The Office of Fair Trading (OFT) has recently imposed its highest ever cartel fine and won its first criminal case. The UK’s antitrust watchdog is currently pursuing several other high-profile enquiries, which may result in further record-breaking fines. The OFT has also publicised its offer of a reward of up to £100,000 to anyone who informs it about cartel activities.

The OFT imposes its highest ever fine

The OFT reached early resolution agreements with tobacco manufacturer Gallaher and five retailers. The companies have admitted engaging in unlawful practices in relation to retail prices for tobacco products in the UK and have agreed to pay a total of £132 million in fines. In exchange for admitting their liability the companies have received a reduction in fines. Six other companies, including Imperial Tobacco and five retailers, refused to enter into resolution agreements and the investigation against these companies is ongoing. The penalty in the tobacco case is the highest combined fine ever imposed by the OFT. It exceeds the £120 million combined fine imposed by the OFT in 2007 in another retail price-fixing case involving dairy products. In the dairy products case the OFT had also reached early resolution agreements with several suppliers and retailers.

More record fines may be coming

Other major investigations are under way and may result in even higher fines. In the construction sector the OFT notified 112 firms of potential competition violations involving bid rigging activities, such as “cover pricing” whereby several bidders agree that all but one would quote prices that would be too high to win the bidding. The OFT received 37 leniency applications in that case, and 40 other companies admitted participation in bid rigging arrangements.

It has been reported that the OFT, after it raided the premises of several retail chains (including Asda and Morrisons), is looking at fines for certain suppliers. This is part of an investigation into sharing price data on a number of consumer products ranging from groceries to detergents.

OFT wins its first criminal case...

In June 2008, three UK businessmen were sentenced to imprisonment of between two and a half and three years each after they pleaded guilty to participating in a cartel to allocate markets and customers, restrict supplies, fix prices and rig bids for the supply of marine hoses (used to transfer oil between tankers and storage facilities). These are the first criminal convictions in the UK since 2002 legislation introduced the cartel offence. All three defendants were also disqualified from acting as company directors for periods of between five and seven years. Two of the defendants have appealed against their sentences.

The OFT has also recently charged four British Airways (BA) executives and former executives with cartel offences. According to the OFT these individuals were involved in the illegal arrangement between BA and Virgin Atlantic to fix prices of fuel surcharges for long haul passenger flights. In 2007, the OFT fined BA £121.5 million for colluding with Virgin Atlantic on fuel surcharges (Virgin Atlantic blew the whistle and therefore qualified for a full immunity from fines). Individuals convicted of the cartel offence may be sentenced to up to five years’ imprisonment and/or an unlimited fine. There are reports of follow-on damages actions being lodged in the UK High Court.

…and litigation inevitably rises

The increased aggressiveness by the OFT has been accompanied by a growing number of appeals against decisions of the regulators before the Competition Appeal Tribunal. It also coincides with an increase in third party damages claims against companies found to have violated competition law. Both the European Commission (EC) and OFT are seeking to encourage private litigation including considering a form of class action and new ways to fund damages claims brought on behalf of consumers.