Country & Competition Agency

Power of inquiries into the state of competition & the functioning of markets

Australia

Australian Competition and Consumer Commission (ACCC)

General Inquiries:
ACCC takes the view that it has "a general power of inquiry" under s. 28(1)(c) of the Trade Practices Act, 1974 (TPA):

Sect 28
Functions of Commission in relation to dissemination of
information, law reform and research

(1) In addition to any other functions conferred on the Commission, the Commission has the following functions:

(c) to conduct research in relation to matters affecting the interests of consumers, being matters with respect to which the Parliament has power to make laws.

An inquiry under s.28(1)(c) can be initiated by the responsible Minister or the ACCC.

Scope of Investigative Powers
Under s. 28(1)(c) of the TPA, the ACCC has no power to compel information. It uses information that is already available or information that is provided voluntarily.

Process
The ACCC has indicated that it prefers the flexible and informal nature of inquiry that s.28(1)(c) allows. However, the typical steps of a general inquiry include:

• notify the persons/companies that are the targets of the inquiry and advise them in writing;
  seek information from targets of inquiry;
• issue a paper or a report to get written submissions;
• meet with subjects of inquiry and other interested parties;
• hold oral hearings/public forums across the country (administrative process instead of judicial process or arbitration);
• interested parties have the opportunity to provide comments on a draft report;
• final report is issued

Other
Section 28(1)(b) also lists Commission's functions as including: "(b) to examine critically, and report to the Minister on, the laws in force in Australia relating to the protection of consumers in respect of matters referred to the Commission by the Minister, being matters with respect to which the Parliament has power to make laws." This is a more formal power for the Minister to refer matters to the Commission. However, our ACCC contact on this issue knew of no examples where this provision had been used. Similarly, s.28(1)(ca) lists as one of the Commission's functions: "(ca) to conduct research and undertake studies on matters that are referred to the Commission by the (National Competition) Council and that relate to the Commission's other functions." Again, our ACCC contact knew of no examples where this provision had been used.

European Commission (EC)

Treaty establishing the European Economic Community (EEC Treaty)

Council Regulation No. 1/2003

Article 17
Investigations into sectors of the economy and into types of agreements:
1.Where the trend of trade between Member States, the rigidity of prices or other circumstances suggest that competition may be restricted or distorted within the common market, the Commission may conduct its inquiry into a particular sector of the economy or into a particular type of agreements across various sectors. In the course of that inquiry, the Commission may request the undertakings or associations of undertakings concerned to supply the information necessary for giving effect to Articles 81 and 82 of the Treaty and may carry out any inspections necessary for that purpose.

The Commission may in particular request the undertakings or associations of undertakings concerned to communicate to it all agreements, decisions and concerted practices.

The Commission may publish a report on the results of its inquiry into particular sectors of the economy or particular types of agreements across various sectors and invite comments from interested parties.

2. Articles 14, 18, 19, 20, 22, 23 and 24 shall apply mutatis mutandis.

This is the same provision used for regular enforcement inquiries. In enforcement cases, the Commission has a very clear idea of specific anti-competitive behaviour. The Commission uses sector inquiries when they don't have specific information about anti-competitive conduct but are concerned that the market is not operating as it should. Still, consistent with the enabling legislation, a sector inquiry has to be linked to Articles 81 (agreements which restrict competition) or 82 (abuse of dominant position). While remedies not directly related to Articles 81 or 82 are possible (e.g. proposals for new regulations), a sector inquiry can only be initiated if it can be related to Articles 81 or 82. If a sector inquiry leads to information indicating anti-competitive conduct under either Articles 81 or 82, then appropriate enforcement action would be taken by the EC.

Scope of Investigative Powers
Article 18 allows the Commission to compel companies to provide information; Article 19 provides that the Commission may interview people, who consent to being interviewed, for the purpose of collecting information; Article 20 allows the Commission to conduct searches; Article 23 and 24 allow the Commission to impose fines on companies for providing incomplete, incorrect or misleading information.

Office of Fair Trading
Competition Commission

The UK has two types of market or general inquiries:

(1) "market studies" which are done exclusively by the Office of Fair Trading (OFT); and

(2) "market investigation references" which involve the OFT referring a matter to the Competition Commission for a detailed public investigation.

Market Studies
Market studies are used "... where there are concerns that a particular market is not working well for consumers but where competition or consumer regulation enforcement action does not appear, immediately, to be the appropriate response." Possible results of these market studies include:

• enforcement action
• a reference of the market study to the Competition Commission
• recommendations for changes in laws or regulations
• recommendations to regulators, self-regulatory bodies and others to consider changes to their rules campaigns to promote consumer education and awareness.

Statutory authority for gathering information is derived from a relatively general provision of the Enterprise Act 2002:

5 Acquisition of information etc
(1) The OFT has the function of obtaining, compiling and keeping under review information about matters relating to the carrying out of its functions.
(2) That function is to be carried out with a view to (among other things) ensuring that the OFT has sufficient information to take informed decisions and to carry out its other functions effectively.(3) In carrying out that function the OFT may carry out, commission or support (financially or otherwise) research.

The OFT will normally publish market study reports under s.(4)(4) of the Enterprise Act 2002:

4. Annual and other reports
....
(4) the OFT may -
(a) prepare other reports in respect of matters relating to any of its functions; and
(b) arrange for any such report to be published

Under certain circumstances, the OFT can use formal powers to obtain information for market studies but UK representatives, have indicated that they do not. Typically, the OFT will write asking for information and it is volunteered by the parties in the context of helping to allay any concerns that the OFT might have.

Market Investigation Reference

The Office of Fair Trading may make a market investigation reference to the Competition Commission if there are:

• "... reasonable grounds for suspecting that any feature, or combination of features, of a market in the United Kingdom for goods or services prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the United Kingdom or a part of the United Kingdom."
• "Features" can include structural considerations, specific kinds of conduct or a combination of structure and conduct.

The legislation specifically concerning market investigation references is extensive and both the OFT and the Competition Commission have published related Guidelines. Among other considerations, the legislation provides that:

• Before making a market investigation reference, the OFT must first consult, so far as practicable, with anyone who is likely to be substantially affected by the reference.
• Upon receipt of a market investigation reference, the Competition Commission is required to determine whether any feature, or combination of features, prevents, restricts or distorts competition.
• If the Commission concludes that there is an adverse effect on competition, it must decide what action should be taken by it (or whether it should recommend the taking of action by others):

for the purpose of remedying, mitigating or preventing the adverse effect on competition concerned or any detrimental effect on customers.

• There is a detrimental effect on consumers if the feature or features result in higher prices, lower quality, less choice or less innovation.
• Statutory remedies available to the Commission under the Enterprise Act are wide ranging (whereas under the previous regime the Commission could only make recommendations to the Secretary of State). The Commission, for example, can make orders: requiring parties to terminate an agreement; prohibiting the withholding of goods or services to a person; prohibiting price discrimination; regulating the price charged for a good or service; prohibiting the acquisition of assets; or requiring that accounting information (e.g. the costs of supply) be published

In its Guidelines, the OFT notes that, in addition to the statutory criteria outlined above, it will also consider whether a market investigation reference to the Competition Commission is the most appropriate way of proceeding. It will only make references to the Competition Commission when, in its view, each of the following criteria have been met:

• it would not be more appropriate to deal with the competition issues identified by applying Competition Act 1998 or using other powers available to the OFT or, where appropriate, to sectoral regulators
• it would not be more appropriate to address the problem identified by means of undertakings in lieu of a reference
• the scale of the suspected problem, in terms of its adverse effect on competition, is such that a reference would be an appropriate response to it
• there is a reasonable chance that appropriate remedies will be available.

Scope of Investigative Powers
Both the OFT and the Competition Commission have three investigatory powers that can be used in market studies:

• to require the attendance of parties to give evidence
• to require the production of specified documents, and
• to require the supply of specified information.

Federal Trade Commission (FTC)

Research and Policy Reports
Considered an important part of the FTC's work, "research and policy" reports can be started in three ways:

• Congress uses its legislative authority to ask the FTC to do a specific report.
• Members of Congress or a Congressional Committee asks, without using its legislative authority, the FTC to do a study.
• The FTC initiates a study on its own.

For the last two types of inquiries, the FTC authority to conduct such inquiries and publish related reports is derived from FTC Act Subsections 6(a) and 6(f), 15 U.S.C. Sec. 46(f):

(a) Investigation of persons, partnerships, or corporations

To gather and compile information concerning, and to investigate from time to time the organization, business, conduct, practices, and management of any person, partnership, or corporation engaged in or whose business affects commerce, excepting banks, savings and loan institutions described in section 57a (f)(3) of this title, Federal credit unions described in section 57a (f)(4) of this title, and common carriers subject to the Act to regulate commerce, and its relation to other persons, partnerships, and corporations.

The authority to publish the reports is derived from FTC Act Sec. 6(f), 15 U.S.C. Sec. 46(f):

(f) Publication of information; reports

To make public from time to time such portions of the information obtained by it hereunder as are in the public interest; and to make annual and special reports to the Congress and to submit therewith recommendations for additional legislation; and to provide for the publication of its reports and decisions in such form and manner as may be best adapted for public information and use: provided, that the Commission shall not have any authority to make public any trade secret or any commercial or financial information which is obtained from any person and which is privileged or confidential, except that the Commission may disclose such information to officers and employees of appropriate Federal law enforcement agencies or to any officer or employee of any State law enforcement agency upon the prior certification of an officer of any such Federal or State law enforcement agency that such information will be maintained in confidence and will be used only for official law enforcement purposes.

There are no formal criteria limiting what kind of research and policy inquiries the FTC can undertake.

Scope of Investigative Powers
The FTC has the ability to compel oral or documentary evidence but rarely uses it for research and policy inquiries.