The Competition Act 1998 (Determination of Turnover for Penalties) Regulations 2024
Introduction:
The Competition Act 1998 (Determination of Turnover for Penalties) Regulations 2024 were laid before Parliament on November 29, 2024. These regulations aim to amend the Competition Act 1998 (CA98) to provide a clearer and more consistent method for determining the turnover of undertakings for the purpose of calculating financial penalties.
Background:
The CA98 empowers the Competition and Markets Authority (CMA) to impose financial penalties on undertakings (businesses) that breach competition law. The amount of the penalty is calculated based on the undertaking’s turnover. However, the current turnover calculation method under CA98 has been criticized for being complex and ambiguous.
Key Changes:
The new regulations introduce the following key changes to the turnover calculation method:
- Use of consolidated group turnover: The turnover will now be based on the consolidated group turnover of the undertaking, rather than the turnover of the individual legal entity that committed the breach.
- Inclusion of certain associated undertakings: The turnover will also include the turnover of certain associated undertakings, such as subsidiaries and joint ventures.
- Exclusion of certain income: The turnover will exclude certain income, such as income from financial transactions and income from non-core activities.
Purpose and Benefits:
The purpose of these regulations is to provide greater clarity and consistency in the determination of turnover for penalties. This will enhance the effectiveness of the enforcement of competition law and ensure that financial penalties are proportionate and reflect the economic impact of the breach.
Implementation:
The regulations will come into force on January 1, 2025. The CMA will provide guidance to businesses on how to calculate their turnover under the new regulations.
Conclusion:
The Competition Act 1998 (Determination of Turnover for Penalties) Regulations 2024 represent a significant step towards improving the clarity and consistency of the turnover calculation method used for calculating financial penalties under competition law. These regulations will ensure that penalties are proportionate and reflect the economic impact of the breach, thereby enhancing the effectiveness of competition law enforcement.
The Competition Act 1998 (Determination of Turnover for Penalties) Regulations 2024
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