The Office of Fair Trading's ("OFT") first and so far only use of a "Fast Track Offer" initiative came under scrutiny in Crest Nicholson plc v Office of Fair Trading [2009] EWHC 1875 (Admin). Mr Justice Cranston held that the OFT had breached the principle of equal treatment in relation to the claimant ("Crest"), in failing to recognise that Crest was different to the other addresses of the "Fast Track Offer", not engaging with Crest's case and not undertaking to bear Crest's difference in mind when fixing any penalty for any breach of competition law ultimately found.

Key points:

  • The Fast Track Offer scheme itself remains available to the OFT to implement in any future large investigations, in place of its general leniency policy.
  • "Fairness" depends on context: in a large investigation it is not necessarily unfair for the OFT not to provide a party with the gist of its case against that party, or any supporting evidence, at the investigation stage even in the context of an offer of leniency against future fines. The OFT has wide discretion in its conduct of investigations and the courts (and Competition Appeal Tribunal – "CAT") will be slow to intervene.
  • Equality of treatment must be viewed globally, with consideration given as to whether party in a different position should be treated differently in order to achieve a fair outcome.
  • The court is unlikely to order a remedy in a judicial review which would result in the claimant receiving preferential treatment, unfairly to other parties in a similar position.

The OFT's investigation of bid-rigging and the "Fast Track Offer" initiative

The OFT faced a large investigation and mass of information in relation to a suspected endemic and widespread culture of bid-rigging in construction industry tenders. The OFT's general leniency programme, under it may grant reduced financial penalties to parties who cooperate and provide information about their anti-competitive behaviour, was only adding to its burden. Needing to streamline its investigation, the OFT closed the leniency programme and introduced a "Fast Track Offer" scheme. Implicated parties were invited to make specific admissions and submit reduced written representations to the OFT, in return for a significant reduction in any ultimate penalty. The OFT did not provide any evidence to support the allegations in respect of which it was seeking admissions.

The OFT's extension of the Fast Track Offer to Crest

Until a management buy out in 2003, Crest was the parent company of Pearce Group plc ("Pearce Group"), who in turn was a parent of one of the companies being investigated by the OFT, Pearce Construction (Midlands) Limited ("Pearce Midlands"). Crest's only connection with the construction industry was through this historic indirect subsidiary, who had ceased trading sometime in 2003. In November 2007 the OFT extended the Fast Track Offer to Crest as the historic parent company of Pearce Midlands. Crest was unable to investigate the OFT's allegations as it no longer had access to Pearce Midlands' records or contact details for anyone who might have had any knowledge. Accordingly, Crest rejected the Fast Track Offer, explaining the circumstances to the OFT and that it could not in good faith admit liability.

The OFT published its Statement of Objections in April 2008, setting out its proposed decision to make findings of bid-rigging against 112 parties, including Pearce Midlands. Thereafter, Crest sought confirmation from the OFT that the Fast Track Offer would continue to be available to it. The OFT replied that the offer had closed and could not be reopened given that the Statement of Objections had been published.

The decision under challenge

Crest challenged the OFT's decision not to reopen the Fast Track Offer on two grounds, namely that the OFT had breaches the principles of:

  • equal treatment, because it did not accord to Crest the same opportunity which other parties had been given to make an informed decision whether to accept the Fast Track Offer; and
  • procedural fairness, in that it had failed to provide Crest with an adequate opportunity to understand the gist of the case against it and decide whether to accept the Fast Track Offer.

The principle of equal treatment (substantive fairness)

The court explained that the principle of equal treatment prohibits treating similar situations differently and different situations in the same way, unless such treatment is objectively justified. Apart from the OFT's obligations at common law, it is also bound (pursuant to section 60 of the Competition Act) by the substantially similar EC law principle of equal treatment.

The OFT's strongest argument was that the Fast Track Offer had been made to everyone in broadly identical terms, giving them a similar timeframe in which to respond. All were given the same information about the type of evidence held by the OFT and the specific details of the tenders in question. All were suspected of involvement in competition law infringements.

However, in the court's view, the OFT should have seen that Crest's response to the Fast Track Offer put it in an objectively different position from most, if not all, other recipients, due to its situation as summarised above. The OFT's "adamant refusal" to have any regard to Crest's different position put the OFT in breach of its obligations to address the principles of equality and fairness; it was not a sufficient answer that Crest had received a similar offer to everyone else.

The court was "deeply unimpressed" by the OFT's additional arguments which sought to rely on the competition law concept of an undertaking and acceptance or rejection of the Fast Track Offer being a commercial decision. In the court's view, the competition law concept of an undertaking did not absolve the OFT from its duty to act fairly during an investigation and to take account of material differences between different legal persons within an undertaking, if different treatment was justified. As for the commercial decision argument, the OFT by its Fast Track Offer was asking parties to admit liability for serious infringements of the Act. A person who reasonably believes that s/he is not liable for wrongdoing should not be pressured into admitting liability simply on the basis of a commercial decision.

The court's decision on procedural fairness

The court disagreed with Crest's allegations that the OFT had acted unfairly in:

  • not providing Crest with the gist of the case against it; and
  • refusing to reopen the Fast Track Offer.

As the court emphasised, it is well-established that the constraints of natural justice apply to preliminary steps in an investigation, which in themselves may not involve legal consequences, but which may lead to acts or decisions that do. An aspect of fairness is the extent to which a person subjected to an investigation must be provided with details of the allegations against him or her. This depends on the specific context of the decision in issue. Very often fairness will require that a person who may be adversely affected is given an opportunity to make representations; this will usually require that he or she is informed of the gist of the case to be answered.

However, in circumstances where the OFT had considerable discretion in its conduct of investigations and the Fast Track Offer was predicated on reducing the OFT's burden in a very large investigation, the court's view was that requiring the OFT to provide evidence of the gist of each case was not feasible and undermined the benefit of the Fast Track Offer to the OFT.

The court's view in relation to the OFT's refusal to reopen the Fast Track Offer after the publication of the Statement of Objections was that this would have resulted in preferential treatment in favour of Crest, unfairly to the other parties.

The OFT's attempted defence: delay and alternative remedy

In its defence, the OFT attempted unsuccessfully to rely on:

  • Crest's delay in bringing the proceedings, which the OFT argued should have been brought earlier at the time of the Fast Track Offer rather than at the time of the OFT's refusal to re-open it; and
  • Crest's statutory right of an appeal on the merits to the CAT, under section 46 of the Act once the final decision was published (which has still not taken place).

It was not necessary for the court to consider the OFT's defence, which was effectively precluded by permission for the judicial review having been granted. However, the court opined that there had been no prejudice by any delay and had it been necessary to do so, it would have extended time for Crest. As regards the availability of the alternative remedy (an appeal to the CAT against the decision and penalty), although recognising that judicial review should not be granted – absent exceptional circumstances – where a suitable alternative remedy is available, in Crest's case the court would not have regarded the availability of the right of appeal to the CAT as a barrier to judicial review. This was because Crest's challenge was properly viewed as a challenge to the OFT's treatment of Crest upon having received Crest's rejection of the Fast Track Offer. At that stage, there was no alternative remedy available to Crest. Further, Crest's right of appeal to the CAT might never be triggered. It was therefore appropriate for the court to reach a decision on the OFT's treatment of Crest at that stage of the process, so that the OFT would be able to act in accordance with its obligations to accord fairness and equal treatment to Crest going forward.

Result

The upshot of the court's decision is that, going forward in considering the application of its penalty policy, the OFT must not maintain its refusal to acknowledge that Crest was in an objectively different position when it received the Fast Track Offer. However, the court could not force the OFT to exercise its discretion in any particular way.

Comment

This decision is a reminder that in applying rules or implementing policies, it is necessary for public bodies, including enforcement authorities, to act reasonably in recognising whether any affected parties should be treated differently, in order to ensure that ultimately all parties are treated fairly and equally.

Latitude is often given by the courts to expert regulators on the substance of their decisions, who will be slow to impugn the substance of decisions by such regulators. Courts tend to be more interventionist on issues of procedural unfairness, as this sits more within their sphere of competence: Interbrew SA v The Competition Commission [2001] EWHC (Admin) 367 is an example of such a case. Crest is interesting in that Crest won on a substantive unfairness point (equal treatment), but lost on the procedural unfairness grounds. The court's decision that the OFT had not breached any principle of procedural unfairness by not providing the gist of its case to Crest is perhaps surprising, in that one of the key differences underpinning Crest's successful equal treatment argument was that Crest did not have access to any relevant information. In this sense, the case reinforces the court's cautiousness about intervening in the conduct of an investigation by a regulator, in particular the regulator's decision-making on how best to apply its resources. If the OFT had had to provide the evidence, this would have undermined the benefit of the Fast Track Offer, which was to save administrative time – in essence it was in the nature of a settlement.