Consultation outcome

Office for the Internal Market: consultation on setting the maximum level of penalties for non-compliance with requests for information

Updated 21 September 2021

Introduction

The UK Internal Market Act 2020 (“The Act”) entered into force on 11pm, 31 December 2020. The measures in the Act are designed to create a coherent approach to market access and support for the UK internal market, to limit barriers and support trade between all parts of the United Kingdom.

The Act establishes two principles (the Market Access Principles) that apply to goods and services, ensuring the shared UK internal market continues to operate effectively:

• the principle of mutual recognition (MR) ensures regulations from one part of the UK are recognised across all other parts of the UK.
• the principle of non-discrimination (ND) supports companies trading in the UK, regardless of where in the UK they are based.

The Act also establishes the Office for the Internal Market (OIM) within the Competition and Markets Authority (CMA). For the purposes of this consultation OIM is used to refer to the CMA undertakings its internal market functions. The OIM will be responsible for carrying out a set of independent advisory, monitoring, and reporting functions - providing technical advice to all four administrations and their legislatures - to support the development and effective operation of the UK internal market on an ongoing basis.

The OIM has the power to issue a written notice requiring a person to provide information or documents to assist in carrying out its reporting, monitoring and advisory functions and to impose penalties where such a notice is not complied with.

The Act requires the publication of a Statement of Policy setting out the OIM’s approach to enforcing these information-gathering powers including what factors the OIM will use to decide the type and amount of any financial penalty imposed. The OIM must have regard to this Statement when reaching decisions about what action to take for failure to comply with an information notice.

The CMA is currently consulting on this Statement of Policy. In addition, the CMA is currently consulting on how the OIM carries out its wider functions. Both consultations are available on the CMA’s website.

To support the exercise of the OIM’s information gathering powers this consultation seeks views on:

• the maximum penalty for the intentional obstruction or delay of any person in the exercise of the power at section 41(7) - the copying of documents produced in accordance with an information notice. Such a penalty must be a fixed amount.
• the maximum level of penalty the OIM could administer for non-compliance with an information notice. The penalty could be a fixed amount, a daily rate or both.

Further legislation setting the maximum penalty is required before any enforcement action can be taken by the OIM. Draft legislation has been provided for information alongside this consultation.

The Government is committed to ensuring that the implementation of the OIM is informed by a robust evidence base. The consultation is open to anyone with an interest and we would welcome views from a wide range of stakeholders.

Responses to this consultation are requested by 11:59 on 11 August.

1. General information

1.1 Why we are consulting

The Government is seeking views on:

• The maximum penalty for the intentional obstruction or delay of any person in the exercise of the power at section 41(7) of the Act – the copying of documents produced in accordance with an information notice. Such a penalty must be a fixed amount.
• The maximum level of penalty the OIM can administer for non-compliance with a request for information. The penalty could be a single fixed amount, a daily rate or both.

The responses received from this consultation will help inform the Government’s approach to setting the maximum level of penalties. Following the consultation, the Government expects to introduce secondary legislation under section 43 of the Act to specify the maximum amounts of penalties the OIM can impose. This legislation will allow the OIM to levy penalties for non-compliance with information requests.

Consultation details

Issued: 16 June 2021
Respond by: 11 August 2021
Enquiries to: UKIMConsultation@beis.gov.uk

Audiences:

The consultation is open to everyone with an interest in this area. In particular, we are keen to hear from:

• businesses
• business representative organisations
• non-governmental organisations
• public and local authorities
• academics
• consumer groups
• trade unions

Territorial extent:

The Office for the Internal Market is responsible for monitoring the operation of the UK internal market – this consultation is relevant to individuals and organisations throughout the UK.

1.2 How to respond

The simplest way to respond to this consultation is through our online questionnaire using the Consultation Hub online form. We strongly encourage submitting information online as this is the Government’s preferred method of receiving responses to support timely and efficient analysis. Alternatively, responses via email or a Microsoft Word document via email will also be accepted. If responding via email or a Microsoft Word document, please indicate which question your answer relates to.

When responding, please state whether you are responding as an individual or representing the views of an organisation. Your response will be most useful if it is framed in direct response to the questions posed, though further comments and relevant evidence are also welcome.

Respond online at: beisgovuk.citizenspace.com/trade/ukim-penalties

Or email to: UKIMConsultation@beis.gov.uk

1.3 Confidentiality and data protection

Information you provide in response to this consultation, including personal information, may be disclosed in accordance with UK legislation (the Freedom of Information Act 2000, the Data Protection Act 2018 and the Environmental Information Regulations 2004). A summary of responses, including a list of names of organisations, but not personal names or contact details, may also be published on GOV.UK and shared with the devolved administrations.

If you want the information that you provide to be treated as confidential please tell us, but be aware that we cannot guarantee confidentiality in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not be regarded by us as a confidentiality request.

We will process your personal data in accordance with all applicable data protection laws: see our privacy policy.

1.4 Quality assurance

This consultation has been carried out in accordance with the government’s consultation principles.

If you have any complaints about the way this consultation has been conducted, please email: beis.bru@beis.gov.uk.

2. Background

2.1 Legal framework

This section summarises the provisions that are most relevant to the issuing of penalties under the UK Internal Market Act.

Section 41 - Information-gathering powers

Under section 41 of the Act, the OIM has the power to issue a written notice requiring a person to provide information or documents to assist in carrying out its functions of reporting, monitoring, and advising by requiring them to produce any document in their possession or any person who carries on a business to provide an estimate, forecast, returns or other information as specified in the notice. The information notice must make clear which precise function of the CMA the information is relevant for as well as the legal and financial consequences of non-compliance.

Section 42 - Enforcement

Section 42 establishes what action the OIM is able to take in response to non-compliance with the information request. It gives the OIM the power to impose penalties in accordance with section 43 of the Act where it considers that a person has:

• without reasonable excuse, failed to comply with any requirement of a section 41 notice;
• intentionally obstructed or delayed any person in the exercise of the power under section 41(7) (copying documents produced in accordance with an information notice)

The CMA is consulting on a Statement of Policy setting up the OIM’s approach to enforcement separately. This includes the factors the OIM will use to determine the nature and amount of any financial penalty imposed. The OIM will be able to determine whether the information request has been complied with, but it must have due regard to its statement of enforcement policy when deciding whether to impose a financial penalty. Following consultation, its policy approach will be published on GOV.UK.

Section 43 - Penalties

The OIM will be able to choose between a range of possible types of penalties and fix appropriate amounts having regard to the Statement of Policy, the facts of the case and the maximum statutory penalty.

The penalty can be a fixed (single) amount, a daily rate or both. Penalties cannot be issued until the maximum amounts have been specified in secondary legislation by the Secretary of State for Business, Energy and Industrial Strategy. The Act requires that the maximum amounts not exceed:

• £30,000 for a fixed amount (for either a penalty for a breach of a requirement of a notice under section 41 of the Act, or for intentionally obstructing or delaying a person copying documents provided in accordance with an information notice (section 41(7) of the Act))
• £15,000 for the daily rate
• a combination of a fixed amount (£30,000) and a daily rate amount (£15,000)

Sections 112 to 115 of the Enterprise Act 2002 set out the procedural requirements and provide for appeals to the Competition Appeal Tribunal should a person decide to appeal a penalty decision made by the CMA.

2.2 Setting the maximum penalty

Views are now sought on the maximum penalty that OIM can impose for non-compliance with an OIM information notice and for the intentional obstruction or delay of any person in the exercise of the power under section 41(7) of the Act (copying documents produced in compliance with an OIM information notice). At present maximum rates proposed under the UK Internal Market Act are as follows:

• £30,000 for a fixed amount
• £15,000 for a daily rate
• £30,000 and £15,000 for a fixed amount and daily rate together

These are also the current maximum penalties set out for equivalent functions exercised by the Competition and Markets Authority (CMA)

The Government considers that there is a strong rationale for maintaining these amounts to provide the OIM with sufficient flexibility to determine the appropriate penalty taking into account its statement of policy and the facts of the case.

The provision of timely, complete, and accurate information will be critical to the OIM’s effectiveness and ability to fulfil its functions. If information is delayed, incomplete, or unreliable, this will impact on the quality of the OIM’s advice and reports and the decisions based on these outputs; with potential implications for the smooth operation of the UK internal market.

It is expected that Section 41 notices are most likely to be used where the OIM considers it necessary to obtain information that is essential for its advice and/or reports, and that could not be obtained in a timely manner through other means. For example, the OIM may seek evidence from specific businesses to analyse the likely or actual market impact of regulatory divergence where this information is not readily available from elsewhere. A maximum penalty that is set too low is unlikely to provide a sufficiently strong incentive to ensure high levels of compliance with information requests. We expect strong financial deterrents to be effective in ensuring compliance in the vast majority of cases.

The CMA is consulting separately on the exercise of OIM’s enforcement powers. This includes guidance on the procedure and actions the OIM is able to take in response to non-compliance - including the factors that it will have regard to before making a decision on whether or not to impose a financial penalty.

2.3 Information sought in this consultation

The Department of Business, Energy and Industrial Strategy is seeking views on:

• Whether the maximum penalty should be set at £30,000 for the intentional obstruction or delay of any person in the exercise of the power at section 41(7) of the Act – the copying of documents produced in accordance with an information notice. Such a penalty must be a fixed amount.
• Whether the maximum penalty that the OIM can impose for non-compliance with an OIM information notice should be £30,000 for a fixed rate and £15,000 for a daily rate. The penalty can be a fixed amount, a daily rate or both.

3. Consultation questions

3.1 About you

1. What is your name?

2. What is your email address?

• If your response is submitted on the Consultation Hub (preferred format), you will automatically receive an acknowledgement email when you submit your response. If you submit your response to the UKIMConsultation@beis.gov.uk email address, we aim to acknowledge your email in a maximum of 5 working days.

3. If relevant, what is the name of your organisation?

4. Please state whether you are content for your responses to be published.

• Yes
• Yes, but without identifying personal information.
• No, I do not want my response to be published.

5. Would you like to be contacted when the consultation response is published?

• Yes
• No

6. Please answer the relevant question below:

(a) If representing an organisation please state the nation(s) in which your organisation primarily operates:

• England
• Northern Ireland
• Scotland
• Wales
• A combination of the above (please state)
• None of the above (please state your interest)

(b) If representing yourself please state the nation(s) in which you are a resident of and/or have an interest in for this consultation:

• England
• Northern Ireland
• Scotland
• Wales
• A combination of the above (please state)
• None of the above (please state your interest)

7. Please choose the category you consider yourself to be a part of:

• An enforcement/regulatory or other public body
• A business representative organisation
• A business which operates in the UK
• Non-Governmental Organisation (NGO)
• An academic; educational institution or think tank
• Consumer group
• A trade union
• An individual responding on your own behalf
• Other (please state your interest in the textbox provided after the next question)

8. Please summarise your organisation’s purpose, focus, or main area of business. If you are not part of an organisation, or answered ‘other’ above, please state your interest in this consultation.

9. If relevant, please describe the size of your organisation or organisation you are responding on behalf of, in terms of number of employees (you may provide supporting comments to elaborate if appropriate):

• 1-9 employees
• 10-49 employees
• 50-249 employees
• 250 or more employees
• Prefer not to say
• Don’t know

10. If relevant, please provide approximate turnover of your organisation or organisation you are responding on behalf of, in the last 12 months - estimates are fine (you may provide supporting comments to elaborate if appropriate):

• Less than £0.5 million
• £0.5 million - £25 million
• Greater than £25 million
• Prefer not to say
• Don’t know

3.2 Views on Office for the Internal Market maximum penalties

We have published a copy of the draft Statutory Instrument alongside this consultation for information.

11. Do you agree that a £30,000 penalty should be the maximum fixed amount for non-compliance with an OIM information notice? If not, please explain why.

• Yes
• No
• Don’t know

Please explain your answer.

12. Do you agree that a £30,000 penalty should be the maximum fixed amount for the intentional obstruction or delay of any person copying documents produced in accordance with an OIM information notice (s41(7))? If not, please explain why.

• Yes
• No
• Don’t know

Please explain your answer.

13. Do you agree that a £15,000 penalty should be the maximum daily rate for non-compliance with an OIM information notice? If not, please explain why.

• Yes
• No
• Don’t know

Please explain your answer.

14. Do you agree that in the case of penalties calculated as a combination of both a fixed amount and a daily rate, the maximum fixed amount should be £30,000 and the maximum daily rate should be £15,000? If not, please explain why.

• Yes
• No
• Don’t know

Please explain your answer.

15. Do you have any other comments relating to the proposed imposition of penalties for non-compliance with a request for information by the Office for the Internal Market?

4. Next steps

The Government will carefully consider the responses received before making a final decision on the maximum penalty rates. The government aims to respond within 12 weeks of the close of this consultation.

Annex A - Glossary

Competition and Markets Authority (CMA)

The CMA was established in 2013 by the Enterprise and Regulatory Reform Act (“ERRA”) as a non-Ministerial department which performs its functions on behalf of the Crown. Competition law functions were transferred to the CMA on 1 April 2014. Under section 25(3) of ERRA the CMA has a statutory duty to seek to promote competition, both within and outside the UK, for the benefit of consumers.

Devolved administrations

A collective term for the executive bodies in Scotland, Wales, and Northern Ireland – the Scottish Government, the Welsh Government, and the Northern Ireland Executive.

Office for the Internal Market (OIM)

The Office for the Internal Market will oversee the operation of the UK internal market, providing monitoring, technical advice & reporting. It will sit within the Competition & Markets Authority (CMA). For the purposes of this consultation OIM is used to refer to the CMA undertaking its internal market functions.

Maximum daily rate

The maximum amount of financial penalty that OIM can impose which is calculated by reference to a daily rate. The UK Internal Market Act 2020 sets out that when the Secretary of State makes regulations specifying the maximum penalties rates, the daily rate cannot exceed £15,000.

Maximum fixed amount

The maximum single (or ‘fixed’) amount of financial penalty that OIM can impose. The UK Internal Market Act 2020 provides that any single or ‘fixed’ penalty set by the Secretary of State cannot exceed £30,000.

UK Internal Market

The movement of goods and services between the four parts of the United Kingdom – England, Scotland, Wales, and Northern Ireland.

UK Internal Market Act 2020

The United Kingdom Internal Market Act 2020 came into force on 31 December 2020. The Act introduced the market access principles of mutual recognition and non-discrimination to limit barriers and support trade between all parts of the United Kingdom.