Two companies have been unsuccessful in their attempt to overturn fines imposed under a settlement agreement with the Office of Fair Trading (OFT) on the basis that the OFT had agreed to refund the fine paid by another company as part of the same investigation. The case establishes that in a claim for judicial review, the English courts will consider equal treatment and substantive fairness as aspects of the requirement for rational decision-making rather than as standalone principles.
In R (Gallaher Group Ltd and others) v Competition and Markets Authority  UKSC 25, the Office of Fair Trading (OFT, the predecessor to the Competition and Markets Authority) investigated price-fixing allegations in the tobacco market, resulting in findings of infringement against 12 parties. Six of these had previously reached settlements with the OFT in return for reduced fines. The other six appealed to the Competition Appeal Tribunal (CAT). All six appeals were successful.
The OFT had told all the parties during settlement negotiations that it would “observe equal treatment principles”. One party, known as TMR, specifically asked for an assurance that if there was a successful appeal by any other party against a finding of infringement, the OFT would withdraw or vary its findings against TMR accordingly. As a result of a misunderstanding of the legal position, one of its case officers gave that assurance. The other parties did not make any similar request.
Following the CAT decision, and in light of the mistaken assurance, the OFT reached a further settlement agreement with TMR under which it would not withdraw its finding of infringement, but would refund TMR’s fine and make a contribution to the interest and legal costs it had incurred. The OFT refused to make similar refunds to the other parties who had reached settlements. Those parties brought claims for judicial review. They relied in part on s.60(1) Competition Act 1988, which requires consistency of interpretation between UK and EU competition law, and the decision in Kone OYJ and others v European Commission, Case C-510/11  4 CMLR 10 that “comparable situations must not be treated differently unless such treatment is objectively justified”.
The Supreme Court did not accept that the decision in Kone applied in the present case, holding that s.60 Competition Act only applied to questions arising specifically under that statute, rather than under general administrative law. The court reiterated that the grounds for judicial review in English law are that a public authority’s decision is illegal, irrational or procedurally unfair. It went on to clarify how these grounds relate to fairness and equal treatment, broadly as follows:
- There is a significant distinction between fairness and equal treatment as general democratic principles and as justiciable rules of law.
- Equal treatment is not a distinct principle of English administrative law, but is one aspect of the requirement of rationality. As such, it is a desirable objective, but not an absolute rule.
- While English administrative law requires procedural fairness, it does not in general require that the result of the procedure is substantially fair.
- However, in rare instances substantial unfairness may fall within the existing requirement of irrationality if:
- the decision-maker’s statements or conduct have given rise to a legitimate expectation of a different result; or
- the decision is not based on relevant considerations.
- Since the concepts of relevance and legitimate expectation are already components of the requirement of rationality, it is not necessary to formulate a new test based on unfairness.
Applying these principles to the present case, the court held that the assurances which TMR had asked for and received from the OFT created a difference between TMR and the others that was not only relevant, but “potentially crucial”, since it created possible grounds for TMR to appeal to the CAT out of time. The other parties had no basis for a late appeal. It was not irrational for the OFT to take this difference into account in dealing with the unpalatable situation in which it found itself as a result of its earlier mistake. The statement made to all parties that the OFT would “observe equal treatment principles” did not give rise to a legitimate expectation that it would do more than was required to comply with the requirement of rationality.
This case provides useful clarification of the extent to which English public authorities are obliged to take equal treatment and substantive fairness into account in their decision-making. The key takeaway is that in judicial review claims, the English courts will consider these objectives as part of the requirement of rationality rather than as standalone principles. In claims brought under the Competition Act, however, a broader duty may apply under EU law.
Although the court began by rejecting objective justification as the applicable test where the claim is brought in judicial review, Lord Carnwarth noted that in his view that test would have led to the same result on the facts, while Lords Sumption and Briggs considered objective justification as an element of their analysis of the rationality of the OFT’s decision. There is therefore still scope for parties to allege that the absence of objective justification rendered a decision irrational. Requests to an authority to explain the justification for a decision should be carefully phrased to ensure that the link with the requirement of rationality is clear.