Following a series of defeats for the Office of Fair Trading ("OFT") in recent years, which prompted criticism of its procedures, the OFT has now adopted a number of changes to Competition Act investigations.  The changes were announced this morning follow a consultation earlier in the year.  According to the OFT, they are intended to improve the robustness, transparency and speed of Competition Act investigations and to enhance engagement with the parties. 

The OFT is due to be replaced by the Competition and Markets Authority ("CMA") in April 2014 and the CMA will determine its own procedural arrangements for Competition Act investigations.  However, the OFT anticipates that these new procedures will provide useful experience on which the CMA can draw in developing its own procedures.  

Collective decision-making model

From today there will be a separation between the team carrying out the investigation into a suspected Competition Act infringement and those who decide whether an infringement has occurred.  The case team, led by a Senior Responsible Officer (SRO), will be responsible for investigating the matter, issuing the Statement of Objections and pursuing the case.  However, once the Statement of Objections has been issued, a Policy Committee comprising senior members of the OFT (including the Chief Executive, other executive members of the OFT Board, the Chief Economist, the General Counsel and the Senior Director of Policy) will appoint a three person Case Decision Group ("CDG").  At least one member of the CDG must be a lawyer and one must be a member of the Policy Committee. 

The CDG will be the decision maker on each case, although the CDG will consult with the Policy Committee on proposed decisions.  The Policy Committee's input will be on legal, economic and policy issues.  In contrast, the CDG will review the evidence and the submissions of the parties before reaching its decision. 

The OFT hopes that this multi-layered process will lead to more robust decision-making, with greater clarity on who the decision maker is, and avoid some of the confirmation bias concerns which existed in the previous structure.

The OFT had originally proposed in its consultation that the CDG would also be responsible for decisions on settlements, the acceptance of commitments and interim measures decisions.  However, following consultation, it has now been decided that the SRO will retain responsibility for settlements and commitments but will require the approval of the Policy Committee (rather than the CDG) before settlements or commitments can be approved.  For interim measures, the SRO will decide whether to take interim measures after consulting senior OFT officials.  The intention with these changes is to ensure that if, for any reason, the settlement or commitments negotiations fail, and the matter proceeds to an infringement decision, then the CDG will not have been "tainted" by concessions that may have been made in the course of settlement or commitment discussions with the case team.

Increased transparency

The OFT has also announced a number of measures designed to increase the transparency of its processes. 

  • Case Opening Notices:  As soon as the OFT decides to open a formal Competition Act 1998 case (ie once it has decided that the Section 25 Competition Act 1988 threshold of reasonable suspicion that an infringement has occurred has been met and that the case meets its case priority criteria) a Case Opening Notice will be published on the OFT's website.  From today, details of all current cases will appear on the OFT's website.  Following concerns expressed by respondents to the OFT's consultation, when the Case Notices are first put on the OFT's website, the parties' names will not be included although they are likely to be added once a Statement of Objections has been issued. 

Exceptionally, the OFT may delay posting Case Opening Notices in cases where publicity would prejudice the conduct of the case, for example, where a cartel case has been opened but dawn raids have not yet taken place.

  • Administrative timetables:  When new cases are formally opened, the OFT will also publish administrative timetables in order to provide interested parties with greater clarity on the stage that the OFT has reached in its investigation and, in theory at least, to impose public accountability on the OFT for the timing of their investigation.
  • State of Play meetings:  The OFT now proposes to offer a minimum of two, and in most cases three, State of Play meetings.  One will be immediately after the case opens (unless this would prejudice, for example, a cartel investigation); one shortly prior to a Statement of Objections being issued; and one after the parties have made written and oral representations.  The OFT is committing that at least one member of the CDG will attend the State of Play meeting that takes place after the parties have submitted their representations. 

Increased checks and balances

The new procedures entail greater involvement for the Chief Economist and General Counsel in the process, both directly with the case team and also through their involvement in the Policy Committee.  

Procedural Adjudicator trial to continue 

The OFT intends to continue its trial of having a Procedural Adjudicator; a senior OFT official who is available to decide on procedural disputes between the case team and the parties in Competition Act investigations.  This role was first introduced in March 2011 and is generally regarded as an effective way of resolving disputes.  The OFT intends to continue this trial through to the end of the life of the OFT.  Whether or not it will continue under the CMA is a decision yet to be taken but, given the success of the role, this seems likely.

Enhanced oral hearings 

The OFT has made it clear that it is keen for parties to request oral hearings.  The intention is that oral hearings will be more interactive and attended not merely by the case team but also by the CDG as well as the Chief Economist and General Counsel or their representatives.  The oral hearing provides an opportunity both for the parties to present their case to the decision makers ie the CDG as well as the investigators and other significant parties, and for the representatives of the OFT attending the hearing to ask questions of the parties.  The OFT has made it clear that oral hearings would not be used as an opportunity for the CDG to question the OFT case team - those discussions would take place on another occasion - nor for the parties to question the case team, although the parties would of course have opportunities in their presentation to raise concerns they have about the OFT's case. 

The agenda for oral hearings will be agreed between the OFT and the parties.  The hearing will be chaired by the Proceedings Adjudicator.  The OFT has extended the period between submission of written representations and the oral hearing in order to allow the parties and the OFT more time to prepare for the oral hearing.

Where fines are imposed, it is now anticipated that there will be two oral hearings - one on liability and a separate one on the penalty (see below on the draft penalty statements).

Draft penalty statements  

Following criticism of the opaqueness of the OFT's decision-making process on the level of penalties and the lack of opportunity for parties to comment on the level of penalties, in future in cases where there is a real possibility that a penalty will be imposed, a draft penalty statement will be issued to the parties (but not made public) and they will be given an opportunity to make written representations and also to request an oral hearing on the penalty.

All final decisions on both the infringement and level of penalty will be made by the CDG after consultation with the Policy Committee.

Comment  

Overall the changes mark a very positive step in the right direction.  It remains to be seen how the new procedures will work in practice, but the structure is a significant improvement.  One residual concern is whether the focus on increased robustness of decision making may work against the OFT's desire to speed up its processes.