, an enactment is taken not to apply to people and matters outside the territory to which it extends.
The CMA argued that the presumption could readily be rebutted by virtue of s.59 of the 1998 Act which provided that "person" in s.26 included "undertaking". Thus, as the CMA saw it, a s.26 notice addressed to the 'BMW undertaking' or to the 'VW undertaking' would affect all legal or natural persons within the undertaking, wherever situate, provided only a part of the undertaking (here BMW UK and VW UK) had a UK territorial connection. In this way, even though neither BMW UK nor VW UK can command documents or information from BMW AG or VW AG, because parts of the 'BMW undertaking' and parts of the 'VW undertaking' have a UK territorial connection, that fact enables a s.26 notice to require the whole undertaking to respond.
The CAT viewed the CMA’s interpretation as rendering section 26 "aggressively extraterritorial", given that a single s.26 notice, addressed to an undertaking, would trigger an obligation to respond in every single legal or natural person within that undertaking, provided only that a single legal or natural person within that undertaking had a UK territorial connection.
The CAT rejected that interpretation as fatally ignoring the need to translate the fundamentally economic concept of 'undertaking' into a legal context. As it put it, "when legal process is engaged, a process of “translation” needs to take place, whereby an economic concept is rendered into a legally comprehensible form. Such translation is vital for due process. [...] [N]one of the mechanics necessary for bringing a notice to the attention of a responsible person exist in the case of an undertaking [...]. It is not possible – it makes no legal sense – to seek to “serve” [an] undertaking" (paragraph 76).
According to the CAT, the correct interpretation of the extended meaning of “person” in section 26 was that a s.26 notice can be given to an undertaking, "but only via a natural or legal person with sufficient connection to the jurisdiction". On that basis, whether any constituent elements of the undertaking, "are themselves obliged to respond to the notice depends on whether – considering their status as natural or legal persons, and disregarding their position as a part of an undertaking – they have or do not have a UK territorial connection. If they do, then they must respond as if the notice were directed to them specifically. If they do not, then the presumption against extraterritoriality applies, and there is no obligation to respond" (paragraph 79).