The principle that the punishment must fit the crime has long since moved on from the notion that all miscreants must suffer the same punishment for the same offence. In 2010, a Swiss motorist was fined £180,000 for driving at 85mph in a 50mph zone in a village near St. Gallen, Switzerland. Why was the fine so large? Partly because he was a repeat offender, but also because he was loaded, as he made abundantly obvious by driving a red Ferrari Testarossa. There would have been no point giving him a small fine which he'd barely notice. As a flash so-and-so, natural justice demanded he face a bigger fine than another, notional motorist in a Fiat Panda. He needed to be hit with a big fine. Still, it could have been worse for our Flash Heinrich; he could have been sent on one of those interminable speed awareness courses. If you are ever given the choice between attending one of those courses or 3-points on your licence, take the points….. 

And this concept of proportionality has now been baked into the Digital Markets, Competition and Consumers Act 2024, which received Royal Assent on 24 May 2024. The Act requires the Competition and Markets Authority (CMA), the courts and other enforcers to estimate or calculate a business’s turnover. This is to assess if a business should be designated as having ‘strategic market status’ (SMS), or to decide the statutory maximum for penalties that organisations or individuals may have to pay if they do not comply with the Act.

These penalties relate to the Act’s provisions relating to digital markets, and to the enforcement of competition and consumer law.

The introduction of turnover based penalties aims to allow penalties proportionate to the size of the business involved, with the aim of providing a more effective deterrent for businesses not complying with investigative measures or breaching the remedies, conduct requirements or other measures imposed by regulators.

In addition to the turnover aspects, the consumer protection regime and the amendments made by the Act to the Enterprise Act 2002 require an assessment to be made about whether a person controls an enterprise. 

The Department for Business and Trade is therefore consulting on the content of draft regulations setting out:

• how turnover should be estimated or calculated; and
• the circumstances in which a person is considered to have control over an enterprise.

Its objectives are:

• to ensure that the relevant decision maker’s estimation or calculation of turnover is fit for purpose and transparent;
• to maintain consistency with existing statutory frameworks for the calculation of turnover; and
• to ensure consistency with accounting principles and practices.

The substantive approach taken in each set of regulations is that the turnover of an undertaking, group or enterprise is the sum of all amounts it derives from the provision of goods and services (broadly speaking), less any sales rebates, value added tax, and other taxes which are directly related to turnover.

In addition, the government intends that that any person or entity (natural or legal) who may exercise control through legal right or through an ability to exert influence over the constitution, operation and management of the person that has committed the infringement should come within the scope of the consumer law regime. 

An enterprise is to be treated as controlled by a person where it is carried on by that person, or where they have a controlling interest in a body corporate or are otherwise able to directly or indirectly control or materially influence the policy of the entity which carries on the enterprise. 

This is bad news for any conglomerate that controls the activities of multiple subsidiaries.  A little local difficulty with compliance in one small part of the organisation could translate to a large fine for the parent company. 

The consultation ends on 10 September 2024. The government intends to make and lay the final version of the regulations before the UK parliament in coming months.