Risk & Economy » Regulation » OFT wields new investigative procedures

INVESTIGATING OFFICERS from the Office of Fair Trading (OFT) arrive unannounced at your reception desk with a warrant to search your office and seize documents. Many businesses that have been raided will be familiar with this scene. Although typically not at dawn, the investigations will be conducted at the start of the business day when companies are least prepared.

It is important to understand that the OFT has wide-ranging powers to investigate suspected breaches of competition law. For example, the OFT can: send written requests for documents, enter premises (and in certain circumstances, directors’ domestic premises), with or without a warrant and without notice, take copies or extracts of documents which they consider relate to any matter relevant to the investigation, and require electronic information to be provided in a readable form in which it can be taken away.

The OFT also enjoys enhanced powers of investigation (including requiring employees to answer questions and the seizing of original documents) when conducting a criminal investigation under the cartel offence.

Companies have a duty to co-operate with the investigation and there are fines for negligently supplying incorrect or misleading information or incomplete documents.

To be prepared for an unannounced visit from the OFT, companies should adopt compliance measures including:

• Compiling a dawn raid manual to ensure that staff are aware of their legal obligations and how to deal with officials in the event of a dawn raid. Staging mock inspections is a useful way to train employees;
• Marking communications with lawyers as “legally privileged” so that legal privileged documents are easy to identify and can be withheld from inspection during a dawn raid
• Using email appropriately across the firm

OFT’s new investigation procedures

Over the years the OFT has received criticism over the lack of transparency, robustness of and time taken to reach decisions. In an effort to address these concerns, the government launched a public consultation in March 2012 to push through improvement to the current administrative system.

On 16 October 2012 the OFT launched a revised guide on its procedures for investigating suspected antitrust breaches. The guidance does not cover the OFT’s investigations under the cartel offence or director disqualification order proceedings.

It is only concerned with administrative investigations under the Competition Act 1998. The new measures include more publicity early on, a separation between the investigative and decision-making roles and strengthened procedural rights during an investigation.

The OFT will publish Case Opening Notices on its website in order to improve transparency. The Notice will set out the basic details of the investigation, including the administrative timetable of the case. Although the OFT has confirmed that the names of parties will only be published in exceptional circumstances, names are likely to be added later on in the investigation if the OFT decides to issue a Statement of Objections (provisional infringement finding) against the parties.

A new three-person Case Decision Group (CDG), consisting of senior staff who have not already been involved in the investigation, will decide upon whether the evidential burden for establishing a competition infringement has been met and for taking final decisions on liability and the appropriate amount of any penalty. To date, decisions have been made by the same person managing the inquiry. The ability for parties under investigation to have their case reviewed by a fresh pair of eyes is a welcome development. The CDG will not have responsibility for settlements, commitments from the parties and interim measures decisions.

The OFT has also adopted a number of checks and balances to strengthen procedural rights during an investigation and improve the robustness of decisions. There will be increased access to the decision makers with more “interactive oral hearings” and additional “state of play” meetings. This is expected to assist the CDG in obtaining a fuller understanding of the parties’ case.

Finally, the OFT has extended the role of the Procedural Adjudicator to resolve procedural disputes until the new Competition and Markets Authority takes office, bringing it more in line with that of a hearing officer in EU cartel cases.. It is expected that this will result in the swifter resolution of procedural disputes during the investigation.

Other changes involve providing parties with a draft penalty statement setting out the key elements relevant to the calculation of the penalty. Parties will have the opportunity to comment on the calculation of the penalty in advance of any final infringement decision. Although parties have always had the opportunity to comment on the Statement of Objections which includes the penalty calculation, it is thought that introducing this at a later stage than the Statement of Objections will ensure that issues of liability and penalty are considered separately. A separate oral hearing on penalty will also be offered.

Caroline Hobson is a partner at CMS Cameron McKenna