Companies can challenge regulator's calculation of fines for anti-competitive behaviour under new procedure

The competition regulator has published updated guidance (79-page / 892KB PDF) on the procedures that it will follow when investigating breaches of the Competition Act. The revised processes detailed mean that organisations said to be in breach of the Act will have an extra opportunity to make "representations" to the OFT in relation to their cases.

Under the OFT's current administrative procedures for investigating and enforcing compliance with the UK's Competition Act, a single 'senior responsible officer' (SRO) is tasked with determining whether to open investigations, whether there is enough evidence in which to issue a 'statement of objections' and whether there is sufficient evidence to issue fines as part of any "infringement decision".

However, the OFT has now confirmed that a new "three-member Case Decision Group" will be responsible for making decisions on whether infringements have taken place. They will decide "whether to issue an infringement decision" and "on the appropriate amount of any penalty" if they decide to issue one after the SRO has decided whether the evidence they have gathered merits issuing a statement of objections on a case.

Companies issued with a statement of objections have had the right to make "representations" on the "substance" of the objections raised against them. Following those representations it will now be up to the Case Decision Group on a case to decide whether penalties should still be proposed.

However, under the OFT's new procedures there will now be a chance for companies issued with a 'draft penalty statement' to challenge the level or calculation of fines that the Case Decision Group proposes to levy. In "exceptional cases" only will the Group consider at this stage representations from companies on whether an infringement has actually occurred.

"Where, once any written and oral representations made to us on the Statement of Objections have been considered, the Case Decision Group is considering reaching an infringement decision and imposing a financial penalty on a party, we will provide that party with a draft penalty statement," the OFT said in its new guidance. "This will set out the key aspects relevant to the calculation of the penalty that we propose to impose on that party, based on the information available to us at the time."

"The draft penalty statement will also include a brief explanation of the Case Decision Group’s reasoning for its provisional conclusion on each aspect. Parties will be offered the opportunity to comment on the draft penalty statement in writing and to attend an oral hearing (in person or by telephone) with the Case Decision Group," it added.

"If a party chooses to make written representations or oral representations at a hearing, these representations should relate only to the draft penalty calculation in the draft penalty statement: the Case Decision Group will not consider further representations at this stage on whether an infringement has been committed, other than in exceptional cases such as where the party is able to demonstrate that it was unable to provide the information/evidence before the issue of the draft penalty statement. The written and oral representations process following issue of the Statement of Objections represents parties’ opportunity to make submissions to the Case Decision Group on whether an infringement has been committed," the regulator said.

The OFT had previously acknowledged that there had been the "perception" of "confirmation bias" in allowing an SRO to both gather evidence against companies and then make decisions on whether a breach of competition law had taken place and whether penalties should be applied.

Under the new regime the SRO will not form part of the Case Decision Group "to ensure that the final decision is taken by officials who were not involved in the decision to issue the Statement of Objections," the OFT said in its guidance.

Throughout the entire investigations process the OFT's General Counsel and Chief Economist will provide oversight and will be "responsible for ensuring that there has been a thorough review of the robustness of, respectively, the legal and the economic analysis (and of the evidence being used to support this) before a Statement of Objections is issued or a final decision on infringement is taken."

The OFT said that views that it had received in its consultation on the new guidance, which it began consulting on in March, had caused it to change the way it divided up responsibility for tasks between the SRO and Case Decision Group.

"Decisions relating to the imposition of interim measures, the acceptance of commitments, and possible settlement will continue to be taken by the Senior Responsible Officer (consulting with other OFT senior officials as appropriate)," the regulator said in a statement. "The agreement of a settlement or the acceptance of commitments by the SRO will require the approval of the Policy Committee before taking effect. The OFT's March 2012 consultation document had proposed that these decisions should be taken by the Case Decision Group."

Jackie Holland, the OFT's senior director of policy, said: "Our updated Competition Act procedural guidance reflects the lessons we have learnt from past cases, external feedback and international best practice. We believe these changes will enhance the robustness and efficiency of our Competition Act cases, as well as resulting in better interaction with parties to investigations and improving the transparency of our work."

Businesses now face fines worth up to 30% of their annual turnover in a particular market if they engage in anti-competitive behaviour following an update to the UK competition regulator's penalties regime announced in September.