On 20 March 2019, the CMA imposed a penalty of £25,000 on Fender Musical Instruments Europe Limited ("Fender") for failing, without reasonable excuse, to comply with a requirement to produce relevant documents during an unannounced inspection, relating to an investigation into the suspected breach of Chapter I of the Competition Act 1998 in the musical instruments and music-making equipment sector. The details are set out in the CMA's penalty notice, published on 26 March 2019 ("Penalty Notice").
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- This decision demonstrates the CMA's willingness to impose penalties for failing to comply with the procedural aspects of its enforcement, and emphasises the importance of ensuring compliance throughout organisations with all aspects of competition law at all steps of an investigation.
- Even in today's world of digitised communications, those subject to a raid must be recognise that hard copy files, papers and notebooks might be relevant, including personal notebooks, and therefore need to be handed over.
- Because the failures of employees and officers are attributable to the company, employers should ensure that their staff are fully aware of the obligations to cooperate imposed on them by competition law.
- The CMA did not take into account Fender's recent steps to improve compliance in coming to an alternative conclusion that no deterrence was required. See our previous article for how different jurisdictions approach compliance programmes when determining the level of any fine.
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Further details
On 17 April 2018, the CMA launched an investigation into Fender and other undertakings, and carried out an unannounced inspection at Fender's premises between 17 and 19 April 2018 (see here for the CMA's case page). The Penalty Notice states that the investigating officer served a written notice on Fender setting out the documents that were required to be produced, and reminded a senior officer within Fender that this included "any hard copy documents including notebooks belonging to Fender Europe staff".
According to the Penalty Notice, the Fender senior officer provided one notebook to the CMA, but told the investigating officer that previous notebooks "only contained Human Resources notes etc.", and had been disposed of. However, on 11 May 2018, Fender's advisers notified the CMA that the senior officer in fact had 10 other notebooks that had not been provided to the CMA.
The CMA therefore found that Fender had, without reasonable excuse, failed to comply with the requirement to produce relevant documents. The CMA did not accept Fender's submissions that the senior officer was a "rogue employee", and the Penalty Notice states that "employees and officers form part of the same undertaking as their corporate employer and therefore an employee's actions are attributable to the undertaking".
The CMA considers that the penalty was appropriate given the breach was "flagrant and was committed intentionally", with the Penalty Notice stating that the conduct "implies that [the officer] was aware that the documents were relevant to the CMA's investigation (as indeed they were) and potentially probative of an infringement".
In setting the level of the penalty, the CMA also took into account the potential for significant harm to the CMA's investigation and the involvement of a senior officer. However, the CMA considered that the maximum possible penalty level of £30,000 was not appropriate because Fender had taken steps to remedy the breach (i.e. by investigating the issue and providing the notebooks to the CMA three weeks after the inspection) and the breach had limited adverse effects on the investigation.
The CMA also considered that this penalty was necessary to achieve deterrence, and did not take into account Fender's recent steps to improve compliance in coming to an alternative conclusion that no deterrence was required.
Concluding remarks
This decision demonstrates the CMA's willingness to impose penalties for failing to comply with the procedural aspects of its enforcement, and emphasises the importance of ensuring compliance throughout organisations with all aspects of competition law at all steps of an investigation.
In addition, it is noted that the CMA's website emphasises that "the competition law investigation is ongoing and no assumption should be made that Fender Europe has been involved in anti-competitive behaviour". However, in the context of an ongoing investigation, companies should seek to avoid both the procedural penalty, and the associated publication of related details.
With thanks to Danica Barley of Ashurst for her contribution
