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Petitioner: The COMPETITION AND MARKETS AUTHORITY VS Respondent: R (ON THE APPLICATION OF JUDGMENT
Court Name: Supreme Court of United Kingdom Judge(s): Lord Hodge, Lord Briggs, Lord Mance, Lord Carnwath, Lord Sumption Title:The COMPETITION AND MARKETS AUTHORITY vs R (ON THE APPLICATION OF
JUDGMENT
Reported As: 2018 SCMR 1342 Result: Appeal allowed Judgment JUDGMENT LORD CARNWATH: (with whom Lord Mance, Lord Sumption, Lord Hodge and Lord Briggs agree) 1. This appeal is concerned with the extent and consequences of duties of "equal treatment" or "fairness", said to have been owed by the Office of Fair Trading ("OFT") to those subject to investigation under the Competition Act 1998 ("the Act"). Since the events in question the OFT has been replaced by the Competition and Markets Authority ("CMA"), but it will be convenient in this judgment to refer throughout to the OFT. The facts The investigation 2. In March 2003 the OFT began an investigation into alleged price-fixing arrangements in the tobacco market, contrary to section 2(1) of the Act. On 24 April 2008, it issued a Statement of Objections ("SO") under section 31 of the Act, addressed to 13 parties, including two manufacturers and 11 retailers. The first respondents ("Gallaher") were involved as manufacturers; the second respondents ("Somerfield") as retailers. On 15 April 2010 the OFT issued its decision ("the Tobacco decision") upholding the finding of infringement against both respondents, and all but one of the other parties. Six of those affected appealed to the Competition Appeal Tribunal. The respondents did not appeal, having each reached settlements with the OFT under the so-called "Early resolution process" (or "ER process"). The ER process 3. The letters accompanying the SOs sent to the parties in April 2008 had offered the possibility of obtaining a reduction in the financial penalty through co-operation with the OFT's investigation.
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The parties were invited to indicate by 9 May 2008 whether they wished to enter into without prejudice discussion with the OFT for this purpose. Both the respondents responded positively within the time-limit. Following negotiations they, along with four other parties, entered into Early Resolution Agreements ("ERAs"). 4. The ERAs required the signatories' admission of involvement in the infringements, set out a series of terms for further co-operation, and indicated the penalties to be imposed subject to a possible reduction of up to 20% for procedural co-operation. Entry into an ERA did not prevent a party from terminating that agreement at any time up to publication of the OFT's final decision. If a party did terminate an ERA, it would forgo any discounted penalty negotiated as part of the ERA. In that event, the OFT would continue with its case against that party in accordance with the usual administrative procedure. A party to an ERA could also, upon receiving the final decision, decide to appeal against it if it wished to do so, notwithstanding the admissions in the ERA. In that event, the OFT reserved the right to make an application to the Tribunal to increase the penalty and to require the party to the ERA to pay the OFT's full costs of the appeal regardless of the outcome. 5. The ER process was not subject to any statutory rules, nor at the material time described in any published document. The clearest contemporary description of the ER process (though not by that name) came in an internal document of the OFT dated 28 January 2008, and entitled "A principled approach to Settlements in Competition Act cases". This paper was designed to draw out "a number of principles from the OFT's experience to date, and emerging thinking, on settlements in Competition Act 1998 cases", and to provide "a policy framework for teams who may be considering the possibility of settlement". Ten principles were identified and discussed. 6. Particular attention in the present case has been directed to Principle Three: "Fairness, transparency and consistency are integral to an effective settlements process". This was explained as follows: "16. The overriding principles of fairness, transparency and consistency must always be taken into account. When engaged in settlement discussions, for example, it is important to ensure that the process is consensual and as transparent as possible throughout, in order to avoid any subsequent allegations of undue pressure having been applied to force parties to 'sign up' to settlement. 17. Consistency is a particularly key consideration, given parties' sensitivity to equality of treatment issues. Whether or not the details of an individual case have been made public, particular approaches in one case will inevitably 'leak out' during the settlement process (and be set out in the infringement decision) and inform parties' strategies in others. Consistency of approach (or, alternatively, the formulation of strong arguments to justify taking a different approach in similar circumstances) is therefore vital ..." 7. Although this is useful as indicating the adopted policy approach of the OFT itself, it is not suggested that the contents were known to or in terms relied on by the respondents when entering into their agreements. However, the OFT had a separate "speaking note" for use in discussions with parties. This summarised the main features of the ER process, and ended with the following commitment to "equal treatment": "Once first party signed up, the OFT will inform other parties of the terms agreed in terms of the Step 1 to 5 penalty calculation - these terms will be the benchmark for dealing with other parties (as the OFT will observe equal treatment principles)." 8. Both the respondents concluded ERAs with the OFT in early July 2008, involving substantial reductions in the anticipated penalties. In due course, when the OFT decision was issued in April 2010 the respondents did not appeal, but instead elected to pay the penalties imposed in the ERAs, taking the benefit of the reductions. TMR
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9. Martin McColl Retail Group Ltd and TM Retail Group Ltd (together, "TMR") was another party subject to the investigation, which also entered into an ERA. In the course of the negotiations for the ERA, at a meeting on 8 July 2008, TMR's representatives asked about the OFT's likely attitude to those who entered ERAs in the event of a successful appeal by one of the other parties to the investigation. The effect of the exchange was recorded in an email from TMR to OFT after the meeting in the following terms (which were not contradicted): , "Should another manufacturer or retailer appeal any OFT decision against that manufacturer or retailer to the CAT (or subsequently appeal to a higher court) and overturn, on appeal, part or all of the OFT's decision against that manufacturer or retailer in relation to either liability or fines, then, to the extent the principles determined in the appeal decision are contrary to or otherwise undermine the OFT's decision against [TMR], the OFT will apply the same principles to [TMR] (and therefore presumably withdraw or vary its decision against [TMR] as required)." (Emphasis added) In the course of 2009 and 2010, and before the expiry of the time for appealing the OFT decision, two other parties ("Party A" and Asda) made similar inquiries about the effect of a successful appeal by other parties, but received non-committal answers. The Tribunal's decision and its aftermath 10.On 12 December 2011 the Tribunal gave judgment allowing all six appeals: [2011] CAT 41. Following the Tribunal's judgment, TMR wrote to the OFT inviting it to withdraw the OFT's decision as against it, and threatening legal action if it failed to do so. In the course of further discussions TMR relied on the OFT's earlier assurances about its position in the event of a successful appeal by another party, stating that this had been "a key factor" in its own decision-making. As to what followed I take the following from the agreed statement of facts (para 50): "The OFT considered that the statements which it had made to TMR in 2008 might have given rise to an understanding on the part of TMR that the OFT would withdraw or vary its decision against TMR in the event of a successful third party appeal. In light of this, the OFT considered that there was a real risk that TMR would, as a result of this reliance on those statements, be permitted to appeal out of time to the Tribunal and would succeed in that appeal. The OFT reached a settlement agreement with TMR, by which the OFT agreed to pay to TMR an amount equal to the penalty TMR had paid together with a contribution to interest and legal costs. The Tobacco Decision was not withdrawn against TMR. The agreed terms were set out in a settlement agreement dated 9 August 2012." The OFT then published a statement about the TMR settlement on its website, in which it said that "in the light of the particular assurances provided to TM Retail" it had agreed to pay the amount of its penalty (2,668,991) and a contribution to costs. 11.In the meantime, following the Tribunal's decision, in February 2012 each of the respondents had written to the OFT calling upon it to withdraw the decision as against them, and .to refund the penalties. This was refused. In August 2012, after the publication of the information about the settlement between the OFT and TMR, they sent the OFT letters before claim, arguing that they also should be given the benefit of the assurances made to TMR. In October 2012 they issued the present claims for judicial review. The out-of-time appeals 12.The claims were initially stayed by consent to allow the respondents to pursue applications, made in July 2012, for permission to appeal the Tobacco Decision out of time. By rule 8(2) of the Competition Appeal Tribunal Rules 2003 (SI 1372/2003), the Tribunal may not extend the time limit for appeal unless satisfied that "the circumstances are exceptional". The applications succeeded before the Tribunal, but its decision was reversed by the Court of Appeal on 7 April 2014: Office of Fair Trading v Somerfield Stores Ltd [2014] EWCA Civ 400. The court held that there were no exceptional circumstances.
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13.In the leading judgment Vos LJ referred (paras 35-36) to the principle of finality, exemplified by the CJEU's decision in Commission of the European Communities v AssiDoman Kraft Products AB (Case C-310/97P) [1999] All ER (EC) 737 (the "Wood Pulp II" case). That principle was said to be based on the consideration that the purpose of such time-limits is "to ensure legal certainty by preventing Community measures which produce legal effects from being called in question indefinitely". Although the Wood Pulp II decision was "no more than analogous", it pointed the way to "the need for finality in competition cases". In the present case, in Vos LJ's view, the respondents had entered the ERAs with their eyes open and made a deliberate decision not to appeal. He added: "It is true that the OFT has the role of a prosecutor and has wide powers to impose penalties, and that those powers must be exercised on a proper basis, but that does not- stop commercial parties from taking a commercial view as to whether or not to sign up to an ERA after a long investigatory process and the publication of a lengthy Statement of Objections. The addressee knows precisely the terms that are being offered. It knows what it has done in relation to the alleged infringements, and what it is being asked to admit, and the terms requiring its co- operation and the fetters on its rights of defence to which it is being asked to agree. It can take it or leave it ..." (para 45) The courts below 14.In a judgment dated 26 January 2015, Collins J rejected the claims: [2015] EWHC 84 (Admin). He started from the proposition that the OFT's powers in relation to infringement of the 1998 Act were "subject to public law requirements of fairness and equal treatment", so that it was "essential that in negotiations in relation to ERAs one party is not given an advantage denied to another" (para 38). However, the assurance given to TMR had been given in error, without regard to the finality principle. Citing Customs and Excise Comrs v National Westminster Bank plc [2003] STC 1072 para 66, he agreed with Jacob J that "as a general rule a mistake should not be replicated where public funds are concerned". That consideration provided "an objective justification" for the refusal by the OFT to make payment to the claimants (para 50). 15.The Court of Appeal took a different view [2016] EWCA Civ 719; [2016] Bus LR 1200. In the leading judgment, Lord Dyson MR (para 34) noted it as common ground'that (in the words of Cranston J, Crest Nicholson plc v Office of Fair Trading [2009] EWHC 1875 (Admin)) "the OFT must comply with the principle of equal treatment in all steps leading up to the imposition of a penalty". He agreed that the assurance given to TMR was a mistake: "a decision which no-one who had the finality and legal certainty principles in mind could reasonably have taken" (para 58). The failure to offer a similar assurance to the claimants or others in the same position, or even to inform them, involved unequal treatment which was "stark and manifest" (para 59). Under the heading "Objective justification" (paras 53-54), he agreed with counsel for the OFT that a mistake was not "a trump card which will always carry the day ..." The question as he saw it was - "... whether there has been unfairness on the part of the authority having regard to all the circumstances. The fact that there has been a mistake may be an important circumstance. It may be decisive. It all depends." 16.He found assistance in the law relating to legitimate expectation, citing R v Secretary of State for Education and Employment, Ex p Begbie [2000] 1 WLR 1115, 1127B-D, per Peter Gibson LJ, to the effect that whether an authority should be permitted to resile from a mistaken statement "depends on whether that would give rise to unfairness amounting to an abuse of power". In the same way, as he saw it, the question in the present case was "whether the OFT should be permitted to resile from a mistake where to do so results in unfair and unequal treatment of the claimants". He concluded that it should not. 17.It is necessary to quote the concluding paragraph in full, to indicate the sequence of events
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and combination of circumstances, which appear to have led Lord Dyson MR ultimately to the view that the OFT's action was unlawful: "60. But the real focus must be on the question whether the 2012 Decision was objectively justified. That is when the OFT decided that it would act on the 2008 decision in relation to TMR and honour the assurances that it had mistakenly given at that time, and to treat the claimants differently. The result was that it agreed with TMR to repay the whole of its penalty plus a contribution of 250,000 in relation to costs and interest. But it refused to pay anything to the claimants. The only difference between the positions of TMR on the one hand and that of the claimants on the other hand was that the OFT had given the assurances to TMR in 2008, but not to the claimants. The effect of that manifestly unfair and unequal treatment in 2008 could have been reversed after the issue had been raised by Asda and party A and the OFT's eyes had been opened to the significance of its earlier mistake in giving the assurances to TMR. That would have put all the companies which had been the subject of the Tobacco Decision and to which the [Statement of Objections] has been addressed on an equal footing. The OFT could have withdrawn the assurances. It would not have been too late for TMR to appeal at that time. Even if TMR had been out of time, it would have had a very powerful case for arguing that the withdrawal of the assurances was an exceptional circumstance which justified an extension of time for appealing. Instead, the OFT acted on the assurances it had given to TMR, made the 2012 decision and repaid the penalty previously levied and made further payments too. In all the circumstances, this was a plain breach of the principle of equal treatment and unfair." 18.The Court of Appeal's order declared that the OFT had acted unlawfully by - "(a) not offering the appellants in 2008 the assurance given to [TMR] that in the event of a successful appeal by other parties, it would benefit from that appeal decision even if it did not appeal; and (b) refusing in 2012 to make payment to the appellants of the amount of the penalty imposed on them even though it had made such a payment to TMR." It ordered that the respondents should each be entitled to payment of a sum equal to the penalties they had paid to the OFT, together with an amount in interest and costs. Equal treatment and fairness The submissions 19.It was central to the reasoning of both courts below that the OFT was subject (as Collins J put it) to "public law requirements of fairness and equal treatment". That analysis was not seriously challenged by counsel for the appellant in this court. They accepted that "the principle of equal treatment" applied to the OFT, but submitted that it did not require it to replicate a mistake, at least in the absence of "conspicuous unfairness". They rely on the approach of Lord Bingham in R (O'Brien) v Independent Assessor [2007] 2 AC 312, para 30: "It is generally desirable that decision-makers, whether administrative or judicial, should act in a broadly consistent manner. If they do, reasonable hopes will not be disappointed. But the assessor's task in this case was to assess fair compensation for each of the appellants. He was not entitled to award more or less than, in his considered judgment, they deserved. He was not bound, and in my opinion was not entitled, to follow a previous decision which he considered erroneous and which would yield what he judged to be an excessive award." 20. The respondents similarly adopt the language of equal treatment and fairness. Thus Miss Jessica Boyd, counsel for the second respondent, formulated the issue in these terms: "The issue before the Court is whether it was conspicuously unfair and/or a breach of the principle of equal treatment, amounting to a breath of public law, for the OFT, on the successful appeal of its decision in the Tobacco Decision, to repay one non-appellant addressee of that decision (namely, TM Retail) the penalty it had paid pursuant to that decision, while refusing to do the same for the respondents."
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The "equal treatment principle" was said to be well-established in domestic law, by reference for example to R (Middlebrook Mushrooms Ltd) v Agricultural Wages Board of England and Wales [2004] EWHC 1447 (Admin) at para 74. The expression "conspicuous unfairness" was derived from the judgment of Simon Brown U in R v Inland Revenue Comrs, Ex p Unilever plc [1996] STC 681, as applied by Richards J in R v National Lottery Commission, Ex p Camelot Group plc [2001] EMLR 3, para 72. 21.To those authorities Lord Pannick QC for the first respondent added Bank Mellat v HM Treasury (No 2) [2014] AC 700, 773 para 25 per Lord Sumption; and Paponette v Attorney General of Trinidad and Tobago [2012] 1 AC 1, 12 paras 28 and 30 per Lord Dyson. He relied also on the formulation of the "principle of equal treatment" in European Union law: "The principle of equal treatment, as a general principle of EU law, requires that comparable situations must not be treated differently and that different situations must not be treated in the same way, unless such treatment is objectively justified." (Case C-510/11, Kone OYJ and others v European Commission (Elevators and Escalators Cartel Appeal) [2014] 4 CMLR 10, para 97). 22.This was said to apply to the relevant functions of the OFT, by virtue of section 60(1) of the Competition Act 1998, the purpose of which is to ensure that as far as possible "questions arising under this Part in relation to competition within the United Kingdom" were dealt with in a manner "consistent with the treatment of corresponding questions arising in Community law ..." However, I say at once that I find no assistance in this respect in section 60, which seems to me directed to questions arising specifically under the statute, rather than as here under general principles of administrative law. 23.Notwithstanding the degree of common ground on these points, it is important in this court to be clear as to the precise content and attributes of the relevant legal principles, and their practical consequences in terms of remedies. Equal treatment 24. Whatever the position in European law or under other constitutions or jurisdictions, the domestic law of this country does not recognise equal treatment as a distinct principle of administrative law. Consistency, as Lord Bingham said in the passage relied on by the appellant (para 19 above), is a "generally desirable" objective, but not an absolute rule. 25.The need for clear dividing lines in this context has been highlighted in the Privy Council's consideration of various forms of equal treatment clauses in common law constitutions. Thus for example in Webster v Attorney General of Trinidad and Tobago [2015] UKPC 10; [2015] ICR 1048 the Board was concerned with section 4(d) of the Constitution of that country, which recognises "the right of the individual to equality of treatment from any public authority in the exercise of any functions". Lady Hale commented (para 14) that "open-ended constitutional guarantees of equal treatment by public authorities, such as that in section 4(d), are few and far between". She contrasted such provisions with the Constitution of Mauritius, section 16 of which "prohibits discrimination both by the laws and by public authorities, but only on defined grounds", and under which, as the Board had held in Matadeen v Pointu [1999] 1 AC 98 "there was no general constitutional right to equal treatment by the law or by the executive". 26.In the latter case, in an important passage under the heading "Democracy and Equality" ([1999] AC 98, para 9), Lord Hoffmann had emphasised the need to distinguish between equal treatment as a democratic principle and as a justiciable rule of law: "9. ... Their Lordships do not doubt that such a principle is one of the building blocks of democracy and necessarily permeates any democratic constitution. Indeed, their Lordships would go further and say that treating like cases alike and unlike cases differently is a general axiom of rational behaviour. It is, for example, frequently invoked by the courts in proceedings for judicial review as a ground for holding some administrative act to have been irrational: see Professor Jeffrey Jowell QC,
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Is Equality a Constitutional Principle? (1994) 7 CLP 1, 12-14 and de Smith, Woolf and Jowell, Judicial Review of Administrative Action, 5th ed (1995), pp 576-582, paras 13-036 to 13-045. ... Of course persons should be uniformly treated, unless there is some valid reason to treat them differently. But what counts as a valid reason for treating them differently? And, perhaps more important, who is to decide whether the reason is valid or not? Must it always be the courts? The reasons for not treating people uniformly often involve, as they do in this case, questions of social policy on which views may differ. These are questions which the elected representatives of the people have some claim to decide for themselves. The fact that equality of treatment is a general principle of rational behaviour does not entail that it should necessarily be a justiciable principle - that it should always be the judges who have the last word on whether the principle has been observed. In this, as in other areas of constitutional law, sonorous judicial statements of uncontroversial principle often conceal the real problem, which is to mark out the boundary between the powers of the judiciary, the legislature and the executive in deciding how that principle is to be applied." (see now the current edition of De Smith's Judicial Review 8th ed (2018) paras 11.061ff) As that passage makes clear, in domestic administrative law issues of consistency may arise, but generally as aspects of rationality, under Lord Diplock's familiar tripartite categorisation. 27. The authorities cited by the respondents provide illustrations. The passage cited by Lord Pannick from Lord Sumption's judgment in Bank Melia( (No, 2) (above) at para 25 was concerned directly with the question of proportionality under the European Convention on Human Rights, but it was expressed in terms which could be applied equally to common law rationality. Lord Sumption spoke of a measure which, while responding to a real problem, may nevertheless be "irrational or disproportionate by reason of its being discriminatory in some respect that is incapable of objective justification". He gave as the "classic" illustration A v Secretary of State for the Home…
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