Antitrust Alert: Following European Trend, UK Office of Fair Trading Imposes its Highest Ever Fine

On 16 April 2010, the UK’s Office of Fair Trading (OFT) announced that it had imposed its largest total fine ever under the Competition Act 1998 – £ 225 million – high even though some of the parties benefited from a reduction of fines through the OFT leniency programme and "early resolution agreements" (or "settlements").  This decision is a sharp reminder that antitrust enforcement in Europe can lead to significant fines, not only by the European Commission (Commission) but also by the national competition authorities of 27 EU Member States, where in fact most competition enforcement in Europe is handled. 

The Commission recently has imposed record fines for violations of the EU competition rules, for both collusive behaviour (Article 101 of the Treaty on the Functioning of the EU, TFEU) and unilateral abusive conduct (Article 102 TFEU).  In 2008, the Commission imposed its highest ever collective fine in the "car glass" cartel (approximately € 1.4 billion), including a record individual fine in a cartel for Saint Gobain (€ 896 million).  In 2009, the Commission also imposed its highest ever fine for an abuse of a dominant position (€ 1.06 billion for Intel, more than double the € 497 million fine imposed on Microsoft in 2004).  This trend is expected to continue even under the new Competition Commissioner, Joaquín Almunia, who has said he has no plans to change the Commission's policy on fines.

In parallel, competition authorities of the 27 EU Member States apply national competition rules and EU competition law.  Although the total annual amount of fines imposed by national authorities in the major EU Member States (such as the UK, Germany, France) varies year to year, the trend of increasing fines can be observed at the Member State level too.  In 2009, Germany imposed a € 159 million fine on coffee producers, and the French imposed a € 94 million fine on interim work companies and a € 63 million fine on telecommunications companies.

The OFT Tobacco decision 

The UK Competition Act 1998 prohibits agreements and practices that have the object or effect of preventing, restricting or distorting competition in the UK and that may affect trade in the UK.  The prohibition applies both to horizontal coordination among competitors and to vertical arrangements between suppliers and resellers.

In 2003, a number of UK retailers applied to the OFT for leniency under the OFT leniency programme, which provides cooperating parties with immunity or a discount off fines, where they proactively volunteer information that assists the OFT's investigation.  Based on information provided by the retailers, the OFT opened an investigation into whether tobacco manufacturers and retailers had coordinated their retail prices for tobacco products in the UK.

In April 2008, the OFT issued a statement of objections (SO) against the tobacco manufacturers and retailers.  The OFT found that two tobacco manufacturers and ten retailers had fixed retail prices for tobacco products in the UK.  In July 2008, the OFT announced that it had reached "early resolution agreements" with six of the retailers, which had admitted coordinating retail tobacco prices and agreed to a streamlined procedure to resolve the case more quickly, reducing the costs of the investigation.  (This "settlement" procedure is available both at the EC level and in some Member States.)  In exchange, the fine that otherwise would have been imposed on each of these parties will be reduced, on the condition that it continues to provide full cooperation with the OFT.  This is one of the few cases in which such "settlements" have taken place in the UK.

On 16 April 2010, the OFT fined each manufacturer and retailer that had made a vertical agreement restricting the ability of the retailers to determine its selling prices independently, by linking the retail price of a manufacturer's brand to the retail price of a competing brand of another manufacturer.  These vertical arrangements restricted the ability of these retailers to determine their selling prices independently, thereby breaching the Competition Act 1998.

Some of the retailers benefited from discounts in their fines under the OFT's leniency programme, with one receiving complete immunity from fines, as it was first to apply to the OFT for leniency.  Some of the parties received reductions in their fines because they had entered into "settlements" in which they admitted liability in respect of the infringements.

The Commission and many national competition authorities have increased their pursuit of price coordination, leading to higher fines.  High fines persist despite leniency programmes and settlements by both the Commission and national authorities.

A public version of the OFT decision will be published later this year. 

For more information, please contact your principal Jones Day representative or either of the lawyers listed below. 

Vincent Brophy
London / Brussels
+ 32.2.645.15.35
vbrophy@jonesday.com

Scott McInnes
Brussels
+ 32.2.645.14.10
smcinnes@jonesday.com 

Jones Day prepares summaries of significant antitrust enforcement, litigation, and policy events as a service to clients and interested readers, to provide timely insight on antitrust and competition law developments relevant to business, but not as legal advice on any specific matter.  Please visit our Publication Request form to add your name to our distribution list.