The Phone-paid Services Authority and the Competition and Markets Authority consult on approach to penalties and sanctions

Who: Phone-paid Services Authority (PSA); Competition and Markets Authority (CMA)

Where: UK

When: 18 July 2017; 2 August 2017

Law stated as at: September 2017

What happened:

It has been a busy summer for the PSA and CMA who are each reviewing their approach to sanctions and penalties. Feedback from industry, consumer groups and the PSA Code Adjudication Panel prompted the PSA to review the effectiveness of sanctioning as a suitable deterrent to non-compliant providers. Meanwhile, on 2 August 2017, the CMA launched a consultation on proposals to amend its guidance relating to penalties for breaches of competition law.

PSA consultation

On 18 July 2017, following a consultation launched in March this year, the PSA published its final statement on proposals to enhance the effectiveness of sanctions. With some critics arguing that the existing sanctions did not go far enough to deter non-compliant providers, the proposals, which the PSA has decided to adopt, set out a number of changes. The changes are aimed at addressing the use of powers to reduce harm to consumers and providing greater transparency, and include:

  • a revised process for imposing fine sanctions;
  • setting out revenue considerations in adjudication reports;
  • establishing severity levels for Code breaches; and
  • determining severity and initial sanctions for each Code breach and assessing any mitigating and aggravating factors in final sanctioning.

Full details of the final statement can be found here.

CMA consultation

The CMA has recently launched a consultation on changes to its guidance in relation to how penalties will be calculated following breaches of competition law. The CMA has confirmed that these changes are intended to enhance transparency and clarify approach, and are based upon the experience it has gained since issuing the guidance in 2012, as opposed to making wholesale changes to the guidelines.

The CMA’s current guidance sets out a six-stage process through which the level of penalty is to be determined. The proposals set out changes to four of these stages, aimed at ensuring penalties adequately reflect the seriousness of the breach and act as a sufficient deterrent on future conduct. The changes focus on:

  • Step 1 – the starting point for calculating fines;
  • Step 3 – adjustment for aggravating and mitigating factors;
  • Step 4 – adjustment for specific deterrence and proportionality; and
  • Step 6 – application for reduction for leniency and settlement.

The consultation will run until 27 September 2017 and a mark-up of the proposed changes can be found here.

Why this matters:

The changes to be adopted by the PSA, and those being consulted on by the CMA, in the most part, will have limited effect on compliant providers. However, the intentions of such changes are to provide additional clarity and transparency to all businesses. In particular, the CMA’s proposed changes should help businesses better understand the compliance steps they should be taking in order to mitigate their exposure if subject to an investigation.

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