Competition Violation: Exclusive Mandatory Training in Conveyancing Quality Scheme Abuses Dominant Position

Introduction

The case of Socrates Training Ltd v. The Law Society of England and Wales ([2017] CAT 10) addresses critical issues surrounding competition law within professional accreditation schemes. Socrates Training Ltd, a provider of Anti-Money Laundering (AML) training for solicitors, challenged the Law Society's Conveyancing Quality Scheme (CQS). Socrates contended that the Law Society's mandate requiring CQS members to obtain AML training exclusively from the Society constituted anti-competitive behavior, thus violating the Competition Act 1998.

The primary legal question revolved around whether the Law Society, holding a dominant position in the market for conveyancing accreditation, abused that dominance by enforcing exclusivity in training provision, thereby restricting competition and harming other market participants like Socrates.

Summary of the Judgment

The Competition Appeals Tribunal (CAT) concluded that the Law Society had indeed held a dominant position in the market for conveyancing accreditation by April 2015. The Tribunal found that by mandating CQS members to exclusively obtain mandatory training in mortgage fraud and AML from the Law Society, the Society abused its dominant position under both Chapter I and Chapter II of the Competition Act 1998.

The judgment highlighted that this exclusive requirement foreclosed competition in the provision of essential training services, thereby harming independent providers like Socrates. The Tribunal rejected the Law Society's defenses of objective justification and inability to implement alternative training provisions, affirming that the requirements were not indispensable and that alternatives were feasible.

Consequently, the Tribunal determined that the Law Society's actions constituted a breach of the Competition Act, setting a precedent for the treatment of exclusive training requirements within accreditation schemes.

Analysis

Precedents Cited

The judgment extensively referenced seminal cases such as Michelin v Commission, Hoffmann-La Roche v Commission, Microsoft v Commission, and Streetmap.Eu Ltd v Google Inc.. These cases provided foundational legal principles regarding market dominance, abuse, and the assessment of anti-competitive effects.

For instance, in Michelin, the concept of dominance was articulated as the position of economic strength allowing an entity to hinder effective competition. Similarly, the Court of First Instance's decision in Microsoft outlined the criteria for identifying abusive tying practices by dominant firms. These precedents were pivotal in shaping the Tribunal's approach to evaluating the Law Society's conduct.

Legal Reasoning

The Tribunal employed a meticulous market definition exercise, distinguishing between the upstream market (accreditation services) and the downstream market (training services). It concluded that the Law Society held a dominant position in the upstream market by April 2015, given the lack of competing accreditation schemes and the significant market share attained through major lenders mandating CQS membership.

Assessing abuse under Chapter II, the Tribunal focused on the exclusive requirement for training, identifying it as a tying practice that foreclosed competition in the training market. The decision underscored that such exclusivity was not essential for the CQS's integrity and that viable alternatives for training provision existed, thereby lacking objective justification.

Furthermore, the Tribunal evaluated the anti-competitive effect under both Chapter I (anti-competitive agreements) and Chapter II (abuse of dominance), determining that the conduct had an appreciable effect on competition by limiting market access for alternative training providers like Socrates.

Impact

This judgment has profound implications for professional accreditation bodies and their associated training requirements. By establishing that exclusive training obligations can constitute anti-competitive abuse when wielded by a dominant entity, the ruling deters similar practices that inhibit market competition and innovation.

Accreditation schemes must now ensure that mandatory training components do not unfairly exclude third-party providers, thereby fostering a more competitive and diverse market environment. Future cases involving professional accreditation and training will likely cite this judgment as a critical precedent.

Complex Concepts Simplified

Dominant Position: A state where an entity has significant power over its market, allowing it to influence prices and exclude competitors.
Tying: A practice where a dominant company requires customers to purchase a secondary product in order to buy a primary one.
Chapter I and II Prohibitions: Sections of the Competition Act 1998 that prohibit anti-competitive agreements and the abuse of a dominant market position.
Objective Justification: A defense wherein a dominant entity can justify its conduct if it serves efficiency or other legitimate business objectives.
SSNIP Test: A method used to define market boundaries by assessing whether a hypothetical small but significant price increase would lead to consumers switching to alternatives.

Conclusion

The Tribunal's decision in Socrates Training Ltd v. The Law Society of England and Wales serves as a landmark case in UK competition law, particularly concerning professional accreditation schemes. By affirming that exclusive training requirements can constitute an abuse of dominance, the ruling enforces the necessity for accreditation bodies to operate without unfairly restricting competition.

This judgment ensures that accreditation schemes promote genuine competition and quality standards without leveraging market power to stifle alternative providers. As a result, professional training markets are now more robust, encouraging diversity and innovation among service providers.

Legal practitioners and accreditation bodies must heed this precedent to align their practices with competition law, thereby fostering fair competition and enhancing service quality within their respective markets.