Competition and Markets Authority v Flynn Pharma Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Sales,Lord Hodge,Lady Rose,Lord Leggatt,Lord Stephens |
| Judgment Date | 25 May 2022 |
| Neutral Citation | [2022] UKSC 14 |
| Court | Supreme Court |
[2022] UKSC 14
Lord Hodge, Deputy President
Lord Sales
Lord Leggatt
Lord Stephens
Lady Rose
Appellants (Flynn Pharma Ltd and Flynn Pharma (Holdings) Ltd)
Daniel Jowell QC
Tom Pascoe
(Instructed by Macfarlanes LLP)
Appellants (Pfizer Inc and Pfizer Ltd)
Mark Brealey QC
Tim Johnston
(Instructed by Clifford Chance LLP (London))
Respondent (Competition and Markets Authority)
Sir James Eadie QC
Rob Williams QC
David Bailey
Rupert Paines
(Instructed by Competition and Markets Authority)
1st Interveners (Association of the British Pharmaceutical Industry (ABPI) and British Generic Manufacturers Association (BGMA))
(written submissions only)
Daniel Piccinin
(Instructed by Bristows LLP (London))
2nd Intervener (Office of Communications (Ofcom))
(written submissions only)
Josh Holmes QC
Jessica Boyd
(Instructed by OFCOM)
3rd Intervener (Solicitors Regulation Authority Ltd (SRA))
(written submissions only)
Andrew Tabachnik QC
Ruth Keating
(Instructed by Solicitors Regulation Authority Ltd)
4th Intervener (Oakridge Farms Ltd)
(written submissions only)
Charles Streeten
(Instructed by Woodfines LLP (Milton Keynes))
Heard on 22 and 23 February 2022
( with whom Lord Hodge, Lord Sales, Lord Leggatt and Lord Stephens agree)
The appellants in these proceedings were successful in an appeal which they brought before the Competition Appeal Tribunal (“the CAT”) under section 46 of the Competition Act 1998. In that appeal they challenged a decision adopted by the Respondent (“the CMA”) fining them for an infringement of competition law.
The CAT allowed the appellants' appeal in part, set aside part of the CMA's decision and remitted the decision to the CMA for reconsideration. On the appellants' application for their costs of the appeal, the CAT made an order that the CMA pay the appellants a proportion of those costs. The Court of Appeal in the judgment now under appeal before this court set aside the CAT's costs order and directed that there be no order as to costs. The Court of Appeal held that the CAT had erred in ordering the CMA to pay the appellants' costs because it had disregarded a principle derived from a line of cases starting with Bradford Metropolitan District Council v Booth [2000] 164 JP 485. That principle was, the Court of Appeal held, that where, as here, a tribunal's power to make an order about costs does not include an express general rule or default position, the starting point is that no order for costs should be made against a public body that has been unsuccessful in bringing or defending proceedings in the exercise of its statutory functions.
The appellants now appeal to this court arguing that the Court of Appeal was wrong to hold that the CAT's discretion as to what costs order to make was constrained by any such principle. They argue that there is no such principle and that what is established by the case law is only that an important factor for a court or tribunal to take into account when considering costs is whether there is a risk that making adverse costs orders will have a “chilling effect” on the conduct of the public body concerned. By a risk of “chilling effect” they mean that the respondent public body might be so concerned about the risk of having to pay appellants' costs in appeals against its decision that it is discouraged from making and standing by decisions which it takes reasonably in the performance of its statutory functions in the public interest. The appellants say further that the CAT is best placed to consider whether there is such a risk of “chilling effect” as regards the different public bodies that regularly appear as respondents before it, defending different kinds of regulatory or enforcement decisions. They argue that the CAT was right to conclude in its earlier case law, applied to their application for the costs of this appeal, that there is no reason to adopt a “no order as to costs” starting point in appeals like this one and every reason in general to award costs to a successful appellant in the absence of any particular circumstances pointing to a different result.
The CMA resists the appeal and supports the reasoning of the Court of Appeal.
The CMA's decision giving rise to these proceedings was published on 7 December 2016 entitled Unfair pricing in respect of the supply of phenytoin sodium capsules in the UK. Following a three year investigation, the CMA found that the appellants (“Flynn” and “Pfizer”) had abused their dominant position in the supply of the prescription epilepsy drug, phenytoin sodium, by charging excessive prices for the drug in capsule form. This was an infringement of section 18 of the Competition Act 1998 and of article 102 of the Treaty on the Functioning of the European Union. The CMA imposed a fine of £84.2m on Pfizer and £5.2m on Flynn. The decision included directions requiring Pfizer and Flynn to reduce their prices.
Both Flynn and Pfizer appealed against the infringement decision to the CAT. The hearing of the appeal lasted 13 days. The CAT (chaired by Peter Freeman CBE QC (Hon)) held that the CMA was right to find that the appellants held a dominant position in the relevant market but that the CMA had made errors in its assessment of whether the appellants had abused that dominant position. Part of the CMA's decision was set aside and the CAT remitted the issue of abuse to the CMA for reconsideration in accordance with the CAT's judgment: see the main substantive judgment of the CAT at [2018] CAT 11 and its ruling on remittal [2018] CAT 12.
The CMA appealed to the Court of Appeal against the substantive judgment of the CAT and there was a cross-appeal by Flynn. Both the appeal and the cross appeal were in large part dismissed by the Court of Appeal: [2020] EWCA Civ 339; [2020] Bus LR 803.
While the appeal from the CAT's substantive judgment was pending before the Court of Appeal, the CAT dealt with the issue of the costs of the proceedings before it. The CAT delivered its ruling on costs on 29 March 2019: [2019] CAT 9 (“the CAT's Costs Ruling”). The CAT had regard to what it described as “the relative successes and failures of the parties” and accepted that the appropriate overall approach would be to award the CMA its costs of defending Pfizer's and Flynn's claims in respect of market definition and dominance and to award Pfizer and Flynn a percentage of their costs in respect of the part of the appeal relating to abuse. The CAT decided “on a broad-brush basis” that approximately one third of the assessed costs should be deemed to relate to market definition/dominance, and two thirds to abuse. The CAT therefore considered that the CMA should pay Pfizer 58% of its allowable costs and Flynn 55% of its allowable costs.
In calculating what those allowable costs were, the CAT deducted some of the costs claimed by the appellants from the base sum to which the percentages would be applied. Pfizer's and Flynn's costs were limited to those incurred after the CMA's decision so did not include costs incurred during the investigation stage. Pfizer's costs of its expert economist were reduced by 40% on the basis that they were too high. The CAT noted that further substantial discounts might be made when the costs went to be assessed, given the high level of Pfizer's costs.
The CMA appealed to the Court of Appeal against the CAT's Costs Ruling and that appeal was successful. In a judgment handed down on 12 May 2020, the Court of Appeal (Lewison, Floyd and Arnold LJJ) allowed the appeal, set aside the CAT's Costs Ruling and replaced it with no order for the costs of the proceedings before the CAT. That judgment (“the CA Judgment”) is at [2020] EWCA Civ 617 and is the judgment now before this court. Permission to appeal was granted by this court on 17 December 2020.
Permission was granted to a number of interveners to make written submissions to the court. The Association of the British Pharmaceutical Industry and the British Generic Manufacturers Association made a joint submission in support of the appellants. The Office of Communications (“Ofcom”) had been refused permission by the CAT to intervene in the costs applications ( [2019] CAT 2) but was permitted to intervene in this appeal in support of the CMA. The Solicitors Regulation Authority Ltd (“SRA”) also intervened in support of the CMA. Those interveners need no introduction.
A company called Oakridge Farms Ltd (“Oakridge”) also intervened in support of the appellants. Oakridge is a farming enterprise which successfully appealed (under section 80 of the Environmental Protection Act 1990) against an abatement notice which alleged that the application of fertiliser to the land it farms was causing an odour nuisance. The magistrates' court awarded Oakridge its costs of that appeal under section 64 of the Magistrates' Courts Act 1980. The local authority appealed against the award of costs by way of case stated. That appeal is stayed, pending the decision of this court on this appeal.
The CAT in its current form was established by section 12 of and Schedule 2 to the Enterprise Act 2002 (“the Enterprise Act”). It replaced the earlier appellate body the Competition Commission Appeal Tribunals which formed part of the Competition Commission with appeal panels convened as and when necessary. That in turn had replaced the Restrictive Practices Court which was established under the Restrictive Practices Court Act 1976 as the appellate body under the very...
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Durham County Council v The Durham Company Ltd
...of costs decisions, specifically by reference to the judgment of Lady Rose JSC in Competition and Markets Authority v Flynn Pharma [2022] UKSC 14; [2022] 1 WLR 2972 (“ Flynn Pharma”) at [136] and following. He said that in subsidy control cases it was best to avoid those chilling effects ......