In a judgment handed down this afternoon, the Competition Appeal Tribunal largely upheld Tesco’s appeal against the OFT’s decision that it had participated in unlawful agreements relating to the price of cheese: see Tesco Stores Ltd v Office of Fair Trading [2012] CAT 31.
Tesco’s victory is essentially on the facts: it persuaded the CAT that the OFT had misunderstood the evidence. The case is therefore yet another example of the facts of a case appearing very different when placed under forensic examination before the Competition Appeal Tribunal than they did when considered by the regulator (other recent examples are the tobacco litigation and the BSkyB case).
The OFT is plainly keen to strengthen the quality of its decisions. It has recently revised its Competition Act procedures guidance with precisely that goal in mind. It will therefore want to examine this latest judgment to see whether any further steps should be considered. Two points stand out.
The first and most obvious is that, in the course of its investigation, the OFT did not try to interview any witnesses in relation to the cheese allegations. Of course, the witnesses could have declined to be interviewed – but as the CAT commented at [119], it would be surprising for a regulator to treat that as a reason not to even try.
The reason the OFT chose not to interview anyone was because it considered that it had sufficient evidence in the form of documents. It did not need more. The problem with that approach is that all documents need to be understood in their context, particularly when they arise in the course of ongoing commercial relationships. Of course it may turn out that the witnesses can add little to what is clear from the documents, or that their evidence is simply unbelievable. But that is hardly a reason not to see what they have to say.
The second point is the limited probative value of early resolution agreements. Some of the other retailers had entered into such agreements with the OFT. The OFT did not rely on those agreements as direct evidence of Tesco’s unlawful conduct, but instead as evidence of the unlawful conduct of those retailers which had entered into the early resolution agreements. The difficulty arises because there is no clear line between Tesco’s unlawful conduct and the other retailers’ unlawful conduct: in a hub-and-spoke infringement such as existed in this case, the case against Tesco depended on proving the state of mind of other retailers.
The CAT held at [110] that, in the context of Tesco’s appeal, the early resolution agreements held little or no probative value, even for the limited purpose of proving the state of mind of the retailers which entered into the agreements. The agreements contain broadly drafted admissions which Tesco has not been able to test in cross-examination. They are vague as to precisely what is being admitted. And crucially, they are commercial documents – parties sign up not because of a simple desire to admit the “truth”, but to limit their fines and the prospect of protracted proceedings. There is inevitably an element of give-and-take over what is admitted, and a degree to which the commercial decision is driven by factors other than the company’s detailed assessment of the evidence.
Early resolution can and should be a major source of evidence for the OFT. One remarkable feature of this case is that some of the allegations against Tesco failed because the OFT could not show that Asda – a party to an early resolution agreement – had the requisite intent. Future signatories to early resolution agreements should take note. The obvious reaction to this judgment would be for the OFT to start insisting that early resolution signatories must require the individuals involved in the unlawful conduct to provide the OFT with detailed witness statements about precisely what happened, and for those people to attend the CAT to give oral evidence if necessary.
The OFT did succeed in establishing a few of the allegations against Tesco. There will be a further hearing to determine whether those allegations comprise distinct isolated infringements, or whether they are sufficient to make Tesco party to the single complex infringement originally found by the OFT.
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