Following the landmark constitutional judgements in the case of Federation of Estate Agents vs the Director General et, whereby the Constitutional Court decided that it was not constitutionally permissible for an Authority such as the Office for Competition (“OFC”) to impose sanctions of a penal nature and that such sanctions can only be imposed by an independent and impartial tribunal or court of law, on the 29th of May 2019, the Maltese Parliament approved a Bill to amend the Competition Act (Chapter 379 of the Laws of Malta)(“CA”) and, subsequently, enacted the bill as law on the 31st of May 2019.
The amendments to the CA significantly change the powers of the OFC (which exercises its authority through its Director General), most notably by removing the OFC’s power to itself issue infringement decisions and relative fines and this in light of the above-mentioned judgements. Following these changes to the CA, any investigation by the OFC which establishes that a breach of the Competition Act may have taken place, will require the OFC to then file proceedings in the Civil Court (Commercial Section) (the “Court”) in order to obtain a judgment confirming the breach and authorising the imposition of the fine or penalty, purportedly to ensure that the matter is determined by an impartial and independent adjudicating tribunal. The procedure is discussed in more detail below.
II. Investigations and “Dawn Raid” Procedures
Investigations relating to Competition law breaches will still be carried out by the Director General (“DG”), either through his own motion, at the request of the Minister responsible for competition matters, following a reasonable request by a complainant in writing or at the request of any designated national competition authority of any other Member State or the European Commission.
The amendments also envisage a new “dawn raid procedure” where the OFC’s investigation may be carried out by the DG (or any of his officers) at the premises of the undertaking, following the issuance of a warrant by a Magistrate. The undertaking in question may however be assisted by legal counsel during such investigation, and the DG’s “officers may wait a reasonable time for legal counsel to arrive before starting the inspection” provided however that the same DG officers are entitled to take preventative measure to stop any tampering of evidence as well as ensuring that such right of assistance does not delay nor suspend the investigation. Moreover, other than for the purposes of the issue of the warrant as aforesaid, this investigation process is not subject to the Court’s involvement or interference.
III. Court Procedure and Powers
In terms of the new amendments, where the DG is of the opinion that, on the basis of the investigation, an infringement of the Competition Act (or the relevant Articles contained the TFEU) may have occurred, he is to file a sworn application in Court (instead of the prior procedure requesting written statements personally from the relevant parties), asking the Court to determine whether an infringement has occurred and in the affirmative case, to take the appropriate measures including the issuing of penalties and the imposition of cease-and-desist orders on the undertaking in question. This application is to include:
1. The facts in relation to the suspected infringement;
2. A request by the DG for the court to issue an infringement judgement;
3. A request to impose a penalty (whereby the DG may request a specific amount) or any other remedy;
4. Any report containing the findings of the DG in the investigation in question.
Within twenty days of service of the sworn application, the undertaking in question may file a sworn reply in order to rebut the allegations made by the DG, containing all the necessary defences, an exhaustive list of witnesses and documents which will be presented. The amendments also provide for the hearing of evidence in camera in order to ensure the protection of confidential information and business secrets, reflecting similar proceedings and provisions found in recently introduced Trade Secrets Act (Chapter 589 of the Laws of Malta).
A decision of the Court may be appealed on issues of fact or law in the Court of Appeal by the DG or the undertaking. This may be done through an application filed in the registry of the Court of Appeal, within twenty days of the First Court’s judgement. The Court, is to appoint any appeal application for hearing within 6 months of the service to the last party, thus expediting the appeals process.
As is customary, the decision of the Court is be made publicly available, however certain confidential information and trade secrets may be omitted from the published judgement at the request of the parties and subject to the Court’s discretion. While the Court files (known as the process) remains publicly available, a confidential and a non-confidential version of any written observations and documentary evidence submitted before the Court shall be compiled;
Additionally, the existing settlement procedure, which provides for the possibility of a settlement between the DG and the investigated undertaking pending an investigation, must now also be approved by a Court decision upon the joint application of the DG and the undertaking in question. Furthermore, commitments offered by the undertaking to bring a suspected infringement to an end, are now also subject to the approval of the Court through a judgement.
Finally, any interim measures imposed on undertakings under investigation, may now only be imposed by the Court upon the application of the DG. The undertaking has a right to file a reply within 8 days of notification of the application filed by the same DG.
IV. Complainant’s Rights
Should the DG consider that there are insufficient grounds to act upon a complaint relating to a breach of Competition Rules (including by competitors, suppliers and customers) or should he fail to pursue a complaint, the amendments to the Competition Act now allow a complainant to file a sworn application in the same Court contesting the DG’s decision “that there are insufficient grounds for acting on a complaint” within twenty days of the notification of the decision by the DG. It is interesting to note that while the amendments also provide the complainant with the right to contest the DG where he “fails for some other reason to investigate a complaint” the law provides that this application should be filed within “20 days of the notification of the decision”. In this case however, and in the absence of any action, let alone a decision, when do the 20 days start to run for the filing of such application? This remains unclear at law.
Should the Court be satisfied that the DG has no lawful reason for failing to act in this regard, it shall deliver a judgment ordering the DG to commence the investigation. Such decision is also subject to the right of appeal (on points of law or fact) by any party who feels aggrieved by such judgement. These amendments may therefore lead to a situation where two separate court actions are required. The first to cause the DG to investigate and, in the event of apparent breaches of the Competition Act, a second to obtain judicial confirmation of the breaches and the relative imposition of penalties.
V. Revised Penalties
The penalties (previously referred to as administrative fines) have also been amended. The penalty in relation to intentional or negligent infringement has remained that of up to the per cent (10%) per annum of the total turnover of the undertaking in breach. However, penalties in relation to any person/undertaking who during an investigation (a) gives any false or inaccurate information (b) knowingly produces false documentation; or (c) prevents or hinders such situation, have increased to up to €30,000 and may be imposed by the Court.
Additionally, the Court may also impose penalties of up to €50,000 where any person/undertaking fails to submit to an inspection or obstructs the DG; or breaks the seals affixed by officers during an inspection.
Although the relevant amendments aim to resolve the stalemate created by the above-mentioned constitutional cases, the amendments in question have effectively passed on to the Civil Courts jurisdiction to try and hear all cases of alleged infringements of Competition law. This may effectively reinforce the parties’ right to a fair trial but it will also invariably lead to a much lengthier procedure, possible taking a number of years until a finding of infringement and an order for effective redress is given by the Maltese Courts. Laws that have the effect of making access to remedies for breaches of law lengthier and more cumbersome, particularly in the increasingly fast-paced world of business, are not desirable. While there certainly was a constitutional issue to be resolved, other solutions should have been considered particularly in view of the fact that the imposition of fines by authorities is not singular to the Competition Act. Will this be the beginning of the end for regulatory authorities and the imposition of administrative fines?
Authors: Dr Thomas Bugeja & Dr Ryan Dalli