Disqualification orders in competition cases

As part of my catching up process, I've been reading the OFT's revised guidance on disqualification orders for directors in competition cases (available at: http://www.oft.gov.uk/news-and-updates/press/2010/68-10). Some of the significant changes are that the OFT are now saying that they may, in exceptional cases, bring proceedings for a disqualification order, even if there has been no prior decision that there was a breach of competition law. In other words, the question of the breach of competition law will be argued in front of the, non-specialist, court. Secondly, proceedings for a disqualification order may be brought even if no financial penalty has been imposed. Thirdly, the OFT may also apply for such an order against a director who has ceased being a director because of a breach of competition law. Finally, the OFT says in its press release that it will be just as concerned to take action against those directors who ought to have known of the breach of competition law, not simply those who were responsible for the breach or had reasonable grounds to suspect that there was a breach.

It is welcome to see the OFT toughening its stance on a number of issues but, given that they have not yet used this power, a certain amount of scepticism is in order. The proposal to bring disqualification proceedings, even when there is no prior decision of a breach in competition law does seem odd. The OFT gives as examples cases where the undertaking is insolvent or in the course of being wound up, where there is an appeal simply on the quantum of a fine and where no action is taken because the undertaking is subject to a limited immunity from fines. As the OFT emphasises that action will only be taken in exceptional circumstances, this presumably means cases where the OFT feels that the director's behaviour has been very bad, but short of meeting the test for criminal liability (because you don't want to have to prove the case in two courts). This makes sense of the insolvency example, although not the immunity one, because presumably the OFT would want to order the undertaking to cease its behaviour, even if it could not impose a fine, and then follow up with disqualification proceedings. Although logical, it would seem to be a waste of resources to pursue an individual, when it was not worth making a decision on the undertaking's behaviour.

What seems to be going on here is an exercise in symbolic toughness, in order to try and improve the deterrent effect of the provisions. This is, indeed, state to be one of the reasons for bringing disqualification proceedings even if no financial penalty is imposed. The problem is that tough messages have to be backed up by tough action at some point. So far, the OFT has not had much luck outside the relative comfort zone of Competition Act proceedings.

Returning

I'm back having surfaced from marking, exam boards and some holiday. Lots to catch up on.

Oh, and two very good conferences. One from CCP at East Anglia on vertical restraints http://www.uea.ac.uk/ccp/events/pastevents/2010annualconference

And one hosted by ACCAN (Australian Communications Consumer Action Network) (their first annual conference). Photos here http://s758.photobucket.com/albums/xx223/ACCANaust/2010%20National%20Conference%20and%20Consumer%20Congress/

All I can say is if you think consumer service for telecommunications is bad in the UK, be thankful you don't live in Australia.

British Airways price fixing trial collapses

The high profile criminal trial of four BA executives has collapsed today when the prosecution offered no evidence. The problem arose over disclosure of relevant material to the defence, to be precise some 70,000 e-mails in the hands of Virgin Atlantic, of which 12,000 were sent or received by the central prosecution witness. According to the Press Association, "The court was told the missing emails were in corrupted files which had been dismissed as irrelevant during the initial investigation. But last week it emerged the corrupted files could be repaired and contained the "large quantity" of emails."

To put it mildly, this is highly embarrassing for the OFT. The issue is whether this is one-off prosecutorial incompetence or represents a more systemic problem. Andreas Stephan of UEA wins the prediction guru prize (http://competitionpolicy.wordpress.com/2010/04/11/the-trial-that-will-make-or-break-the-uk-cartel-offence-begins-today-the-british-airways-four/#more-305), although probably not in the way he thought he would. More comments form him are promised once the UK has a government!

A link to the Press Association report is at: http://lawprofessors.typepad.com/antitrustprof_blog/ Daily Telegraph has a bit more: http://www.telegraph.co.uk/travel/travelnews/7705592/British-Airways-price-fixing-trial-collapses.html

Camelot, the Lottery and commercial services

Fans of the obscure jurisprudence surrounding Article 106 TFEU will be interested to note that the National Lottery Commission is consulting on a proposal by Camelot, the owners of the lottery infrastructure (terminals etc) to offer commercial services through this structure. Camelot wants, in particular, to run payment services through the infrastructure and this has reportedly caused a number of potential competitors to object, saying that Camelot could cross-subsidise its commercial operations and thus abuse its dominant position (See the Sunday Telegraph for 25^th April). It will be very interesting to watch a national regulator navigate these murky waters!

Details of the consultation, but no substantive discussion of the competition law issues, which closed on 25th April, are here:  http://www.natlotcomm.gov.uk/CLIENT/content_inner.ASP?ContentId=419

OFT's first competition advice

The OFT has today (27 April), for the first time, given advice to two businesses on the competition law implications of a proposed collaboration agreement. Two grocery wholesalers, Makro Self-Service and Palmer & Harvey, received advice on a joint purchasing agreement which the OFT felt would secure better prices from common suppliers and would be unlikely to restrict competition in the market. The OFT did have a concern with certain exchanges of information between the parties, but the arrangements were altered to ensure that the data supplied was general and aggregated. A non-confidential version of the OFT's opinion will be published shortly.

This is a potentially very interesting development because, with the demise of the notification process for agreements, companies have had to depend on their own assessment, in the light of whatever guidance has been issued by the competition authorities. This is the first example of the OFT giving an opinion and it will be interesting to see if this process becomes more popular in the future.

Sky, Ofcom and pay TV

Attachments:

Sky has lodged an application with the CAT seeking to have Ofcom's decision on pay TV suspended until Sky's proposed appeal against this decision is heard. The hearing on interim relief will be hear on 23^rd April. Details of the application are here: http://www.catribunal.org.uk/237-6095/1152-8-3-10-IR-British-Sky-Broadcasting-Limited-.html

 

Links to Ofcom's decision are here: http://www.ofcom.org.uk/consumer/2010/03/delivering-consumer-benefits-in-pay-tv/

The Liberal Democrats, competition and regulation

Today it's the turn of the Liberal Democrats. They have two specific proposals for competition law. The first is to restore the public interest test in merger control so that regulators can consider a broader range of factors. This misses a key point in the Enterprise Act arrangements, namely that unelected regulators (the OFT and the Competition Commission) are quite good at deciding on competition matters, but don't have greater expertise on non-competition matters. Hence a regime for specified public interest matters, involving the Minister. This would take us back to the Fair Trading Act system, although without the politicians and, much as I have respect for members of the Competition Commission, letting them loose on non-competition factors could be quite worrying.

The second idea is to introduce a local competition test for all planning applications for retail developments, which is a development of the Competition Commission's remedy in the Groceries investigation. This is linked into establishing a local competition office within the OFT which will investigate anti-competitive practices at a local and regional level. I suspect that the OFT will be surprised to discover that it doesn't do this already!

The banks come in for a predictable bashing and those which have public support will be split into retail and investment banks.

In energy, rising block tariffs will apparently become compulsory. So that will help to make the industry more competitive – not.

Unfairness in water charging will be addressed by consulting on the implementation of the Walker review, there will be a crack down on wasting water (I think they mean leakage here) and compulsory smart meters will be installed in areas of water stress.