“We regard this as an exceptionally good result. It shows that competition law is working,” says the Solicitor to the Office of Fair Trading (OFT) Brian McHenry.
The OFT is justifiably delighted with its victory over all:sports and JJB Sports, which appealed against the regulator’s decision that they were guilty of fixing the price of football shirts.
According to the Director of Fair Trading John Vickers, before the OFT’s investigation began, it was very difficult to buy an adult short-sleeved England shirt for less than £39.99. By Euro 2004, he says they were widely available for as little as £25 – a statistic to hearten every flag-waving fan in England.
Make no mistake, though, that this appeal by all:sports and JJB was a crunch case for the OFT, which is no doubt relieved as well as delighted.
Until football shirts, the regulator had stuck to low-profile targets.
However, following a rare leak to the Evening Standard (which the regulator says was not officially sanctioned) and a total of £18.6m in fines for major high street names, the OFT – an acronym not usually found on the lips of Joe Public – was suddenly all over the press.
Not just all:sports and JJB, but ten businesses including the Football Association, Manchester United FC (MUFC), Umbro, Sports Soccer and JD Sports were found to have been involved in price-fixing.
OFT assistant director of legal Simon Brindley points out that the regulator has never lost a cartel appeal on the basis of liability, but it has been overturned on the level of its fines on several occasions.
The Competition Appeals Tribunal (CAT) has also been critical of the OFT’s case preparation, saying witness statements in the Hasbro toys and games price-fixing case were poorly drafted.
Plus, on the merger side, the OFT was virtually castrated by the CAT earlier this year. The CAT gave a ruling in the IBA Health case, only partially reversed by the Court of Appeal, which under one interpretation meant that any marginally controversial decision should be referred to the senior merger control body the Competition Commission.
So all in all, the OFT really needed a victory here.
Of those found guilty of price-fixing, only all:sports and JJB appealed on the issue of liability. As The Lawyer pointed out during the hearing (3 May) there were too many variables to predict which way the CAT would go.
But when the CAT handed down its ruling, the OFT won hands down. The regulator won on the key points of JJB’s and all:sports’ appeals against its original decision, which said the companies were involved in price-fixing on England shirts in the run-up to Euro 2000 and on MUFC’s new shirt, which was launched in August 2000.
In a particularly bold move, the OFT sent the previously unavailable diary of David Hughes, the owner of all:sports, for forensic examination. Sir Christopher Bellamy, president of the CAT, felt the diary was “evidence of Mr Hughes’ intention to form a ‘sports trade cartel’”.
Lead counsel for JJB, Lord Grabiner QC of One Essex Court, spent considerable time arguing the point that two of the main protagonists, Umbro and Sports Soccer, which both turned state’s evidence and received leniency from the OFT, actually had a mutually beneficial close commercial relationship.
This was important, he argued, because the OFT’s case was based on the premise that Umbro was in a position to put pressure on Sports Soccer and the other retailers to keep prices high.
However, Bellamy did not agree, saying in his judgment: “In our view, there was no sense in which Sports Soccer had ‘control’ over the Umbro brand.”
Bellamy also gave short shrift to JJB’s decision not to submit the usual 50-page skeleton argument. Grabiner argued successfully that there was no legal need for JJB to do so, but Bellamy said in his judgment: “The tribunal did not find JJB’s approach in its written pleadings to be helpful.”
Perhaps most crucially, Bellamy was unconvinced by the protracted grilling Grabiner and Laurie West-Knights QC of Hailsham Chambers gave to Mike Ashley, the owner of Sports Soccer.
The CAT president said: “Much of the fuller evidence now before us resulted, in our view, from the cross-examination which the appellants chose to conduct. In those circumstances, the approach we have adopted is, first, to make our findings of fact on the basis of the totality of the evidence before the tribunal.”
But that is only one side of the story. JJB and all:sports continue to deny that they were involved in price-fixing and are both considering an appeal. JJB’s finance director David Greenwood called the decision “slightly perverse”, but said it would take his legal team of Grabiner and DLA some time to plough through the judgment.
A spokesperson for all:sports said: “If only life was as black and white as the OFT and the CAT portray it. Time for appealing has not yet expired and it’s anticipated that it will not do so until after the penalty hearings have concluded. Time to appeal the tribunal’s earlier judgment, allowing the OFT to resurrect elements of the England case, is still running.”
Plus, there is a second half to this game. An appeal on the level of damages is still pending from JJB, all:sports, Umbro and MUFC. It was the huge fines that caught the eye of the public and the regulator must fight to preserve its right to triple damages.
Here JJB and all:sports might have a couple of tricks. The argument advanced about the complicity of Sports Soccer and Umbro might have more impact if it is used to argue that JJB and all:sports are less culpable.
Also, while the pair lost on the three main points, the CAT ruled that they did not fix prices for other periods during 2000 and 2001. According to Greenwood: “If the fine ends up being based on the turnover of those months [we were found liable for], it will be a very different picture indeed.”
Alternatively, as the OFT points out, the tribunal can vary damages up as well as down, and certainly a lot more evidence came to light as a result of the appeal.
That’s fighting talk from the regulator – it looks like this is one watchdog that is growing teeth.