Tech company fined over UK market study questionnaire response

Alan Davis of Pinsent Masons, the law firm behind Out-Law, was commenting after a technology business was fined £20,000 by the UK regulator for failing to provide information the CMA requested from it within its set deadline. It is the first time that the CMA has imposed an administrative penalty of this kind in the context of a market study investigation under the UK's Enterprise Act 2002 (EA02).

The CMA used its powers under section 174 of the Act to serve AppNexus Europe with a notice compelling the company to provide information and documents as part of its market study into online platforms and digital advertising.

The notice was served on 22 August 2019 and AppNexus had until 11 September to respond. However, according to the CMA, AppNexus "failed to produce a response to the notice by the required deadline and has therefore failed to comply with the requirements of this notice". It said it received a partial response to the notice on 7 October and further information seven weeks later. This subsequent response came after US parent company, AT&T, took over responsibility for coordinating the response.

The CMA said the complete information requested was provided within four working days of AT&T getting involved, and it highlighted this as a factor in determining that there was "no reasonable excuse" for the company's failure to comply with its notice. It said "the situation which led to non-compliance with the notice was not caused by an event beyond the control of AppNexus, or the result of a significant and genuinely unforeseeable or unusual event".

AppNexus had made a number of submissions to the CMA in support of its claims that it had a reasonable excuse for non-compliance with the notice. These included that the 250 questions the CMA had asked it to answer required "expert knowledge", and that it has only two lawyers working for it across Europe, the Middle East and Africa. It further pointed to the global nature of its business and stated that this meant a review of its response would "inherently take several phases". The company also said "key stakeholders" were located in the US and that it was responding to similar questionnaires from other authorities.

Davis said the CMA should be more cognisant of the burdens companies can face in cooperating with their market studies.

"The respondent’s size, resources and operations should be considered by the CMA when issuing statutory information and document requests with short response periods, as these factors impact a business’s ability to respond," Davis said. "Some smaller tech companies might in practice operate largely independently of their large corporate parents and may struggle when confronted with complex questionnaires from competition authorities, and sometimes multiple agencies."

The CMA is bound by statutory deadlines for concluding market studies. It said that AppNexus had displayed a "negligent attitude" towards compliance with its deadlines. The company's delay had a knock-on impact on the CMA's market study, the regulator said.

"AppNexus’ delay led to the CMA being denied the timely opportunity to review and analyse relevant materials which, by its nature, had an adverse impact on the effective running of the market study and the CMA’s ability to consult on a proposed market investigation reference decision," the CMA said.

"The CMA requires a wide range of information to discharge its functions. The availability and receipt of complete and accurate information is crucial to enable it to make evidence-based decisions and, more generally, for the quality and effectiveness of its work. Requests for information and documents are therefore a key tool for the CMA to collect the information it needs to carry out the market study. The CMA therefore considers it is of utmost importance to its ability to conduct effective investigations that parties have due regard to the requirements imposed on them by, among other things, section 174 EA02," it said.

"The imposition of an administrative penalty under section 174A EA02 is critical to achieve deterrence, to impress on both AppNexus in this specific case and more widely to those who may be subject to investigatory requirements in future, the seriousness of a failure to comply with a section 174 EA02 notice without a reasonable excuse," the regulator said.

The £20,000 fine is below the statutory maximum of £30,000 for these type of breaches. While the CMA considered the compliance failure was serious, it factored in that AppNexus had not tried to conceal its compliance failure or to mislead it.

The CMA published an interim report in its online platforms and digital advertising market study late last year. The CMA said in that report that while it intends to outline "a comprehensive suite of recommendations to government" in relation to reforms in the market, it is proposing not to refer the market for a broader investigation at this stage. Businesses have until 12 February to respond to its consultation on that proposal. The CMA's final report from the study is due to be published by 2 July.