Anti-competitive companies, beware. There is a new regulator in town. It is tough, effective and saves the UK economy more than eight times what it costs the taxpayer.
So which body could possibly be this model of regulatory behaviour? None other than the Office of Fair Trading (OFT). Surprised?After all, we are talking about the same OFT that the National Audit Office blasted two years ago for costly inefficiencies, stating it needed “to improve further its management of investigations so that they are quicker, more transparent and are more consistent in quality”.
With those rebukes still fresh in the memory, it is little wonder the OFT wants to promote a report that found it saved the UK economy roughly £600m a year while operating on an annual budget of £70m.
Such were the findings of an OFT- commissioned report by Deloitte, the first of its kind. The report, which canvassed 202 UK companies and 234 competition lawyers in London and Brussels, discovered that each OFT investigation into a merger, cartel or abuse of dominant position deters at least five other anticompetitive agreements from taking place.
“One question is to what extent competition law deters rather than just punishes,” explains OFT chief executive John Fingleton in an interview with The Lawyer. “Our priority is to get compliance. It’s not to get people into court.”
As with any report, the more interesting elements are the questions raised rather than the answers supplied.
Not least whether the OFT should make more use of its criminal powers. The report found that “sanctions which directly affect individuals are believed by companies to be more important in deterring infringements than sanctions which are imposed on businesses”.
Fingleton also highlights this issue. “Ask any US lawyer and they’ll say that what made US companies take antitrust seriously was individual sanctions,” he says.
To that end the OFT has pledged to hire more case officers to ensure more civil and criminal investigations (The Lawyer, 6 August). Another key question is whether the OFT should examine more abuse of dominant position cases. The regulator has had successes with cartel cases such as British Airways, and in merger work, it has restructured its team and hired Alastair Mordaunt from Freshfields Bruckhaus Deringer to work under Simon Pritchard in a dedicated merger notification team.
But while Europe’s Directorate-General for Competition (DG Comp) seems obsessed with Article 82 (abuse of dominance) cases such as Microsoft, the same could not be said for the OFT.
So why is it not doing more monopolies work? “Concurrent UK regulators deal with sectors that are typically associated with monopolies,” argues Fingleton. “The UK has been ahead of the curve in restructuring those sectors.”
That said, Fingleton is keen to get a more “balanced portfolio” and wants more companies with legitimate concerns to approach the OFT. ‘Legitimate’ is the key word here: Fingleton says the OFT is inundated with complaints from ineffective companies in a markets with bigger, more efficient rivals.
He refutes claims that the OFT shies from abuse cases because they are too difficult and time-intensive to prove on limited resources. “Our staff think these cases are stimulating. They’re certainly not afraid of them – it’s just getting the right ones where there’s no concurrency with other regulators,” he insists.
Its reticence may be linked to the European Commission’s lack of concrete guidance. “There’s a compelling case for DG Comp to produce guidelines on Article 82,” stresses Fingleton. “If businesses across Europe are to face a consistent standard, some guidance would be useful.”
So in the absence of any such guidance thus far, will the OFT publish its own?”The OFT put up draft guidelines on its website four years ago,” counters Fingleton. “But the lead should be taken by the Commission. We want to work closely with it in producing them.”
Certainly this report arms the OFT with a strong bargaining card when it comes to negotiating its budget with the Treasury.
“Our budget negotiations for the next three years closed last December,” objects Fingleton. “Our budget will be 15 per cent lower in March 2011 than it is now. But we’ll make efficiency savings and we’re very confident we can deliver results within that budget.”
Even with all those new hires? “There are things we can do less of. We’ll prioritise and take on a smaller number of high- profile cases,” he says.
If that is true, expect more reports like this glowing one – it is hardly surprising that the OFT is considering commissioning them more often.