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OFT able to levy fines up to 30% of firms 'relevant turnover' for anti-competitive behaviour

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.

The Office of Fair Trading (OFT) has announced that it will be able to consider, as a "starting point", that businesses should be fined 30% of their "relevant turnover" when determining the penalties they should face for engaging in anti-competitive behaviour.


The regulator can adjust the level of fine it first proposes to issue depending on the length of time the infringement has taken place for and other factors, including "aggravating and mitigating factors", providing that the final amount does not exceed 10% of the company's relevant turnover.


The OFT's previous starting point was that it could issue fines of up to 10% of their relevant turnover. Companies' relevant turnover refers to their revenues generated in a "relevant product market and relevant geographic market" in which an infringement took place within firms' "last business year". The OFT said that its new "starting point" on sanctions brings it into line with the approach of the European Commission and other EU regulators of competition law.


In new guidance the OFT said it would determine what an appropriate starting point for a competition law infringement would be on the basis of the seriousness of those infringements, and that the seriousness would itself be assessed according to a range of factors.


"The OFT will apply a rate of up to 30 per cent to an undertaking's relevant turnover in order to reflect adequately the seriousness of the particular infringement and, in so doing, to deter the infringing undertaking and other undertakings generally from engaging in that particular practice or type of practice in the future," the OFT said in new guidance (31-page / 412KB PDF) it issued on its penalties regime. "The OFT will use a starting point towards the upper end of the range for the most serious infringements of competition law, including hardcore cartel activity and the most serious abuses of a dominant position."

"It is the OFT's assessment of the seriousness of the infringement which will be taken into account in determining the percentage rate for the starting point. When making its assessment, the OFT will consider a number of factors, including the nature of the product, the structure of the market, the market share(s) of the undertaking(s) involved in the infringement, entry conditions and the effect on competitors and third parties," the guidance said. "The seriousness assessment will also take into account the need to deter other undertakings from engaging in such infringements in the future. The damage caused to consumers whether directly or indirectly will also be an important consideration. The assessment will be made on a case-by-case basis for all types of infringement, taking account of all the circumstances of the case."

The OFT also announced that there was a new adjustment it can now make in order to revise the level of fine it can issue companies with for anti-competitive behaviour. The regulator will be able to consider whether penalties it plans to levy are proportionate.

This process enables the OFT to either increase or decrease the level of fine it had reached following earlier adjustments to its "starting point" position, the OFT said.


"The OFT will assess whether, in its view, the overall penalty proposed is appropriate in the round," it said in its guidance. "Where necessary, the penalty reached at the end of [the adjustment] steps 1 to 3 may be decreased to ensure that the level of penalty is not disproportionate or excessive. In carrying out this assessment of whether a penalty is proportionate, the OFT will have regard to the undertaking's size and financial position, the nature of the infringement, the role of the undertaking in the infringement and the impact of the undertaking's infringing activity on competition."

The OFT's guidance also outlines how companies can receive more lenient punishments for competition offences if they meet certain standards of cooperation with the regulator.

Jackie Holland, senior director of OFT's policy group, said: "The changes reflect our experience in applying the guidance in a series of cases, as well as recent court judgments. They also incorporate international best practice. We hope that they will give businesses and their advisors even greater clarity and transparency about our approach to setting penalties."

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