Gallaher Group Ltd and Others, R v The Competition and Markets Authority
| Jurisdiction | England & Wales |
| Judge | Lord Carnwath,Lord Briggs,Lord Sumption,Lord Mance,Lord Hodge |
| Judgment Date | 16 May 2018 |
| Neutral Citation | [2018] UKSC 25 |
| Court | Supreme Court |
| Date | 16 May 2018 |
[2018] UKSC 25
Lord Mance, Deputy President
Lord Sumption
Lord Carnwath
Lord Hodge
Lord Briggs
Appellant
Daniel Beard QC
Andrew Henshaw QC
Brendan McGurk
(Instructed by CMA Legal)
1 st Respondent (Gallaher)
Lord Pannick QC
Hanif Mussa
(Instructed by Slaughter and May)
2 nd Respondent (Co-operative Group Ltd)
Jessica Boyd
(Instructed by Burges Salmon LLP)
Heard on 13 and 14 March 2018
( with whomLord Mance, Lord Sumption, Lord HodgeandLord Briggsagree)
This appeal is concerned with the extent and consequences of duties of “equal treatment” or “fairness”, said to have been owed by the Office of Fair Trading (“OFT”) to those subject to investigation under the Competition Act 1998 (“the Act”). Since the events in question the OFT has been replaced by the Competition and Markets Authority (“CMA”), but it will be convenient in this judgment to refer throughout to the OFT.
In March 2003 the OFT began an investigation into alleged price-fixing arrangements in the tobacco market, contrary to section 2(1) of the Act. On 24 April 2008, it issued a Statement of Objections (“SO”) under section 31 of the Act, addressed to 13 parties, including two manufacturers and 11 retailers. The first respondents (“Gallaher”) were involved as manufacturers; the second respondents (“Somerfield”) as retailers. On 15 April 2010 the OFT issued its decision (“the Tobacco decision”) upholding the finding of infringement against both respondents, and all but one of the other parties. Six of those affected appealed to the Competition Appeal Tribunal. The respondents did not appeal, having each reached settlements with the OFT under the so-called “Early resolution process” (or “ER process”).
The letters accompanying the SOs sent to the parties in April 2008 had offered the possibility of obtaining a reduction in the financial penalty through cooperation with the OFT's investigation. The parties were invited to indicate by 9 May 2008 whether they wished to enter into without prejudice discussion with the OFT for this purpose. Both the respondents responded positively within the time-limit. Following negotiations they, along with four other parties, entered into Early Resolution Agreements (“ERAs”).
The ERAs required the signatories' admission of involvement in the infringements, set out a series of terms for further co-operation, and indicated the penalties to be imposed subject to a possible reduction of up to 20% for procedural co-operation. Entry into an ERA did not prevent a party from terminating that agreement at any time up to publication of the OFT's final decision. If a party did terminate an ERA, it would forgo any discounted penalty negotiated as part of the ERA. In that event, the OFT would continue with its case against that party in accordance with the usual administrative procedure. A party to an ERA could also, upon receiving the final decision, decide to appeal against it if it wished to do so, notwithstanding the admissions in the ERA. In that event, the OFT reserved the right to make an application to the Tribunal to increase the penalty and to require the party to the ERA to pay the OFT's full costs of the appeal regardless of the outcome.
The ER process was not subject to any statutory rules, nor at the material time described in any published document. The clearest contemporary description of the ER process (though not by that name) came in an internal document of the OFT dated 28 January 2008, and entitled “A principled approach to Settlements in Competition Act cases”. This paper was designed to draw out “a number of principles from the OFT's experience to date, and emerging thinking, on settlements in Competition Act 1998 cases”, and to provide “a policy framework for teams who may be considering the possibility of settlement”. Ten principles were identified and discussed.
Particular attention in the present case has been directed to Principle Three: “Fairness, transparency and consistency are integral to an effective settlements process”. This was explained as follows:
“16. The overriding principles of fairness, transparency and consistency must always be taken into account. When engaged in settlement discussions, for example, it is important to ensure that the process is consensual and as transparent as possible throughout, in order to avoid any subsequent allegations of undue pressure having been applied to force parties to ‘sign up’ to settlement.
17. Consistency is a particularly key consideration, given parties' sensitivity to equality of treatment issues. Whether or not the details of an individual case have been made public, particular approaches in one case will inevitably ‘leak out’ during the settlement process (and be set out in the infringement decision) and inform parties' strategies in others. Consistency of approach (or, alternatively, the formulation of strong arguments to justify taking a different approach in similar circumstances) is therefore vital …”
Although this is useful as indicating the adopted policy approach of the OFT itself, it is not suggested that the contents were known to or in terms relied on by the respondents when entering into their agreements. However, the OFT had a separate “speaking note” for use in discussions with parties. This summarised the main features of the ER process, and ended with the following commitment to “equal treatment”:
“Once first party signed up, the OFT will inform other parties of the terms agreed in terms of the Step 1 to 5 penalty calculation — these terms will be the benchmark for dealing with other parties (as the OFT will observe equal treatment principles).”
Both the respondents concluded ERAs with the OFT in early July 2008, involving substantial reductions in the anticipated penalties. In due course, when the OFT decision was issued in April 2010 the respondents did not appeal, but instead elected to pay the penalties imposed in the ERAs, taking the benefit of the reductions.
Martin McColl Retail Group Ltd and TM Retail Group Ltd (together, “TMR”) was another party subject to the investigation, which also entered into an ERA. In the course of the negotiations for the ERA, at a meeting on 8 July 2008, TMR's representatives asked about the OFT's likely attitude to those who entered ERAs in the event of a successful appeal by one of the other parties to the investigation. The effect of the exchange was recorded in an email from TMR to OFT after the meeting in the following terms (which were not contradicted):
“Should another manufacturer or retailer appeal any OFT decision against that manufacturer or retailer to the CAT (or subsequently appeal to a higher court) and overturn, on appeal, part or all of the OFT's decision against that manufacturer or retailer in relation to either liability or fines, then, to the extent the principles determined in the appeal decision are contrary to or otherwise undermine the OFT's decision against [TMR], the OFT will apply the same principles to [TMR] (and therefore presumably withdraw or vary its decision against [TMR] as required).” (Emphasis added)
In the course of 2009 and 2010, and before the expiry of the time for appealing the OFT decision, two other parties (“Party A” and Asda) made similar inquiries about the effect of a successful appeal by other parties, but received non-committal answers.
On 12 December 2011 the Tribunal gave judgment allowing all six appeals: [2011] CAT 41. Following the Tribunal's judgment, TMR wrote to the OFT inviting it to withdraw the OFT's decision as against it, and threatening legal action if it failed to do so. In the course of further discussions TMR relied on the OFT's earlier assurances about its position in the event of a successful appeal by another party, stating that this had been “a key factor” in its own decision-making. As to what followed I take the following from the agreed statement of facts (para 50):
“The OFT considered that the statements which it had made to TMR in 2008 might have given rise to an understanding on the part of TMR that the OFT would withdraw or vary its decision against TMR in the event of a successful third party appeal. In light of this, the OFT considered that there was a real risk that TMR would, as a result of this reliance on those statements, be permitted to appeal out of time to the Tribunal and would succeed in that appeal. The OFT reached a settlement agreement with TMR, by which the OFT agreed to pay to TMR an amount equal to the penalty TMR had paid together with a contribution to interest and legal costs. The Tobacco Decision was not withdrawn against TMR. The agreed terms were set out in a settlement agreement dated 9 August 2012.”
The OFT then published a statement about the TMR settlement on its website, in which it said that “in the light of the particular assurances provided to TM Retail” it had agreed to pay the amount of its penalty (£2,668,991) and a contribution to costs.
In the meantime, following the Tribunal's decision, in February 2012 each of the respondents had written to the OFT calling upon it to withdraw the decision as against them, and to refund the penalties. This was refused. In August 2012, after the publication of the information about the settlement between the OFT and TMR, they sent the OFT letters before claim, arguing that they also should be given the benefit of the assurances made to TMR. In October 2012 they issued the present claims for judicial review.
The claims were initially stayed by consent to allow the...
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