OFT will have to rethink reforms if they do not allay fairness concerns says expert

The OFT has admitted that there is a "perception" that the procedures it currently observes when looking into and addressing competition concerns result in "confirmation bias", meaning that people give greater weight to information that confirms existing beliefs.

Competition law specialist Guy Lougher of Pinsent Masons, the law firm behind Out-Law.com, said that the regulator's proposed changes to how decisions will be made in competition cases were to be welcomed, but that failure for the system to work as intended would lead to pressure on the Government to make changes.

On Wednesday the OFT announced plans (124-page / 1.65MB PDF) to "separate" individuals involved in investigating whether anti-competitive activity has occurred from the decision-making process in those cases.

Under the OFT's current administrative procedures for investigating and enforcing compliance with the UK's Competition Act, a single 'senior responsible officer' 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".

The OFT conceded that this process has led to the "perception" of "confirmation bias" because the same person is responsible for actions throughout the entire process. As a result it has proposed to reform the process.  The regulator proposed that decisions would be made by a new three-man 'Decisions Committee' in every case where a statement of objections has been issued. The Committee would not feature the senior responsible officer who opened the case, it said.

The OFT also announced plans for its legal staff and economists to provide an internal oversight of procedures in order to scrutinise the "key evidence being relied upon" in cases. "In future, the General Counsel and Chief Economist (or their representatives) will attend all oral hearings and will be consulted on all proposed decisions under the proposed revised decision-making structure," it said.

"Requiring fresh sets of eyes to review investigators’ proposed steps for enforcement action for breaches of competition law has to be viewed as a good thing," Lougher said. "This should help ensure that investigators’ cases are evidentially sound and introduces a greater internal scrutiny of the OFT’s proposed decisions."

"There is a risk that people who have day to day responsibilities for handling investigations may become overconfident about the strength of their case. The Competition Appeal Tribunal (CAT) has previously overturned decisions made by the OFT to fine companies as a result," he said.

"Companies will welcome the OFT’s plans because it should mean that the OFT only takes enforcement steps where those are justified by the evidence. The proposed reforms should also help to ensure that where the OFT does take enforcement action, the enforcement steps taken are proportionate and that any financial penalties are justified by the need for deterrence and the circumstances involved."

"The Department for Business, Innovation and Skills previously consulted on, but rejected, plans to adopt a prosecutorial system for enforcement action. That system would have seen the OFT effectively act as a prosecutor and have the CAT rule on whether a case was made out and what penalties should be imposed on infringers. If the OFT’s proposed reforms do not in fact ensure that there are effective checks and balances to its investigations, pressure will grow on BIS to reconsider moving towards a prosecutorial system," Lougher said.

The OFT said its planned reforms would deliver collective judgment with "enhanced" senior and legal oversight and ensure that decision-makers are only involved in case procedures after objections had been raised.

"Whilst the introduction of collective decision-making may result in some cases taking longer, the proposal would ensure that the case and evidence is tested more robustly and systematically at administrative phase before a decision is taken," the OFT said in its consultation. "The proposal seeks to strike an appropriate balance among these different objectives and ensure that the procedures do not have an undue adverse impact on the speed of decision-making or be duplicative of other stages in the process, including full merits review by the CAT."

The Government recently announced plans to press ahead with its plans to merge the competition functions of the OFT with those of the Competition Commission. A new single Competition and Markets Authority (CMA) will now be formed in 2014 and have the power to "investigate practices across markets". The CMA will also be obliged to investigate any "public interest issues alongside competition issues" that the Business Secretary asks it to.

The OFT said that the changes it proposed to make would help "facilitate a smooth transition into the CMA."

The OFT's plans are open to consultation until 19 June.