Mission impossible?

Collins is taking the reins at a time when the troubled regulator has taken an unprecedented battering in the public arena. Recently, the House of Commons Committee of Public Accounts slammed the regulator for its high turnover of lawyers and for its financial inefficiency. It was also labelled “spineless” in relation to its supermarkets investigation (which was eventually referred to the Competition Commission) and for only focusing on small-fry cartel matters.

Collins has been charged with getting the OFT’s house in order amid this intense scrutiny and criticism of the regulator’s decisions and policies. While his supporters think he may be the OFT’s white knight, cynics believe Collins is more sacrificial lamb. For Collins, determined to retire on a high note, it is the biggest professional challenge he has ever faced.

Collins joined the OFT in October last year, having built much of his reputation in Lovells’ Brussels-based competition practice. The timing of his hire by the OFT was not great, with Collins having just joined Wilmer Cutler Pickering Hale and Dorr (now Wilmer Hale) in April 2005. He was forced to resign his position just one week after signing on the dotted line at the US firm.

“It was an opportunity I couldn’t miss,” Collins says. “I had the chance to lead the OFT into its next stage of development… All lawyers eventually face the question of how they will bring their career to an end and many don’t do it very effectively or sensibly. I felt this was a useful way to end mine.”

Since joining the OFT, Collins has been instrumental in rewriting a number of policies he describes as “outdated”, and has introduced a raft of initiatives aimed at tackling the criticisms levelled at the regulator.

One particular change that has raised the ire of many competition lawyers was the OFT’s move to abolish confidential guidance regarding mergers.

“It was past its sell-by date,” Collins says. “I was around when it started. I worked on the first case where it was used. It was important back then because there was very little information in the public domain and the process was not as transparent in that most of the decisions were taken by politicians.”

The confidential guidance process was “designed for a different era”, he adds. “It was becoming very resource-intensive and, because we couldn’t consult third parties, the value of what we could provide was limited. In hindsight, I think we should have pulled the plug earlier.”

Collins says the confidential guidance process will be reconsidered as part of a large-scale review to be conducted next year. He adds that interim measures will be announced within the next month.

“There was a huge divergence between law firms and how they used the confidential guidance. Some were in direct competition with one another for an advisory role on cases that may not have come to fruition,” Collins says. “We’re happy to have pre-notification discussions in real cases and, in future, we’ll be reviewing [confidential guidance] as part of the broader process. But we had a situation where we had to stop it from running away from itself.”

The OFT’s boldest new initiative was unveiled in January this year when it announced plans to launch a preliminary investigation unit to screen new cases.

Once set up, the department will investigate cases on an initial basis and decide whether they ought to be considered by the regulator.

The changes are set to be implemented after a damning National Audit Office (NAO) report criticised the OFT for being inefficient with public money.

At the time, the director of the OFT’s competition enforcement division Vincent Smith told The Lawyer (16 January) that the regulator needed to manage its workload and prioritise certain cases.

Collins says the new department is the first in a series of sweeping structural changes to be introduced within the OFT. Details of the across-the-board restructure are set to be announced during the summer.

“We’ve come up with an action plan and there’s a number of things we’ll be doing that will be announced later this year,” he says. “It’s all about the management of resources and ensuring the proper project management of cases. We want a much more structured system regarding the way cases are managed.”

Along with the preliminary investigation unit, the OFT is unashamedly dropping cases it no longer deems as a priority.

In March, the regulator came under fire for dumping a four-year, £1.5m cartel investigation into the telecoms market.

The OFT provisionally walked away from its investigation into a complaint by Cityhook, a transatlantic cable making company, that it was being boycotted unfairly by the UK Cable Protection Committee (UKCPC), the members of which include BT, Cable & Wireless and Level 3.

Addleshaw Goddard competition partner Edward Pitt, who represented the UKCPC, says the investigation was unnecessary and should have been stopped much sooner.

“If the OFT spent £1.5m on this investigation, you can multiply that by five for the companies that spent four years defending themselves against these allegations,” says Pitt. “The real cost of such an unnecessary and long investigation is the economic inefficiency caused by business uncertainty, as well as the disruption of management time.”

New initiatives such as the preliminary investigation unit reflect a growing trend among European regulators to manage the workload and encourage businesses to pursue litigation as a means of dealing with competition issues in a system broadly similar to that used in the US.

Collins is particularly supportive of the European Commission green paper that encourages private enforcement of antitrust cases. “It’s an important issue and it goes back to the proper use of public and private resources,” he says. “We’re looking at what we can do in the UK to promote private enforcement.”

He adds that the OFT is also keen to protect competition as opposed to competitors. “We need to give the appropriate weight to competitors,” he says. “In the US, competitors are usually given short shrift.”

The OFT chairman’s comments provoke a mixed reaction from City competition lawyers when put to them. One magic circle competition lawyer claims the UK regulator is in danger of following in the footsteps of the US, where private action is sought after the regulator makes a judgment.

“This doesn’t result in enforcement, just a huge amount of expenditure and a heavy burden on the so-called victim,” the source says.

DLA Piper Rudnick Gray Cary competition partner Mike Pullen argues that private enforcement is difficult for companies which lack the powers to obtain evidence.

“Unlike companies, regulators like the OFT have the powers necessary to conduct dawn raids and demand documents and evidence to support the case,” says Pullen.

On the other hand, Lovells global head of competition Susan Bright agrees with Collins’ sentiments. “The OFT and the Competition Commission don’t have the resources to pursue every case,” she insists.

Criticisms of the OFT have been threefold. Perhaps most prominently, the House of Commons Committee of Public Accounts slammed the regulator for failing to hold on to its best lawyers and for being inefficient with public funds.

During the grilling, which took place in February 2006, committee chairman Edward Leigh stormed: “Your costs have increased by 70 per cent over the past five years. You’ve been given strengthened powers, but you don’t have a great deal to show for it.”

Leigh also criticised the regulator for its high staff turnover and questioned its ability to retain staff, including lawyers.

But Collins insists the turnover rate, which is around 10 per cent this year, is a typical feature of any regulator. “We view the revolving-door policy as not such a bad thing,” he says. “There’s intense competition for a small pool of talent.”

But Collins admits that the OFT does have its weaknesses. “Something we have to do is to bring the office together to make sure it has a single mission,” he says. “What we haven’t been good at is evaluating the benefits of the work we’ve been doing and explaining those benefits to businesses and consumers.”

The OFT has also been publicly slated for its ‘small fish’ cartel work, but Collins insists that size does not matter. “The fact is that anything large scale is likely to end up in Brussels,” he says. “The size of the case shouldn’t matter. For instance, we’re currently investigating the construction industry where it involves mostly small fish, but it’s a very real competition issue.

“It’s true that cases are driven by the information and complaints that come in, which is why we’re keen for a more intelligence-led approach.”

More recently, the OFT has come under fire for bowing to external pressure regarding its decisions, while other decisions have been overturned by the Competition Appeal Tribunal (CAT).

In March, the regulator made an embarrassing U-turn, announcing its intention to refer an investigation into the grocery sector to the Competition Commission six months after declaring no inquiry was necessary. The referral came after the OFT was lobbied to reverse its initial decision.

One competition lawyer close to the case says the OFT has become “spineless”.

“It’s bound by fear,” the lawyer says. “A regulator needs to rise above everything and make a judgment based on law, not on emotion or what others think.”

But Collins insists that the OFT’s authority has not been undermined.

He says the OFT looked at the supermarket inquiry again and that “a number of new issues emerged”. He argues: “It’s not undermining our authority at all. Judicial review is all part of an effective system. The CAT has told us that we need to be more thorough and robust and ensure we have the appropriate evidence to support our decisions. We’ve learnt a lot from the CAT.”

While Collins is well respected and highly regarded by both past and present colleagues, most competition lawyers agree that the OFT has a long way to go before some of its serious issues have been ironed out. That said, many think Collins and OFT chief executive John Fingleton could be the team to turn things around for the embattled regulator.

The OFT needs to engage with business in order to avoid being perceived as a barrier, but finding real solutions is likely to be a tad more complicated.

As chairman of the Office of Fair Trading (OFT), Phillip Collins is responsible for managing the board as well as all policy issues and matters affecting the regulator’s reputation. It is a part-time role - Collins remains based in Brussels while supplementing his time with academic work.

Critics have carped that Collins will struggle to fulfil his duties working in London just two or three days per week, but Collins insists that he can achieve his objectives under the current working arrangements.

“I’m living closer to my job than many other people who live in London,” he argues. “The fact that I live in Brussels is no impediment at all to my job. I spent many years spreading myself very thin in private practice, but I know I can’t do that in a public appointment.”