CAT on the mat?

Who regulates the regulators? At present it is 21 lawyers and 17 non-lawyers sitting in panels of three in Bloomsbury, with expansive powers by which scores of regulatory decisions can be revisited and remade.

The Competition Appeal Tribunal (CAT) may be a relatively new creature, but litigants have not been slow to recognise it as a powerful one. There is, nevertheless, a growing sense that, as businesses call increasingly frequently on those powers, the CAT is in danger of being overwhelmed.

With the proposed merger of the OFT and the Competition Commission, announced last October, has the time come for a review? Do the CAT’s broad powers improve regulatory decision-making or shift the focus too far towards litigated resolutions? Is there a mountain of litigation approaching with which the CAT will be unable to cope?

The CAT was established primarily to hear appeals on the merits against decisions of the OFT and the sectoral regulators under the Competition Act 1998, and to review merger and market reference decisions under the Enterprise Act 2002. With its panellists’ expertise in economics and business as well as in law, it is a natural forum for the specialised disputes in which regulators and their subjects are likely to engage.

There is no doubt that it is an impressively professional and modern jurisdiction, as the advocates who appear in its spacious, Wi-Fi-enabled hearing rooms and whose submissions are transcribed and published free on the tribunal’s website as a matter of course, will attest. Nobody would dispute either that good regulation requires the availability of a proper means of challenging regulatory decisions.

Heavy load

Nevertheless, as parties make more and better use of the scope for challenge, the issue of capacity is an increasingly pressing one.

The annual number of new claims or appeals, which has fluctuated between 10 and 20 since the CAT’s creation, leapt last year to 41. This was due primarily to the 25 appeals brought against the outcome of the OFT’s enormous investigation into bid-rigging in the construction industry.

The administrative implications of those appeals have been daunting. For one thing, the task had to be devolved to multiple panels, notwithstanding the risk of inconsistent judgments. Even the paperwork was physically too much. In October 2009 the tribunal issued a statement noting the procedural rule requiring applicants to attach a copy of the decision being appealed, and effectively instructing the parties named in the bid-rigging decision – a 2,000-page document – to ignore that rule.

The situation has amplified concerns that a readily available appeal on the merits may not be the best way of regulating regulation. If an undertaking adversely affected by a decision may invite the CAT to examine the case again, no matter how much effort has gone into making the decision unchallengeable, the fear is that parties will lose interest in the months of consultation and concentrate their fire on the crucial few days of court time.

These concerns are perhaps overstated. The CAT has shown that it is prepared, even on merits appeals, to show deference to the decisions of expert regulators. As it said in T-Mobile v Ofcom (2008), if a regulator chooses between equally sensible options, it is unlikely to remake that choice. One might also think that, leaving aside the construction appeals, the CAT’s caseload last year was relatively typical.

Nevertheless, there is little doubt that the CAT is stretched. Its user group noted in October 2010 how “very busy” the CAT was and indicated that the “long hearings” expected in the pay-TV and tobacco appeals this year would continue that strain.

There is a further unknown quantity in the form of damages claims following on from competition authorities’ findings of market abuse. Such cases, hitherto under-explored but capable of producing damages in the tens of millions, will stretch the CAT’s capacity still further as prospective claimants begin to take advantage of them.

In light of all this the tribunal’s stated aim of completing “straightforward” cases in less than nine months looks increasingly optimistic.

Change for the better

What scope is there for reform? The CAT’s president Mr Justice Barling is a firm defender of the merits appeal jurisdiction, and indeed has recommended (in his 2009-10 annual statement and elsewhere) that the damages jurisdiction be extended to embrace standalone claims.

Others suggest that the CAT’s jurisdiction should be confined to substantial errors in decision-making, as in a judicial review, or that damages jurisdiction could be removed to the High Court, leaving the CAT to deal exclusively with regulatory matters.

Less drastically, there is scope for stricter case management at the CAT, for example by limiting the extent to which it will allow cross-examination on disputed issues of fact. Finally, although a straightforward injection of funding is unlikely, the CAT is notably one of the few courts not to charge fees, and may consider doing so.

The problem is not yet so acute as to be unmanageable. But if the growth of litigation continues, thought will have to be given to a principled and practical approach to keeping the system under control.

Brian Kennelly and Tom Cleaver are barristers at Blackstone Chambers