Gallaher Group Ltd and others v CMA

Following its investigation into the tobacco market, the Office of Fair Trading (OFT) issued a finding against 12 companies that certain price fixing arrangements had an anti-competitive object and/or likely effect (the Tobacco Decision).

The OFT entered into early resolution agreements (ERAs) with some of the companies, offering them reduced financial penalties in return for their co-operation with its investigation. TM Retail Group Ltd (TMR) entered into one such ERA. At the same time, it also secured assurances from the OFT that the Tobacco Decision against TMR would be withdrawn or varied in the event of a successful third party appeal against that decision.

Six parties who had not entered into ERAs went on successfully to appeal the Tobacco Decision. On the basis of the assurances it had given, the OFT then refunded the penalties TMR had previously paid, plus interest and legal costs.

When other companies with ERAs who had not obtained similar assurances to TMR found out about the settlement that the OFT had reached, they also requested to be refunded the penalties they had paid. The OFT refused these refunds, and the claimants, who fell into this category, brought a judicial review. The case concerned whether refunding TMR but refusing refunds to other companies was a breach of the principle of equal treatment or was unfair.

At first instance, Collins J found that the assurances to TMR had been given in error and the effects of that error should not be replicated due to cost to the public purse. The Court of Appeal disagreed, finding that the OFT's refusal to pay the appellants was unfair, in breach of the duty equal treatment, and not objectively justified. The Supreme Court unanimously allowed the appeal by the CMA (the OFT's statutory successor), finding that the OFT did not act unlawfully.

The main point of the judgment is that a mistake does not have to be repeated in the name of equal treatment. However, the main interest in the case lies in the Court's wider discussion. Although it had not been a point of contention between the parties, the Supreme Court took the opportunity to assert that the concepts of equal treatment and substantive fairness are not free-standing heads of claim for judicial review. Instead they are subsets of the concept rationality and legitimate expectation.

It remains to be seen whether this unexpected conclusion will make any difference to the threshold that must be met to succeed in challenges on the basis of equal treatment.