Economists have a large stake in the judicial and competition systems getting the scope and nature of disclosure right, both as a matter of public policy and as a practical matter. Access to information in the form of data, documents and analyses is critical to economists engaging with the substance of competition and regulatory cases. However, the extent and nature of information available to each party to a competition investigation varies widely, and is affected by important practical and legal considerations. In particular, the extent of disclosure is influence by a multiplicity of factors, such as the relevant statute, competition agency practice and the nature of judicial oversight of competition agency decision making.
This paper, available here, considers the extent of disclosure required to ensure a fair process, while taking into account the practical realities of undertaking economic and econometric analyses in competition cases. It does so as follows:
Section II explains why disclosure is fundamental to the application of economics in competition cases.
From an economists’ standpoint, disclosure is necessary for it to understand the economic analyses undertaken by opposing experts (whether in submissions to a court or to a competition agency) and test the robustness of the evidence. The process of testing a theory of harm starts with a consideration of the assumptions under which, according to economic theory, harm to customers could result. As the case proceeds, the theory of harm will be tested against the evidence. In practice, the process of developing and testing a theory of harm usually involves a degree of iteration, as specific theories of harm may need to be adjusted to accord with the facts in a particular case. Ultimately, competition cases ideally will have both a coherent foundation in economic theory and a tight connection to the facts of the specific case.
The needs of economists when acting in a competition case are similar for both competition agencies and investigated parties, and can be found in a number of agency guidelines. Economic evidence presented in competition cases should clearly state the results and conclusions, together with the methodology used, the assumptions made, the justification for the choice of methodology and assumptions, and the robustness of the results to any assumptions made. The evidence should comprehensively describe the analysis, and be amenable to replication. However, this is not the legal standard for disclosure – as a rule, the requirements of disclosure are far less stringent.
Section III considers the law of disclosure in competition proceedings the UK.
For public authorities in the UK, the duty of disclosure arises from a duty to consult which may be set out in statute or arise at common law. As regards mergers and market studies, the CMA only has to consult those parties who the CMA considers likely to be adversely affected by its decision. To this end, the CMA must give a relevant party a reasonable opportunity to inspect the documents in the CMA’s file that relate to the matters referred to in a notice given to that relevant party, except if the documents are internal or confidential. Confidential information may be disclosed in some exceptional circumstances, with the CMA sometimes adopting language that suggests that it must ‘balance’ the need to run a fair process with the duty not to disclose to protect commercially sensitive information. The CMA typically adopts a wider approach to disclosure as regards infringement procedures than for mergers or market investigations.
In all cases, if fairness requires disclosure then information must be disclosed, or else the CMA should not rely on the evidence. In this sense, the courts have decided that the duty properly to consult trumps concerns that disclosure might cause commercial harm. The key question that remains in any given context is what degree of disclosure is required to meet the necessary standard of procedural fairness. Answers to this question have been developed in a number of cases before the English courts. One relevant principle is that fairness requires that parties should be able to make “worthwhile representations” and should be informed of the ‘gist’ of the case against them. In economic matters, this requires the disclosure of information that allows parties to fully check and comment on the reliability of the economic model upon which the authority based its decision. The Competition Appeal Tribunal (CAT) has recognised that, given the technical nature of competition cases, fair disclosure of the ‘gist’ of a case will require a high degree of disclosure and transparency. The “starting point” for examining what level of disclosure is required is that those subject to a competition investigation should be made aware of confidential information, which may nonetheless be modified and derogated from to take account of the reasons why the information in question is confidential.
Section IV elaborates on how disclosure operates in practice.
In competition cases, the CMA will provide access to the set of disclosable documents in its case file, together with a separate schedule of external documents. Disclosable documents in the file are documents that relate to matters contained in the CMA’s Statement of Objections (SO), excluding certain confidential information and CMA internal documents – including documents not referred to in the SO but which may be helpful to the parties’ defence. An original set of all written representations and the transcript from the oral hearing are also placed on the case file, which is provided, for example, through a DVD or through an encrypted hard drive. Although the obligation to disclose is, in principle, to the parties whose interests are adversely affected by the CMA’s proposed decision, in practice disclosure of confidential information is made to their legal and economic advisers rather than to the parties themselves. To do so, the CMA can decide to use confidentiality rings and/or data rooms.
Merger and market investigations are subject to statutory time limits. For example, the CMA’s report on a phase 2 merger case must be completed within 24 weeks, whereas a market investigation must be completed within 18 months. Naturally, the time available for an investigation can affect the amount of time available for disclosure and consultation with interested parties. Nonetheless, the CAT has found on occasion that the period of time in which its legal and economic advisers were allowed access to a disclosure room was unreasonably short. There is no statutory timetable for antitrust investigations, but the CMA typically allows six to eight weeks for parties to inspect copies of disclosable documents.
Section V identifies what disclosure is required for a competition authority or court to operate a genuinely fair process
This section provides some recent examples of the ways in which disclosure helps parties and their advisers understand the case being made against them, and allows them properly to test the robustness of evidence that a competition agency proposes to rely upon. This section include numerous war stories about obtaining disclosure of information to test the CMA’s economic methodology; the adoption of new economic methodologies; and the testing of the robustness of the data and data analysis on the file, including disclosure of information on econometric evidence.
Section VI concludes by making recommendations for the improvement of the CMA’s disclosure procedures.
The author considers that the CMA should increase the opportunities that parties have to input into their analysis, and allow them to inform decision-making at an earlier stage. Recent developments in this direction are particularly welcome in market investigations. However, these developments fail to fully recognise that good economic analysis is almost always developed iteratively; the back-and-forth of consultation improves the end result. A desirable consultation process would involve significantly more direct engagement with the parties’ economists on submissions from confidentiality rings or, if necessary, disclosure rooms. This would also avoid changes to economic analyses in reaction to party input late in the process, which can put due process rights at risk. Another desirable change would be to disclose more documents than what currently occurs, if necessary with changes to the rules governing disclosure of potentially sensitive information by consultants to clients.
This is a somewhat verbose paper – surprisingly, considering it was written by an economist. The paper also has a very clear bias towards making the author’s life as an economic consultant easier. Even taking this into account, I found the paper to be interesting, particularly its description of the role and importance of disclosure, and the very detailed discussions of how a number of UK cases proceeded