Competition Act 2018 1

MODEL
HOUSE OF COMMONS

Competition Bill
BILL 613.2

BILL
TO

Expand the jurisdiction of the Competition and Markets Authority; to require advance
notification of certain mergers; to create offences related to anti-competitive practices;
to ban interlocking directorates; and for connected purposes.

B E IT ENACTED by the Queen’s most Excellent Majesty, by and with the advice and consent
of the Lords, and Commons, in this present Parliament assembled, and by the authority
of the same, as follows:—

PART 1
ENTERPRISE ACT 2002

Amendment of the 2002 Act

1 Amendment of the Enterprise Act 2002

The Enterprise Act 2002 is amended in accordance with sections 2 to 8.

Mergers and acquisitions

2 CMA merger references: reduction of minimum turnover requirement

In subsection (1)(b) of section 23 (relevant merger situations), for “exceeds £70
million” substitute “exceeds £60 million”.
2 Competition Act 2018

3 CMA merger references: market share requirement thresholds

(1) Section 23 (relevant merger situations) is amended as follows.
(2) In all places where it occurs, for “at least one-quarter of all the goods” substitute “at
least one-fifth of all the goods”.
(3) After subsection (9), insert—
“(10) For the purposes of this section, references to a substantial part of the United
Kingdom are references to any, or a combination of any adjacent two or more,
of the following areas where the aggregate population exceeds 15 million—
(a) a region of England,
(b) a unitary authority area of Wales,
(c) a district of Northern Ireland, or
(d) a local authority area of Scotland.”

4 CMA merger references: removal of discretion in treatment of different forms of

supply
In section 23 (relevant merger situations), omit paragraph (b) of subsection (7).

5 Duty of enterprises to report certain proposed mergers to CMA

After section 34, insert—
“34ZZA Duty of enterprise to report certain anticipated mergers
(1) This section applies where one or more persons carrying on enterprises (“the
transactors”) propose to take one or more actions to, or with a view to, create a
situation of the type mentioned in subsection (2).
(2) The type of situation mentioned in this subsection is a situation which would
be a relevant merger situation by virtue of section 23(1).
(3) For the purposes of subsection (1), “action” does not include any offer or
negotiation.
(4) The transactors must each send notice to the CMA of the anticipated merger.
(5) Notice under subsection (4) must be sent not less than 50 days prior to the date
of the proposed taking of any of the actions referred to in subsection (1).
(6) A body corporate commits an offence if it fails to send notice under subsection
(4) in accordance with this section.
(7) A body corporate guilty of an offence under subsection (6) is liable, on summary
conviction, to a fine not exceeding 10 percent of the gross profit accruing to the
body corporate during its most recent previous accounting reference period.
(8) For the purposes of subsection (7), the “accounting reference period” of a body
corporate is—
(a) where the body corporate is a company, the period determined in
accordance with section 391 of the Companies Act 2006;
(b) otherwise, any like period (such as the financial or fiscal year of the body
corporate).”

Anti-trust and cartels

6 Extension of the cartel offence to bodies corporate

(1) In the following provisions, for “individual” substitute “person”—
(a) section 188(1) (cartel offence),
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(b) section 188A(1) and (3) (circumstances in which cartel offence not committed),
(c) section 188B(1) (defences to commission of cartel offence).
(2) After section 189, insert—
“189A Cartel offence: bodies corporate
(1) Where an offence under section 188 committed by a body corporate is proved—
(a) to have been committed with the consent or connivance of an officer of
the body corporate,
(b) to be attributable to neglect on the part of an officer of the body corporate,
that officer (as well as the body corporate) is guilty of the offence and is liable
to be proceeded against and dealt with accordingly.
(2) In subsection (1), “officer”, in relation to a body corporate, means—
(a) any director, manager, secretary, or other similar officer of the body
corporate, or
(b) any person purporting to act in any such capacity.
(3) In subsection (2), “director”, in relation to a body corporate whose affairs are
managed by its members, means a member of the body corporate.”
(3) Section 190 (cartel offence: penalty and prosecution) is amended as follows.
(4) In subsection (1), for “person” substitute “individual”.
(5) After subsection (1), insert—
“(1A) A body corporate guilty of an offence under section 188 is liable, on summary
conviction, to a fine not less than one-third of the gross profit accruing to it in
the previous accounting reference period.
(1B) A reference in subsection (1A) to an accounting reference period is to be
construed in accordance with section 34ZZA(8).”

7 Defences to the commission of cartel offence

(1) Section 188B (defences to the commission of cartel offence) is amended as follows.
(2) In subsection (1), for “concealed from customers at all times” substitute “concealed
from customers at any time”.
(3) Omit subsection (2) (which provided for a defence that the individual making a cartel
agreement did not intend to conceal it from the CMA at the time of making it).
(4) Omit subsection (3) (which provided for a defence that the individual making a cartel
agreement took reasonable steps to ensure that the nature of the agreements would
be disclosed to counsel).

Minority shareholdings

8 CMA consent to be required for certain share acquisitions

After section 204, insert—
“204A Certain share acquisitions to require CMA consent
(1) Where subsection (2) applies, no person (“P”) is to acquire, directly or
indirectly, an interest in shares in a company (“the relevant company”) without
the consent of the CMA.
(2) This subsection applies where condition A and condition B are met.
(3) Condition A is that—
(a) the percentage in nominal value of shares acquired would equal or exceed
4 Competition Act 2018

20%, or
(b) the percentage in nominal value of shares acquired would equal or exceed
5% and the acquisition of the shares would confer a right specified in
subsection (4).
(4) The rights specified in this subsection are—
(a) such voting rights as would enable P to prevent the passing of a special
resolution (see section 283 of the Companies Act 2006);
(b) a right to appoint one or more directors to the company (other than a right
to appoint a director in a vote open to all persons with voting rights);
(c) a right to access information which, in the opinion of the CMA, would be
commercially sensitive information.
(5) For the purposes of subsection (4), “commercially sensitive information” is any
information with regard to any—
(a) manufacturing process,
(b) trade secret, or
(c) other matter prescribed by the Secretary of State in regulations made by
statutory instrument.
(6) Regulations made under subsection (5)(c) are subject to annulment in
pursuance of a resolution of either House of Parliament.
(7) Condition B is that P carries on an enterprise which operates at a different level
of the same or a substantially similar supply chain as the relevant company.

204B Application for section 204A consent

(1) A person seeking the consent of the CMA under section 204A must submit a
report to the CMA in accordance with this section.
(2) The report must contain—
(a) statements as to the operation and ownership of each party to the
acquisition,
(b) a statement as to the structure of the acquisition,
(c) a statement as to the percentage in nominal value of shares held by each
party to the acquisition prior to the transaction and the holding each party
would have subsequent to the transaction,
(d) a statement as to any rights conferred by shares transferred in the
acquisition, and
(e) such other information as the CMA may direct.

204C Determination of section 204B application

(1) Subsequent to its receipt of an application under subsection 204B, the CMA
must—
(a) give its consent under section 204A, or
(b) refuse consent.
(2) The CMA must make a determination under this section within 4 months of its
receipt of an application under section 204B.
(3) In making a determination, the CMA may require—
(a) a party to the acquisition, or
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(b) a person who the CMA believes holds relevant information on any of the
parties to the acquisition,
to provide the CMA with such information as it may reasonable require to make
a well-informed and evidence-based determination.
(4) The CMA must refuse consent to an application under section 204B if it is of the
opinion that the giving of its consent to the application would, or is likely to,
pose a substantial risk to the competition in any market in the United
Kingdom.”

PART 2
COMPANIES ACT 2006

Amendment of the 2006 Act

9 Amendment of the Companies Act 2006

The Companies Act 2006 is amended in accordance with sections 10 to 12.

Interlocking directorates

10 Prohibition of interlocking directorates

After section 161, insert—
“Appointment: interlocking directorates

161A Appointment as director not to create interlocking directorate

(1) A person may not be appointed as a director of a company if the appointment
of the person would create an interlocking directorate.
(2) For the purposes of this section, an appointment would create an interlocking
directorate if it is an appointment to which any of the following sections
apply—
(a) section 161C (interlocking directorates: direct);
(b) section 161D (interlocking directorates: indirect);
(c) section 161E (interlocking directorates: vertical);
(d) section 161F (interlocking directorates: horizontal).
(3) An appointment made in contravention of this section is void.
(4) Nothing in this section affects any liability of a person under any provision of
the Companies Acts or any other enactment if the person—
(a) purports to act as a director, or
(b) acts as shadow director,
although the person could not, by virtue of this section, be validly appointed as
a director.
(5) This section has effect subject to section 161B.

161B Power to disapply section 161A for certain companies

(1) The Competition and Markets Authority (“the CMA”) may by order, on the
joint application by two or more companies (“the applicants”), designate the
applicants for the purposes of this section.
6 Competition Act 2018

(2) Section 161A does not apply in respect of a company that is designated for the
purposes of this section.
(3) An order under this section must not be made unless the CMA is satisfied that—
(a) the companies operate primarily or entirely in a small market where it
would be impractical for the operation of the applicants for section 161A
to apply to them, and
(b) the making of the order would not, or is not likely to, result in or
contribute to the substantial lessening of competition within any market
or markets in the United Kingdom.
(4) An order under this section is subject to the negative resolution procedure.

161C Interlocking directorates: direct

This section applies to an appointment the result of which is that there would
be two or more companies with a director in common.

161D Interlocking directorates: indirect

This section applies to an appointment where—
(a) there are three companies (A, B, and C) and two directors (P1 and P2);
(b) P1 is a director of A;
(c) P2 is a director of B and C; and
(d) P1 would become a director of C.

161E Interlocking directorates: vertical

This section applies to an appointment where—
(a) there are two companies (A and B);
(b) A and B operate at different levels of the same or a substantially similar
supply chain; and
(c) the result of the appointment is that A and B would have a director in
common.

161F Interlocking directorates: horizontal

This section applies to an appointment where—
(a) there are two companies (A and B);
(b) A and B operate at the same level of the supply chain; and
(c) the result of the appointment is that A and B would have a director in
common.”

11 Prohibition of interlocking directorates: auditors

After section 494, insert—
“494A Interlocking auditors
(1) Sections 161A and 161C to 161F (“the interlockment provisions”) apply to
auditors as they apply to directors.
(2) Section 161B applies to the interlockment provisions as modified by this section
as it would apply to those provisions otherwise.”
Competition Act 2018 7

12 Prohibition of interlocking directorates: executives

After section 1283, insert—
“Interlocking chief executives

1283A Prohibition on interlocking chief executives

(1) Sections 161A and 161C to 161F (“the interlockment provisions”) apply to chief
executives as they apply to directors.
(2) Section 161B applies to the interlockment provisions as modified by this section
as it would apply to those provisions otherwise.
(3) For the purposes of this section, “chief executive” means a person who—
(a) exercises executive functions within the company, and
(b) is responsible, and directly accountable to the directors, for the day to day
management of that company.”

PART 3
MISCELLANEOUS

Transitional relief

13 Transitional relief scheme

(1) The Secretary of State must make a scheme in accordance with this section.
(2) The scheme must disapply the effect of amendments made by this Act—
(a) in respect of a body corporate entered into the scheme, and
(b) until such time as the body corporate is able to comply with the changes in the
law introduced by the amendments made by this Act.
(3) The scheme may include such provision as the Secretary of State considers necessary
for the purposes of the efficient and effective operation of the scheme.
(4) The scheme may make provision creating offences which—
(a) relate to deceptively, dishonestly, maliciously, or unreasonably gaining entry
to the scheme by the misrepresentation or misreporting of a burden,
(b) are triable only summarily, and
(c) are punishable with a fine not exceeding one-third of the gross profit accruing
to the person committing the offence in the previous quarter.
(5) The scheme may require the Competition and Markets Authority to assess, for the
purposes of granting entry to the scheme, bodies corporate of such description as may
be specified in the scheme.
(6) The scheme—
(a) is to be made by statutory instrument, and
(b) must not be made unless a draft of the instrument containing the scheme has
been laid before, and approved by resolution of, each House of Parliament.

General

14 Commencement
(1) This Part comes into force on the day after Royal Assent.
8 Competition Act 2018

(2) The other provisions of this Act come into force at the expiry of the period of 2 years
beginning with Royal Assent.

15 Extent
This Act extends to the whole of the United Kingdom.

16 Short title
This Act may be cited as the Competition Act 2018.