Variable monetary penalties: the new ‘go to’ enforcement tool for UK regulators

Thursday 8th February 2024

The regulators’ increasing shift from the criminal courts to monetary penalties.

It is clear that the Office for Product Safety and Standards (OPSS), the Competition and Markets Authority (CMA) and other enforcing authorities such as Trading Standards are planning to greatly increase their powers relating to, and use of, civil monetary penalties, just like the Environment Agency (EA) have recently done.

The EA now has the power to issue unlimited financial penalties for breaches of environmental permitting legislation (which is very wide in scope) with the previous cap being £250,000.

We think other regulators will want to adopt similar powers because:

  • OPSS’ recent consultation on updating its Enforcement Policy indicated a clear policy shift towards variable monetary penalties albeit there is currently a lack of clarity as to how the approach will work across the different sectors and in relation to the specific approach to penalties.
  • The 2023 product safety consultation recognised the potential for greater of use and penalties and the Digital Markets, Competition and Consumers Bill (set to become law in 2024) will simplify and reform the law (as well as facilitating enforcement) in respect of unfair commercial practices allowing for the introduction of CMA monetary penalties of up to 10% of global turnover.

It remains to be seen whether the Health and Safety Executive (HSE) also see an opportunity for more ‘expedient’ and ‘streamlined’ justice; it may certainly be attractive given the current court backlog and cost pressure and particularly given the ease with which prima facie safety breaches can usually be proven.

In this context, if a regulator serves a notice of intent (detailing the alleged breach and proposed penalty), then the only recourse available to a recipient is to reply with written representations setting out why no penalty should be handed down, or why the proposed penalty should be reduced. The regulator would then determine what (if any) notice/penalty is to be handed down which can only be challenged by appeal to the First Tier Tribunal.

Why the change?

Civil monetary penalties are likely to be very attractive to regulators (dealing with their own cost and resource pressures) as they:

  • enable non-compliance to be sanctioned without the need for prosecution through the criminal courts;
  • ensure authorities can avoid the significant time and costs associated with criminal proceedings;
  • effectively allow a regulatory authority (rather than a court) to determine breach/guilt; and
  • place significant time pressure on alleged offenders to raise potential defences/mitigation.

Organisations need to be in a position whereby they can quickly review and respond to notices of intent, collate any relevant information in respect of a defence or potential mitigation and be in a position to appeal should there be appropriate grounds to do so.

Time is very much of the essence in dealing with these matters.

Simon Tingle and Harvey Blake are very experienced in dealing with these matters and would be happy to assist where support was required.