Cats, bags, rings and rooms: the problem of confidentiality

Dealing with confidential information in competition cases can be tricky.  The CAT’s recent judgment in BMI Healthcare and others v Competition Commission [2013] CAT 241 provides some help.

The core problem of confidentiality in the context of competition law is that many of the arguments deployed by litigants and regulators rely upon information which is highly commercially sensitive.  Revealing one party’s business secrets to another – letting the cat out of the bag2 – not only risks aggravation to the cat’s owner but has the potential for serious economic harm.

A solution often employed by regulators is to redact confidential information from public documents.  But redactions can make it impossible to understand an argument.  To illustrate with the words of another Cat, Stevens:

‘The first [REDACTED] is the deepest, Baby I know —

The first [REDACTED] is the deepest

’Cause when it comes to being [REDACTED], she’s [REDACTED]

When it comes to [REDACTED], she’s [REDACTED]

When the argument matters, concealing the cat (or cut) can be grossly unfair.  In an attempt at compromise, the Tribunal commonly makes orders for confidentiality rings in proceedings before it, allowing feline excursions among the parties’ external advisers but (typically) out of sight of the parties themselves.  An alternative, which the Competition Commission had adopted in its private healthcare market investigation and which provoked the BMI Healthcare challenge, is a restricted-access data room: not letting the cat out, but allowing external advisers into the bag.  Both of these procedures are “closed”, in the sense that they are not open to the actual parties.

The Tribunal in its judgment is clear that the use by regulators of data rooms is not necessarily objectionable.  Such use is justifiable, so long as the sensitivity of the material in question warrants it and affected persons remain able to make worthwhile representations.  However, the particular data room procedure adopted by the Commission failed to meet the second part of that test.  External advisers were permitted to note down only their own client’s data; they were given an unreasonably short period of time in the room (two days); and they had no opportunity to confer or to draft a proper response while in the room (¶¶70-74).  The process was thus unfair and unlawful.

The judgment focuses upon the particular duty to consult under the statutory regime governing market investigations (section 169 of the Enterprise Act 2002), but it makes some broader and important observations on general principles of fairness.  Fairness usually requires, as the House of Lords held in ex parte Doody [1994] 1 AC 531, that a person be told at least the “gist” of the reasons for a decision affecting his interests.  The requisite “gist” is context-specific, but in a competition case will often require a high level of detail (¶39(7)).  It may be permissible, however, to restrict who is given access to that information (¶40).  The recent Supreme Court decisions of Al Rawi [2011] UKSC 34 and Bank Mellat [2013] UKSC 38 held that “closed” judicial proceedings are anathema to the common law and require express statutory authority; taken to their ‘logical extreme’, as the Tribunal nervously notes, those decisions ‘might be taken to express extreme disapprobation of the Commission’s use of confidentiality rings and data rooms – and, indeed, this Tribunal’s use of confidentiality rings’ (¶44).  Yet Al Rawi and Bank Mellat are not in the Tribunal’s judgment directly applicable to market investigation consultations; the decisions indicate only that closed procedures (including both confidentiality rings and data rooms) should be as narrowly used as possible (¶45).

The Tribunal is probably right so far as concerns consultation in the course of market investigations, which are, after all, administrative rather than judicial procedures.  The position in proceedings before the CAT is much more open to doubt.  In a case where confidential information is central to the case against a party, to restrict sight of that information to that party’s external advisers by a confidentiality ring or any other kind of “closed” procedure would appear to be in direct conflict with the common law principles of natural justice articulated by the Supreme Court.  Often it is in all parties’ interests to consent to a confidentiality ring.  But in an appropriate case, a party refusing to consent may be able to confront an opponent with this dilemma: either the cat’s out, or you are.

1                At the time of writing, the link to the judgment on the CAT’s website is down, but it should in due course be available here.  The only version I can get hold of appears to be missing the final part of ¶44.

2                To be distinguished from “Keeping the CAT in its bag”, an entirely different matter and the subject of Emily Neill’s blog post last year on 08- numbers


Filed under Procedure

2 responses to “Cats, bags, rings and rooms: the problem of confidentiality

  1. Pingback: Update – more cats in bags | Competition Bulletin

  2. Pingback: Competition round-up: January 2014 | Competition Bulletin