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Subsidy Control Act 2022

Contents

Part 4: CMA: Referrals and functions

Chapter 1: Functions on referrals of subsidies and schemes

Section 52: Mandatory referral to CMA

  1. This section deals with the making of mandatory pre-award referrals to the CMA. Public authorities must request a report from the CMA before giving:
    1. a subsidy, or subsidy scheme, of particular interest; or
    2. a subsidy or scheme which the Secretary of State has directed the public authority to refer to the CMA before it is given or made.
  2. The public authority’s request to the CMA (a ‘mandatory referral request’) must contain certain information including an assessment by the public authority as to whether the subsidy or scheme would be consistent with the requirements of Chapters 1 and 2 of Part 2 of the Act, and the reasons for that conclusion, together with any supporting evidence. The Secretary of State may make further provision by regulations as to the content and form of the request.

Section 53: CMA reporting period for mandatory referral

  1. This section makes provision as to the period during which the CMA must report on a subsidy or scheme which is subject to a mandatory referral by a public authority. The CMA must generally publish its report on the subsidy or scheme before the end of the period of 30 working days beginning with the day on which the CMA notifies the public authority that its mandatory referral request contains the required information. If the public authority withdraws its mandatory referral request then the CMA will cease to have a duty to report.
  2. The reporting period may be extended by agreement between the CMA and the public authority, or by the Secretary of State further to a request by the CMA (with the request having the effect of pausing the reporting period until the Secretary of State determines whether to grant the extension). The Secretary of State may also make regulations which amend the length of the reporting period and the period prior to that during which the CMA must determine whether the mandatory referral request contains the required information.

Section 54: Cooling off period following mandatory referral

  1. This section makes provision as to the ‘cooling-off’ period that must elapse before a public authority may give a subsidy or make a scheme on which the CMA has published a report before the end of the reporting period. This ensures that the public authority must wait for a short period during which it may wish to reflect on the CMA’s findings before deciding whether to give the subsidy or make the subsidy scheme.
  2. The Secretary of State may extend the cooling-off period if the Secretary of State considers that the report has identified serious deficiencies in the public authority’s assessment as to whether the subsidy or scheme would comply with the subsidy control requirements in Chapters 1 and 2 of Part 2. The cooling-off period may not be extended by more than 30 working days.

Section 55: Call-in direction

  1. This section gives the Secretary of State a reserve power to direct a public authority to request a report from the CMA in relation to a proposed subsidy or subsidy scheme. A direction may be made in relation to a subsidy or scheme of interest (see section 11), or subsidy or scheme that the Secretary of State considers to be at risk of failing to comply with the requirements in Chapters 1 and 2 of Part 2, or of having negative effects on competition and investment within the United Kingdom.

Section 56: Voluntary referral to CMA

  1. This section enables public authorities to request a report from the CMA on a subsidy or scheme of interest (a ‘voluntary referral request’). The request must include the same information as is required in relation to a mandatory referral request. The Secretary of State may likewise make provision by regulations as to the content and form of the request.

Section 57: CMA reporting period for voluntary referral

  1. This section makes provision as to the period within which the CMA must report on a subsidy or scheme of interest in cases where it decides to prepare a report further to a voluntary referral request. The CMA must publish its report before the end of the period of 30 working days starting from when the CMA notifies the public authority that it is willing to produce a report in response to the public authority’s voluntary referral request (which it must do before the end of the period of five working days beginning with when it receives the request). It is for the CMA to decide at its discretion whether to produce a report further to a voluntary referral request. If the CMA decides to produce a report, it is not obliged to publish it if the public authority withdraws its request, or gives or makes the proposed subsidy or scheme before the CMA has reported.
  2. The CMA and public authority may agree to a different reporting period, or to extend the reporting period. The Secretary of State may also make regulations which amend the reporting period, and the period within which the CMA must determine whether it will prepare a report in response to a request.

Section 58: Call-in direction following voluntary referral

  1. This section makes provision as to the effect of a call-in direction made by the Secretary of State in respect of a subsidy or scheme of interest that a public authority has already voluntarily referred to the CMA.

Section 59: CMA report following mandatory or voluntary referral

  1. This section makes provision as to the content of the report which is to be produced by the CMA further to a mandatory or voluntary referral. The CMA must contain an evaluation of the public authority’s assessment as to whether it considers the subsidy or scheme would be consistent with the requirements of Chapters 1 and 2 of Part 2. The report may also include advice from the CMA about how that assessment might be improved, and how the proposed subsidy or scheme might be modified with a view to complying with the relevant subsidy control requirements. The Secretary of State may by regulations make provision as to the content and form of the report.

Section 60: Post-award referrals

  1. This section makes provision as to the referral by the Secretary of State of subsidies or schemes after they have been given or made (a ‘post-award referral’). A post-award referral may be made to the CMA at any time before the end of the period of 20 working days beginning with the day on which the subsidy or scheme was published on the database (or if information about the subsidy or scheme does not need to be published on the database, the date on which the subsidy or scheme was given or made).
  2. The Secretary of State must at the same time as making a referral direct that the public authority provides certain information including any assessment undertaken by the public authority, before the subsidy or scheme was given or made, as to whether the subsidy or scheme would comply with the requirements in Chapters 1 and 2 of Part 2 (or in a case where the assessment is not provided, the reasons for that) (a ‘post-award referral direction’). The public authority must provide the relevant information before the end of the period of 20 working days beginning with the day on which the post-award referral direction is given.
  3. The Secretary of State may by regulations amend the periods mentioned above, and the form in which the relevant information must be provided by the public authority further to a post-award referral direction.

Section 61: CMA reporting period for post-award referrals

  1. The CMA must publish a report on the subsidy or scheme before the end of the period of 30 working days beginning with the earlier of the day on which the required information is provided by the public authority to the CMA, or the day after the deadline expires for providing that information.
  2. The reporting period may be extended by agreement between the CMA and public authority, or the CMA may in exceptional circumstances request an extension from the Secretary of State (with the request having the effect of pausing the reporting period until the Secretary of State determines whether to grant the extension). The Secretary of State may also make regulations that amend the length of the reporting period.

Section 62: CMA report following post-award referral

  1. This section makes provision as to the content of the report which must be published by the CMA following a post-award referral (the ‘post-award referral report’). The CMA must evaluate any assessment which the public authority has provided as to whether the subsidy or scheme would comply with the subsidy control principles, prohibitions and requirements. If an assessment was not provided then that fact must be stated in the report along with any reasons provided by the public authority as to why an assessment was not undertaken. The CMA may, if the subsidy or scheme is ongoing, provide advice about how the subsidy or scheme might be modified with a view to ensuring compliance with the principles, prohibitions and requirements. The Secretary of State may make further provision by regulations as to the content and form of the post-award referral report.

Section 63: Referrals in relation to subsidy schemes

  1. This section excludes from Chapter 1 of Part 4 subsidies which are given under a subsidy scheme. It is instead the scheme which would be subject to referral to the CMA.

Section 64: Other exemptions

  1. This section provides for the exemption of certain subsidies and subsidy schemes from some or all of the requirements of Chapter 1 of Part 4. Subsections (1) and (2) exempt from the requirements of Chapter 1 of Part 4 various subsidies or schemes where either the subsidy control principles, prohibitions and conditions do not apply, or it would otherwise be inappropriate for them to apply.
  2. Subsection (3) confers a reserve power on the Secretary of State to exempt subsidies or schemes from the mandatory referral requirements of Chapter 1 of Part 4 where there are considered to be urgent and exceptional circumstances which mean that it is in the public interest that the subsidy or scheme can be given without delay. In the event that the Secretary of State exempts a subsidy or scheme for these purposes, the subsidy or scheme would still need to meet the subsidy control requirements under Part 2.

Chapter 2: General functions

Section 65: Monitoring and reporting on subsidy control

  1. This section requires the CMA to undertake a periodic review of the effectiveness of the operation of this Act, and its impact on competition and investment within the UK. A report is required to be published by the CMA within the first three years of the implementation of the regime, and a second report three years after its first report. After the first two reports, the CMA is required to prepare a report each subsequent period of five years. The Secretary of State may also direct that the CMA prepare a report in respect of a specified period, provided that the first two reports in respect of the first two relevant periods under subsection (3) have been prepared. The CMA must publish its reports and arrange for copies to be laid before each House of Parliament.

Section 66: CMA annual report

  1. This section requires that the CMA’s annual report include certain information as to the number and types of subsidies or schemes in respect of which it has prepared a report under Chapter 1 of Part 4.

Section 67: Information-gathering powers

  1. This section applies sections 41 to 43 of the United Kingdom Internal Market Act 2020 for the purpose of assisting the CMA in carrying out any of its functions (monitoring and reporting on subsidy control). It confers a power on the Secretary of State to make regulations to make such further modifications to section 41 to 43 as are considered necessary for these purposes, with the exception of modifying the amounts in Section 43(6).
  2. Section 41 to 43 of the United Kingdom Internal Market Act confer information-gathering powers on the CMA for the purposes mentioned in section 41(1) of that Act and deal with the enforcement of those powers. As provided in Section 41(2) and (3), the CMA will be able to give an information notice or require the production of a document by an individual, business or public authority. Section 42 establishes what action the CMA is able to take in response to non-compliance with the information requests described in the previous section.
  3. Under Section 43 of the United Kingdom Internal Market Act, subsections (4) and (5) set out the conditions where financial penalties may not be imposed because more than 4 weeks have expired since the CMA exercised its relevant functions. This section modifies subsection (4) to make provision as to when the CMA is to be treated as having exercised its functions. Section 42(6) requires the CMA to publish its policy approach in relation to subsequent action should it decide that a request for information has not been adequately fulfilled.
  4. If the CMA decides that a person has not fulfilled the request or has obstructed the production of documents, it is able to impose a financial penalty as described under Section 42(1) of the United Kingdom Internal Market Act. Section 43 sets out how the CMA will decide on appropriate financial penalties in cases of non-compliance with a notice. The CMA will be able to choose between a range of possible types of penalties and fix appropriate amounts having regard to their statement of policy on penalties and the facts of the case.
  5. Sections 43(2) to (4) of the United Kingdom Internal Market Act state that the penalty can be a single, fixed amount, a daily rate or both. In any of these cases, the Secretary of State must specify maximum amounts through secondary legislation not exceeding £30,000 for a fixed amount and £15,000 for the daily rate, as stated in subsection (6). Those amounts cannot be modified by regulations made under this section.

Chapter 3: Subsidy Advice Unit

Section 68: Subsidy Advice Unit

  1. The section requires the CMA to establish a new committee of its Board which is to be referred to as the Subsidy Advice Unit. The CMA is given the power to delegate its functions under or by virtue of this Act to the Unit, which must consist only of persons who are members of the CMA or its staff.

Section 69: References to subsidy control groups

  1. This section enables the Subsidy Advice Unit to make a reference to the CMA Chair for the constitution of a CMA panel group under Schedule 4 to the Enterprise and Regulatory Reform Act 2013 (ERRA 2013). A CMA group must consist of at least three members of the CMA Panel (paragraph 38 of Schedule 4 ERRA 2013). The CMA may refer its subsidy control functions to that group. A reference must specify the subsidy control functions being referred, and (where relevant) the subsidy or scheme in respect of which the functions are to be carried out.

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