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BMW and VW challenge the extraterritorial reach of CMA information gathering powers

On 8 December 2022, the CMA imposed administrative fines on BMW AG for having failed to comply with an information request under s26 of the Competition Act 1998 (CA98) during the CMA’s ongoing investigation of suspected anti-competitive conduct in relation to the recycling of end-of-life vehicles (ELVs). The fines were issued under s40A of the CA98, under which the CMA can impose administrative fines of up to £30,000 and/or a daily fine of up to £15,000 per day of non-compliance with a s26 notice without reasonable excuse. The fines on BMW AG were at those statutory maximums and BMW AG has now appealed the imposition of the fines to the Competition Appeal Tribunal (CAT), with a hearing set for 26-27 January 2023, on the grounds that:

  • Neither s26 nor s40A of CA98 apply extraterritorially - hence, as a foreign-domiciled company, BMW AG had no obligation to comply with the s26 notice; and the CMA did not have powers under s40A to impose the penalty
  • Given the legal uncertainty regarding whether s26/40A apply extraterritorially and its obligations under German and EU data protection law, BMW AG had a "reasonable excuse" within the meaning of s40A(1) for its non-compliance, and
  • Even if the CMA was entitled to impose a penalty, the statutory maximum level was excessive and disproportionate

The CMA’s s26 notice had been issued to BMW (UK) Ltd (BMW UK) and its ultimate parent company, BMW AG. BMW AG is also subject to a parallel European Commission (EC) cartel investigation in respect of ELVs and it argued its German domicile, without itself having any UK branch or operations, meant the s26 notice and the associated penalty could not be enforced against it. BMW AG therefore stated that it would not fully respond to the s26 notice, arguing it would also risk breaching its obligations under German/EU data protection law if it provided certain information to the CMA and the CMA lacked jurisdiction to require the information from BMW AG. Whilst BMW AG took steps to preserve material that could be relevant to the s26 notice, BMW AG requested that the CMA withdrew the s26 notice on the basis that it was unlawful.

However, the CMA maintained that BMW AG was legally required to respond to the s26 notice on the basis that:

  • The BMW Group is the undertaking concerned for the purposes of s26 with BMW AG forming part of that undertaking, which is present in the UK through BMW UK
  • CMA’s CA98 enforcement powers apply to any undertaking, wherever situated, if its conduct may affect trade in the UK, and
  • BMW AG could seek informed consent from relevant individuals and thereby comply with German/EU data protection law when responding to the s26 notice

The issue of the territorial scope of CA98 is also a central issue in a claim for judicial review brought in the High Court by Volkswagen AG against the CMA in relation to the same cartel case; and will be heard together with the BMW AG appeal at the CAT.

That the extraterritorial reach of the CMA’s CA98 enforcement powers is being tested before the CAT is welcome, particularly now the CMA can investigate cartels in parallel with the EC following the UK’s exit from the EU. If the CMA loses this case, it could make it more difficult for it to carry out future cross-border cartel investigations effectively, as the CMA no longer forms part of the European Competition Network (ECN) of EU competition authorities. When the UK was still an EU member, the CMA could access the cooperation mechanisms of the ECN to obtain overseas documents and information more easily in an investigation.

Recent case law suggests the CMA’s position is far from clear-cut. In R (on the Application of KBR, Inc) v Director of the Serious Fraud Office ([2021] UKSC 2), the UK Supreme Court held that the SFO could not use the information gathering powers under s2(3) of the Criminal Justice Act 1987 to compel a foreign company to produce documents it holds outside the UK. The company in that case, KBR, Inc, did not have any fixed place of business in the UK and had never carried on business in the UK. In the BMW case, the CMA is arguing that the KBR case did not establish the jurisdictional scope of s26 notices under CA98 and that the CA98 applies to any arrangement which has been implemented in the UK. It now remains to be seen whether the CMA can persuade the CAT of its position.

It is also worth noting that recent legislative proposals may result in the CMA being able to impose administrative fines of up to 1% of annual worldwide turnover and additional daily fines of up to 5% of daily worldwide turnover. This would represent significant increases from the current legal maximums of £30,000 and £15,000 respectively and it would be helpful for businesses to have further legal clarity on the territorial scope for those powers before those legislative changes come into force.

"CMA does not have the legal power to compel foreign companies to produce documents held entirely outside the UK jurisdiction" / BMW


automotive, competition