OFT's 'adversarial' approach meant witness documents do not have to be disclosed, CAT rules

Out-Law News | 27 Mar 2012 | 2:08 pm | 3 min. read

A supermarket does not have to hand over notes from discussions with witnesses to the Office of Fair Trading as part of an ongoing legal dispute because the information was protected by 'litigation privilege', the Competition Appeal Tribunal (CAT) has ruled.

The information the OFT sought from Tesco did not have to be disclosed because the investigation the regulator had initiated against the company had reached an "adversarial" stage by the time the information it was looking to obtain had been gathered, according to the ruling.

Lord Carlile of Berriew QC said Tesco had not waived its right to that privilege and that, in any case, it would have been unjust, unnecessary, unfair and disproportionate to order Tesco to hand over the information.

"I consider that the administrative procedure under the [Competition] Act was sufficiently adversarial by the time Tesco contacted third party witnesses that the Potential Witness Material it gathered was subject to litigation privilege," the judge said in his ruling (24-page / 243KB PDF)

In August last year Tesco was one of four supermarkets fined by the OFT for collaborating with four dairy companies to share pricing information in an attempt to drive the cost of dairy products up. The regulator had been investigating the issue since 2004.

Tesco has appealed the OFT's decision and said evidence it obtained from witnesses supporting its case had not been taken into account by the OFT when making its findings. The OFT said at the time that the submissions had been made after the deadline had passed for them to be considered, according to the CAT ruling.

CAT will hear the appeal by Tesco next month. However, the OFT applied to the CAT chairman seeking an order that would have forced Tesco to provide "a list of the individuals contacted prior to the [OFT's decision to issue a fine] and production of notes of Tesco’s discussions with those individuals." The OFT wanted to use the information in order to cross-examine those witnesses during the appeal.

Tesco had argued that the information was subject to litigation privilege and that, as a result, it did not have to disclose it to the OFT.

Under the UK's Competition Act (Act) parties in a dispute are "not be required ... to produce or disclose a privileged communication". The Act defines a 'privileged communication' as "a communication between a professional legal adviser and his client, or made in connection with, or in contemplation of, legal proceedings and for the purposes of those proceedings, which in proceedings in the High Court would be protected from disclosure on grounds of legal professional privilege."

Previous case law in England and Wales has established that litigation privilege cannot be claimed in order to protect from disclosure in non-adversarial proceedings. The OFT had argued that the 'administrative procedure' it is obliged to follow when conducting competition investigations under the Act "is investigative and non-adversarial in nature" and that therefore the litigation privilege in such cases is "excluded".

Lord Carlile of Berriew QC agreed with the supermarket's arguments.

"In my judgment the proceedings in this case were confrontational by the time Tesco began collecting the Potential Witness Material in early 2011," Lord Carlile of Berriew QC said. "By then, the OFT had issued [a statement of objections and supplementary statement of objections], both of which proposed to find that Tesco had infringed the [anti-competitive agreements] prohibition [under the Competition Act]; the investigation was not simply an inquiry to get to the bottom of the facts."

"Tesco stood accused of wrongdoing ...Tesco was contesting the OFT’s proposed decision that the ... prohibition had been infringed. By this point the character of the administrative procedure was no less confrontational than ordinary civil proceedings involving the same alleged infringements," the judge said.

"Further, the OFT was about to decide Tesco’s liability under the Act. The outcome of the procedure in this case was by no means certain, but there was a serious risk that Tesco could be found liable for infringing the Act and be fined up to a maximum of 10 per cent of worldwide turnover of the infringing undertaking and be potentially liable in damages," he said.

Lord Carlile of Berriew QC said Tesco had not waived its privilege. The OFT had not provided enough evidence to show that Tesco had relied on the new evidence during the OFT's investigation and was not entitled to explore altered evidence by one of Tesco's witnesses.

The judge had previously determined that issuing the order the OFT was looking for would not be just and was "neither necessary nor proportionate to the issues" in any case.

He said it would have been "unfair and unhelpful" for the OFT to use the information it was seeking in order to cross-examine witnesses and that it was "disproportionate" for the new evidence to be included at such a "late stage" in the appeal proceedings.

In addition "it is not necessary for a court to find that a person was lying in the witness box in order to have reservations about his or her version of events," the judge said. The OFT had also admitted that it was not "necessary" for the new evidence to be considered because of its claims about the ' strong documentary evidence' it previously said it would solely rely on, Lord Carlile of Berriew QC said.

The Act prohibits the forming of "concerted practices" where the object or effect is "the prevention, restriction or distortion of competition" in the UK, or which may affect trade in the UK.