The Office of Fair Trading (OFT) is consulting on draft guidance which will
give companies and complainants more details about how it conducts
investigations into potential breaches of competition law.
Lawyers say the consultation has come about as a result of the OFT’s slow
pace in determining whether complaints should be pursued and its poor record in
prosecuting cases. They also say the consultation has not actually proposed any
significant changes to the way the regulator already operates.
Andrew Borer from law firm Burges Salmon says that the OFT has faced
criticism from companies being investigated, complainants and the National Audit
Office for its lack of transparency and undue delay when investigating alleged
anti-competitive practices. He adds that, once the OFT has conducted its initial
information gathering, little is often heard about the progress of the
investigation for months or even years.
“The OFT’s recently completed tobacco pricing investigation lasted over seven
years, yet parties were provided with little information about or input into
the investigation for most of this period,” says Borer. “The problem is
compounded by a perceived lack of consistency in the procedures the OFT adopts
in different cases, notably with regard to leniency and early resolution.”
By giving businesses and their advisers better detail about its processes,
the OFT hopes to deliver investigations more quickly and efficiently. “By being
more open about internal processes, we intend to give businesses and others
interested in our work more clarity about investigations into anti-competitive
practices, which in turn will help us to improve the delivery of our cases,”
says Cavendish Elithorn, senior director of policy, at the OFT.
But Borer believes the consultation document adds little to the OFT’s
existing guidance and is a missed opportunity. “The OFT has done little to
address the concerns of parties under investigation that the regulator’s lack of
transparency leads to unnecessary cost and delay, and undermines their rights of
defence,” he said.
Stephen Smith, associate in the competition group at law firm Mayer Brown,
says that the consultation is a recognition that with limited resources, an
efficient enforcement process is essential to ensuring that the only cases taken
forward for formal investigation are those that not only have a genuine prospect
of success, but which also meet the OFT’s enforcement priorities – meaning those
cases likely to cause greatest consumer detriment.
“When the Competition Act first came into force around 10 years ago, it could
certainly be claimed that the OFT routinely accepted complaints where perhaps it
should not have done, resulting in a significant backlog of cases,” says Smith.
Rod Lambert, partner and co-chair of the global anti-trust and competition
group at law firm Fulbright & Jaworski, says that high-profile prosecution
failures, such as the collapse of the British Airways trial, whereby executives
were accused of price-fixing, has prompted the OFT to re-examine the suitability
of the evidence it bases its decision on to prosecute companies for
Gustaf Duhs, head of the competition group at lawyers Stevens Bolton, says it
could be inferred “that the OFT is giving complainants four months to prove
their case and get their evidence together before it will consider taking any
The aim of the OFT’s guidance is to increase transparency about how the OFT
handles all stages of Competition Act investigations, from the opening of a case
through to the final outcome. In particular, the guidance aims to provide better
information on how the OFT conducts its “prioritisation assessment”, which
determines which cases are to be pursued.
The draft guidance also proposes new initiatives aimed at encouraging
complainants to provide better evidence about potential breaches of competition
law. This includes offering informal discussions with potential complainants
before they submit a substantiated complaint (similar to the OFT’s approach in
merger cases), as well as a commitment to reach a decision on whether to
formally open a case within four months of receiving a substantiated complaint.
Although the OFT considers all complaints it receives, the regulator does not
formally investigate all complaints. Instead, it decides which cases to
investigate based on its “prioritisation principles”. These take into account:
1. The likely impact of an investigation in the form of direct or indirect
benefits to consumers
2. The overall strategic significance of the case on consumers
3. The risks involved to consumers in taking on the case
4. The resources required to carry out the investigation
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