R (Cityhook Ltd) v Office of Fair Trading
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE FOSKETT |
| Judgment Date | 20 January 2009 |
| Neutral Citation | [2009] EWHC 57 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 20 January 2009 |
| Docket Number | Case No: CO/7886/2006 |
[2009] EWHC 57 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Foskett
Case No: CO/7886/2006
Paul Lasok QC and Ben Rayment (instructed by Edwin Coe LLP) for the Claimants
Mark Hoskins and Maya Lester (instructed by OFT) for the Defendant
Daniel Jowell for the 4 th Interested Party
Jon Turner QC and Meredith Pickford for the 1st and 3rd Interested Parties
Hearing dates: 1 st, 2 nd and 3 rd December 2008
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
MR JUSTICE FOSKETT:
Introduction
This case raises the issue of the extent to which the Office of Fair Trading ('the OFT'), the body charged with policing and enforcing the Competition Act 1998 ('the 1998 Act'), may be the subject of judicial review in respect of a decision to close an investigation into suspected infringements of the Act.
In granting the Claimants permission to apply for judicial review of the decisions of the OFT the subject of this case, His Honour Judge Andrew Gilbart QC, in his capacity as a Deputy High Court Judge considering the application on the papers, said that the case “raises very important issues”, the principal issue being “the degree to which a statutory body, whose remit is to investigate activities prohibited by statute, may decline to proceed further with an investigation even though it has found prima facie evidence of prohibited conduct, which in this case was alleged to have been carried out in concert by several large concerns at the expense of a small one.”
The two decisions ('the Contested Decisions') lying at the heart of this claim were notified in a letter from the OFT to Cityhook Ltd ('Cityhook') dated 23 June 2006 (see paragraph 43 below). The claim for judicial review (made by Cityhook without at that stage being represented) was lodged on 22 September 2006 as a “protective application” and thereafter stayed whilst an appeal against the Contested Decisions was made to the Competition Appeal Tribunal ('the CAT'). The CAT, created by section 12 and Schedule 2 to the Enterprise Act 2002, is the specialist tribunal with jurisdiction inter alia to hear appeals on the merits in respect of decisions made under the 1998 Act by the OFT and other regulators in the telecommunications, electricity, gas, water, railways and air traffic services sectors. In relation to appeals within the jurisdiction of the CAT, the Tribunal may confirm, set aside or vary the OFT's decision, remit the matter to the OFT or make any other decision that the OFT could have made.
Over two days in January 2007 the Tribunal, chaired by the late Marion Simmons QC, considered a preliminary issue arising in the appeal to the CAT that Cityhook had launched in August 2006, namely, whether the Contested Decisions were appealable to the CAT under sections 46(3)(a) and 47(1)(a) of the 1998 Act. Cityhook was represented by its Chairman, Mr Kenny Shovell (a former Partner of Ernst & Young), who was assisted by Mr David Greene, a partner in Messrs Edwin Coe. The OFT and other interested parties were represented.
In a decision promulgated on 3 April 2007 the Tribunal held that it did not have jurisdiction under sections 46 and 47 of the 1998 Act to entertain the appeal and the appeal was, accordingly, dismissed. In a nutshell, the Tribunal decided that the closure of the case did not amount in substance to a decision that there either had or had not been an infringement of the Act, a decision of one or the other being a necessary precursor to the bringing of an appeal.
The judgment (reported under the Neutral Citation [2007] CAT 18) runs to some 94 pages containing 299 paragraphs. It gives a comprehensive history of the issues arising and I should like to pay tribute to its thoroughness and clarity. I acknowledge my indebtedness to it for its exposition of the issues that fell for determination by the Tribunal.
Following the decision of the CAT, the stay on the claim for judicial review was lifted, the application reinstated and permission to pursue it was given on 28 November 2007.
Before descending into the detail of the case and the arguments advanced by the various parties concerned, it would be helpful to say something about those parts of the Competition Act that are relevant to the issues arising and to the statutory role of the OFT.
The Competition Act and the OFT
Section 2 of the 1998 Act is closely modelled on what is now Article 81 of the Treaty establishing the European Community (the ' EC Treaty'), formerly Article 85 of the Treaty of Rome. Article 81 defines what is known as “the Chapter I prohibition” and is in these terms:
“1. The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
2. Any agreements or decisions prohibited pursuant to this article shall be automatically void.
3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:
any agreement or category of agreements between undertakings, any concerted practice or category of concerted practices which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not:
(a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;
(b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.”
The material parts of section 2, which essentially mirror Article 81, are in these terms:
“ Agreements etc preventing, restricting or distorting competition
(1) Subject to section 3, agreements between undertakings, decisions by associations of undertakings or concerted practices which–
(a) may affect trade within the United Kingdom, and
(b) have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom, are prohibited unless they are exempt in accordance with the provisions of this Part.
(2) Subsection (1) applies, in particular, to agreements, decisions or practices which –
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts….”
The OFT “may conduct an investigation if there are reasonable grounds for suspecting … that the Chapter I prohibition has been infringed”: section 25(1)(a). There are further provisions within the Act to facilitate any investigations: ss. 26–30. Section 31(1) provides as follows:
“If as a result of an investigation the OFT proposes to make a decision, the OFT must-
(a) give written notice to the person (or persons) likely to be affected by the proposed decision; and
(b) give that person (or those persons) an opportunity to make representations.”
The written notice referred to in section 31(1) comprises a “Statement of Objections” which sets out the alleged infringements, the evidence relied on and the conclusions the OFT proposes to draw from the evidence set out in the notice: rules 4 and 5 of The Competition Act 1998 (Office of Fair Trading's Rules) Order 2004. (Throughout the documentation in this case, the abbreviation 'SO' for a Statement of Objections has been used. I propose to do the same.)
Once an SO has been issued and responded to the OFT must then decide how to proceed. The issue will be whether to make an infringement or non-infringement decision which then will engage the notification and publication requirements of rule 7 of the Rules.
Various provisions concerning directions that may be made by the OFT following an infringement decision appear in sections 32–34 and provisions concerning interim measures appear in section 35. Provisions concerning penalties imposed for infringement appear in sections 36–38, the maximum penalty being 10%...
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