Tobacco manufacturers: investigation into anti-competitive practices
| Case Outcome | CA98 - infringement Chapter I |
| Decision Date | 27 October 2016 |
| Date | 27 October 2016 |
| Subject Matter | CA98 and civil cartels |
| Court | Competition and Markets Authority (EW) |
Competition Act 1998
Decision of the Office of Fair Trading
Case CE/2596-03: Tobacco
15 April 2010
Confidential information in the original version of this Decision has been
redacted from the published version on the public register. Redacted
confidential information in the text of the published version of the
Decision is denoted by '[C]'.
1
1 INTRODUCTION ......................................................................... 9
A Executive summary .........................................................................................9
I The Parties.................................................................................................9
II Summary of the infringements....................................................................10
B The OFT's action ..........................................................................................14
2 FACTUAL BACKGROUND ...........................................................16
A The Parties................................................................................................... 16
I The Manufacturers.................................................................................... 16
II The Retailers ............................................................................................18
B THE OFT'S INVESTIGATION...........................................................................28
I The origins of the investigation................................................................... 28
II Leniency ..................................................................................................29
III The Chapter I investigation ........................................................................30
IV Section 26 Notices....................................................................................30
V Reduction in the number of parties.............................................................. 30
VI Types of evidence.....................................................................................31
VII Issue of a Statement of Objections .............................................................32
VIII Issue of a Supplementary Statement of Objections .......................................33
IX Early Resolution ........................................................................................33
X Memoranda on factual inaccuracies.............................................................34
XI Representations on the SO and SSO ...........................................................35
XII Decision not to pursue certain alleged infringements set out in the SO and SSO
…………………………………………………………………………………………….....35
XIII Addressing representations on the matters raised by the SO ..........................36
3 LEGAL BACKGROUND ...............................................................37
A Introduction - the Chapter I Prohibition.............................................................37
B Application of section 60 of the Act – consistency with European Union law .......37
C Application of Article 101 TFEU – effect on inter-State trade .............................38
D Undertakings ................................................................................................38
E Attribution of liability for infringements............................................................ 39
F Relevant case law in relation to agreements or concerted practices .....................42
G Prevention, restriction or distortion of competition ............................................47
H Restriction of the buyer's ability to determine its resale price..............................50
I Appreciability................................................................................................52
J Effect on trade within the UK .........................................................................53
K Burden and standard of proof .........................................................................54
2
L Relevance of evidence pre-dating 1 March 2000 ...............................................57
4 ASSESSMENT OF THE RELEVANT MARKET .................................58
A Introduction..................................................................................................58
B The relevant product market........................................................................... 59
I Focal products.......................................................................................... 59
II Distribution channels .................................................................................64
C The relevant geographic market ......................................................................67
D The relevant market - conclusion.....................................................................68
5 THE UK TOBACCO INDUSTRY .................................................... 69
A Introduction..................................................................................................69
B Industry concentration ...................................................................................69
C Products ......................................................................................................70
D Distribution ..................................................................................................72
E Regulations ..................................................................................................74
F Taxation ......................................................................................................75
G Manufacturers' Price Increases .......................................................................76
6 ANALYSIS OF THE INFRINGING AGREEMENTS............................. 77
A Overview .....................................................................................................77
I The anti-competitive object of the Infringing Agreements............................... 77
(a) Elements of the Infringing Agreements...................................................80
(b) The existence of the Manufacturers' parallel and symmetrical parity and
differential requirements ..............................................................................116
(c) The Infringing Agreements implemented the Manufacturers' retail pricing
strategies, which aimed to achieve parity or a fixed differential between competing
linked brands ..............................................................................................122
(d) The restrictive nature of the Infringing Agreements ...............................129
(e) Legal and Economic Context in which the Infringing Agreements are
assessed ....................................................................................................141
II The OFT's response to arguments that the Infringing Agreements had a pro-
competitive nature.......................................................................................... 147
III The Retailer's adherence to the Manufacturers' retail pricing strategies .........153
B Manufacturers' retail pricing strategies ..........................................................156
I ITL ........................................................................................................156
(a) Supply and distribution ......................................................................156
(b) Bonuses paid to Retailers by ITL .........................................................157
(c) ITL's retail pricing strategy – parity and differential requirements ............160
(d) ITL's retail pricing strategy– internal documentation ..............................165
(e) Monitoring of the Retailer's retail prices ...............................................166
IV Gallaher .................................................................................................169
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