CAT sets aside competition fines in blow to OFT

The Competition Appeal Tribunal (CAT) has set aside fines totalling more than £200m levied by the Office of Fair Trading against tobacco manufacturers and retailers for alleged antitrust activity.

The ruling is believed to be the largest defeat ever given by the CAT against the Government, coming after the OFT’s defence fell apart after 19 witnesses failed to support its case.

The appellants, which included Imperial Tobacco, Shell and Asda, branded the OFT’s actions “mealy-mouthed”.

The OFT, represented by Monckton Chambers’ Paul Lasok QC, was forced to refine its case following cross examination of its witnesses.

It abandoned some of the assertions it had made in its decision to fine the companies in April 2010. It submitted a narrower defence, suggesting that the CAT came to its own decision on the alleged illegal activity rather than using the method deployed by the OFT.

Appearing for Imperial Tobacco having been instructed by Ashurst partner Nigel Parr, Brick Court’s Mark Howard QC launched a stinging attack on the OFT, stating: “In the refined case, the central plank has gone. It is no longer suggested that the [alleged illegal] agreements […] provided any certainty to Imperial in relation to the situation where [it] puts up the price”.

Blackstone Chambers’ Dinah Rose QC, who appeared for Shell instructed by Baker & McKenzie partner Richard Pike, piled on the pressure by labelling the OFT’s case a “Frankenstein”, adding: “What we have is not a living entity but a corpse.”

The trial began in September and was not expected to end until 21 December, but given the refined defence the CAT said it would halt the trial early, allowing the appeals because there was no defence.

In its judgment, delivered by a panel of three chaired by Vivien Rose, the CAT stated: “There is nothing in what happened during the course of the hearing that could properly be described as coming to light since the defences were first served or as something which it was not practicable for the OFT to know at that stage or as amounting to exceptional circumstances.”

The claimants will now issue a costs order against the OFT, following a seven-year long investigation by the regulatory body.

Ashurst partner Parr said:  “Throughout the investigation and the appeal we  believed that the OFT’s allegations would ultimately prove to be unfounded, as the OFT’s theory of harm was not supported by the factual evidence.”

It has been a tough year for the OFT in the CAT. In March the court ordered the regulator to reduce a series of fines it had imposed against six construction companies found to have breached price-fixing rules (21 March 2011).

The OFT said in a statement that it “considered it important to investigate fully concerns around the pricing practices of the parties in this case and to make a decision about them. Despite the disappointing outcome in the particular facts and circumstances of this case, the OFT will continue to pursue high impact enforcement cases, including taking difficult or highly complex cases of this type that test the law”.

The legal line up:

Ashurst partner Nigel Parr instructed Brick Court’s Mark Howard QC and Mark Brealey QC to lead Tony Singla, also of Brick Court, for Imperial Tobacco Group plc and Imperial Tobacco Ltd.

Burges Salmon partner Laura Claydon instructed Matrix Chambers’ Rhodri Thompson QC to lead Christopher Brown, also of Matrix Chambers, for the Co-operative Group.

Hogan Lovells partner Suyong Kim instructed Blackstone Chambers’ Pushpinder Saini QC to lead Monckton Chambers’ Meredith Pickford and Tristan Jones, also of Blackstone Chambers, for Wm Morrison Supermarkets, Safeway Stores and Safeway Ltd.

Norton Rose partner Mark Jones instructed Brick Court’s James Flynn QC to lead Robert O’Donoghue, also of Brick Court, for Asda Stores, Asda Group, Wal-Mart Stores (UK) and Broadstreet Great Wilson Europe Ltd.

Baker & McKenzie partner Richard Pike instructed Blackstone Chambers’ Dinah Rose QC to lead Brian Kennelly, also of Blackstone Chambers, for Shell UK, Shell UK Oil Products and Shell Holdings (UK).

Defendant lawyers:

OFT general counsel Francis Barr instructed Monckton Chambers’ Paul Lasok QC to lead a team of Monckton juniors which included Elisa Holmes, Rob Williams, Anneliese Blackwood and Ligia Osepciu.


Addleshaw Goddard partner Adam Aldred instructed Brick Court’s Helen Davies QC to lead for interveners J Sainsbury plc and Sainsbury’s Supermarkets Ltd.