R (on the application of Gallaher Group Ltd and anr) v Competition & Markets Authority and R (on the application of Somerfield Stores Ltd and anr) v Competition & Markets Authority [2015] EWHC 84 (Admin)

In claims arising out of an investigation into the tobacco market, Mr Justice Collins in the High Court has emphasised the duty of the Competition and Markets Authority (the Office of Fair Trading prior to 1 April 2014) ('the Authority') to act 'fairly and consistently' in all its dealings. This duty meant it had to ensure that one signatory to an Early Resolution Agreement ('ERA') was not given an advantage denied to another. However, where public funds are concerned, mistakes made in the ERA process should not be replicated. This provided an objective justification to deny repayment of the settlement amount to the Claimants.

Key points

Public authorities are expected to act fairly and consistently in all their dealings. Such a requirement arises under public law, independent of any guidance set out by the public authority. The Authority had made a mistake by providing an assurance to one party that it would return the settlement amount in the event of a successful third party appeal. However, where public funds are involved, the Authority should not replicate such mistaken decisions.


In March 2003, the Authority began an investigation into the tobacco market by exercising its powers under the Competition Act 1998 ('the Act'). The Authority believed that thirteen parties (two manufacturers and eleven retailers) were in breach of section 2 of the Act dealing with agreements preventing, restricting or distorting competition.

The Authority operated a type of administrative settlement process, whereby it would offer a discount on the penalty to those who co-operated in the investigation, or reach an agreement not to impose any penalty on a whistle-blower. The Authority did not have any guidance on how this Early Resolution process or the resulting ERAs would operate. However, it produced a paper in January 2008, which it agreed was not definitive. One of the principles was to ensure fairness, transparency and consistency in its dealings.

The first claimant (a manufacturer) and the second claimant (a retailer) agreed an ERA in July 2008. Other parties followed suit. Materially, these ERAs were the product of considerable negotiations and both the Claimants received expert legal advice. All the other parties had entered into discussions with the Authority as well, with an understanding that discussions were to be confidential unless they led to a change to key aspect of the ERA process itself.

The Authority issued its final Decision (in 2010), which was successfully appealed against by parties who had not entered into ERAs. Following this, the Claimants sought leave to appeal out of time, but this was eventually rejected by the Court of Appeal in Office of Fair Trading v Somerfield Stores Ltd [2014] EWCA Civ 400, citing the need for finality and legal certainty in competition cases.

However, in August 2012, the Authority published a statement where it noted that it had given assurances to one of the retailers ('TMR') that in the event of any successful appeal brought by another party against the Authority's final decision, it would repay the amount of TMR's penalty and other costs. Consequently, the Authority had paid back TMR's penalty amount of £2,668,991.

These assurances were never been made public, and the Authority's stance was that it was not discriminatory to give assurances only to those parties who expressly requested one while negotiating their ERAs. The Claimants, on the other hand, put forward a claim that they were entitled to the same repayment.

The High Court's decision

The High Court, after considering whether there had been an assurance given to TMR, proceeded to assess the Authority's conduct.

Requirement of fairness and consistency

Mr Justice Collins made two key observations on the law. First, he reiterated the fact that Authority was subject to requirements of fairness and equal treatment under public law. Fairness requirements will therefore apply even in the absence of any guidance (though Mr Justice Collins did note the 'self-direction' in the January 2008 paper). It was essential that no party was given an advantage while negotiating ERAs. Secondly, the principle of 'don't ask, don't get' relied on by the Authority could only apply in negotiations where there was no public law involvement, but could not be used to override general public law duties.

Mistaken decisions and public funds

On the facts, Mr Justice Collins concluded that the Authority had made a mistake. The question, therefore, was "whether that mistake must nonetheless inure to the benefit of the claimants so that they are at least entitled to be paid, as was TMR, a sum equivalent to the penalty paid by them together with interest and some costs."

The Authority argued that where public funds were concerned, a mistake which has led to a financial benefit should not be replicated by payments to others (relying on Customs and Excise Commissions v National Westminster Bank Plc [2003] STC 1072). The Claimants pointed out that this was a considered decision taken by the senior-most official in the Authority with responsibility for enforcement.

However, the Court ultimately decided that given that the penalties were public funds, the 'interests of the general community' dictated that there should be no repayment unless there was an entitlement to the same. This provided an objective justification to deny repayment of the settlement amount to the Claimants.

Access to legal advice

The Court went on to consider whether this was unfair on the Claimants. It noted, however, that the Claimants were well-aware of the allegations, and had entered into the ERA after seeking expert legal advice. They had chosen not to appeal despite being aware of the law surrounding finality of competition law cases.  


The Authority managed to avoid the repayment of a large settlement amount to the Claimants, but its conduct was criticised. This judgment once again highlights the importance of regulators designing transparent methods for their dealings and negotiations with commercial parties – especially where such negotiations may have an impact on other parties.

From the perspective of commercial parties, the Court's observation regarding access to expert legal advice was crucial, and demonstrates that parties must fully consider the implications of their decisions before entering into any negotiations with regulators. A failure to do so may leave them at a disadvantage in terms of future challenges to a regulator's decisions.