Eligibility for sporting competitions caught in the cross-hairs of competition law

In a recent announcement, the European Commission got its skates on and launched an investigation into the rules of the International Skating Union (ISU) which preclude skaters from taking part in events which have not been approved by the ISU. The announcement is only preliminary and does not represent a statement of what may or may not infringe competition law. However, it provides an indicator as to the issues of interest to the Commission, which may potentially have wider implications for other sporting bodies and the impact of competition law on their rules. It also reflects a growing willingness for EU bodies to apply antitrust rules to organisational rules of sporting bodies.

In this case, two Dutch ice speed skaters, Mark Tuitert and Niels Kerstholt, complained to the Commission that the ISU’s rules are “unduly preventing athletes from exercising their profession” by effectively precluding other companies or entities from organising alternative ice-skating events. No more detail has been provided at this stage, however the allegation bears a striking resemblance to that in the Bruce Baker dispute (see my previous post on this here) or the Indian dispute over the BCCI’s licensing of rival cricket events, Barmi v Board of Control for Cricket in India (see my post here).

Article 1(1) of the ISU’s Constitution (2014) makes clear that it is “the exclusive international sport federation (IF) recognized by the International Olympic Committee (IOC) administering Figure Skating and Speed Skating Sports throughout the world”. Article 2(1) goes on to provide that “[t]he ISU has jurisdiction throughout the world over all forms of international Figure and Speed Skating on ice and on synthetic polymeric ice surfaces whether performed using ice skating blades or substitutes simulating such blades”. Article 7(1)(b) contains a general prohibition that:

Members of the ISU, their affiliated clubs, their individual members and/or all other persons claiming standing as participants in the international activities of a Member or of the ISU […] shall not participate in any activities, national or international, against the integrity, the exclusive role and interests of the ISU.”

This set-up is not unusual. Indeed, in the so-called ‘European model of sport’, as recognised by the Commission itself, one of the ‘specificities of sport’ is that of:

the sport structure, including […] a pyramid structure of competitions from grassroots to elite level and organised solidarity mechanisms between the different levels and operators, the organisation of sport on a national basis, and the principle of a single federation per sport” (White Paper On Sport, COM(2007) 391 final, §4.1)

Although in its more recent documentation (e.g. the Communication, “Developing the European Dimension in Sport” COM(2011) 12 final) the Commission noted that there is no single model of good governance in sport (see §4.1), the ‘specificity of sport’ is now recognised in the EU Treaties, in particular at Article 165(1) TFEU.

However, since its seminal decision in Case C-519/04 P Meca-Medina and Majcen v Commission [2006] ECR I-06991 (ECLI:EU:C:2006:492), the Court of Justice of the European Union (“CJEU”) has made clear that “the mere fact that a rule is purely sporting in nature does not have the effect of removing from the scope of the Treaty the person engaging in the activity governed by that rule or the body which has laid it down”. In other words, sporting rules are not per se excluded from the scope of competition law where they have economic effects on the internal market. Indeed, other international bodies, such as FIFA, have been found to be dominant undertakings or associations of undertakings for the purposes of EU competition law (see, e.g. Case T-193/02 Piau v Commission of the European Communities [2005] E.C.R. II-209 (ECLI:EU:T:2005:22) at [114]-[115]).

On eligibility, the ISU Regulations provide (at Article 102(1)(b)) that an “eligible person”, i.e. one who can participate in ISU events (pursuant to Article 103), must be one who

elects to take part only in International Competitions which are:

1. sanctioned by the Member and/or the ISU;

2. conducted by ISU recognized and approved Officials, including Referees, Technical Controllers, Technical Specialists, Judges, Starters, Competitors Stewards and others; and conducted under ISU Regulations.

By virtue of Article 102(2), a person who fails to do so, and participates in other non-sanctioned events may be declared ineligible and effectively excluded from ISU activities.

The Commission has indicated the initial view that this “may prevent alternative event organisers from entering the market or drive them out of business” and therefore “constitute anti-competitive agreements and/or an abuse of a dominant market position in breach of EU antitrust rules”. It should be stressed that this is only an early announcement and the relevant rules will need to be examined according the objectives they pursue, and their proportionality in light of those objectives. However, the substantive analysis of the compatibility of sporting rules with EU competition law appears to be a growing trend.

In MOTOE (Case C-49/07 Motosykletistiki Omospondia Ellados NPID (MOTOE) v Elliniko Dimosio [2008] ECR I-4863 (ECLI:EU:C:2008:376)), the CJEU was faced with a case concerning an application by an independent Greek motorcycling association to organise various events, refused by the body charged by Greek law with authorising motorcycling events within the national territory. The CJEU carried out a substantive analysis of the legislative framework and held that “[a] system of undistorted competition, such as that provided for by the Treaty, can be guaranteed only if equality of opportunity is secured as between the various economic operators” (at [51]).

What is more, this is not the first time the ISU has been in the news in the past year, its rules on arbitration famously giving rise to the Munich Higher Regional Court’s decision in the case of Claudia Pechstein v ISU that a decision by the Court of Arbitration for Sport is void (as noted by Jane Mulcahy in her post). In that decision, the German Court considered that for the purposes of German law, the ISU was dominant on the relevant market, namely the organisation of World Speed Skating Championships, as it was the sole person able to organise those events.

These decisions appear to illustrate an incoming tide of interest from national and European competition authorities in the duties of international and national sporting bodies which are in monopolistic positions. It may be that the recognition of the organisational traditions of sport no longer cuts ice (or at least carries the same weight) with competition bodies as it did, such that rules conferring exclusivity and monopolies will need to be justified on the merits. However, this expansive approach is likely to be limited to cases of clear exclusions from or foreclosure of a market, given the Commission’s consistent recognition that the primary responsibility for governance of sports lies with “sport organisations” themselves (see, e.g. §4.2 of the 2012 Communication). Like skaters in the “Kiss and Cry”, awaiting results alongside the rink, this is a space to keep watching…

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Blown out of the water? Air Cargo and the future of extra-EU/EEA cartel damages claims

If the captain of a trading ship fires cannon on a canoe to prevent the canoeists trading with another boat vying for their trade, that boat’s owners can sue the captain: Tarleton v M’Gawley (1793) Peake 270. An intention to gain where your gain must be another’s loss is an intention to injure the other for the purposes of the “unlawful means” economic torts: OBG v Allen [2007] UKHL 21, [63] per Lord Hoffmann, [164]-[167] per Lord Nicholls.

What if there are two other boats competing for the canoe’s business, and the captain doesn’t care which of them will lose out? In such a case there remains an intention to injure, even though one of the victims will in fact have suffered no loss, because ‘there is the intent to damage the identifiable and known class of two boats’, competition for the canoe’s business being ‘effectively a zero-sum game’. So the Court of Appeal accepted in its judgment yesterday [2015] EWCA Civ 1024 in the Air Cargo litigation at [168]-[169].

But swap cannon for cartels; increase the number of victims; change boats for air cargo shippers and freight forwarders; exeunt the canoeists and enter The Gondoliers. In W.H. Newson [2013] EWCA Civ 1377 (blogged here by Andrew Scott), Arden LJ waxed lyrically dismissive of a cartel victim’s argument that it formed part of a class of persons against whom the cartelists intended to injure: ‘When everybody is somebody, then nobody is anybody’, to quote, as she did, Gilbert & Sullivan. Now in Air Cargo the Court of Appeal has endorsed Arden LJ’s approach and affirmed the binding nature of the Newson decision. Because the immediate victims of a cartel, or those next in the supply chain, may be able to pass on their losses to others further down the chain, the cartelists cannot be said to be seeking to gain at their expense. And while the loss must ultimately be borne by someone, to expand the class of victims ‘to anyone in the chain down to the ultimate consumers’ would open up ‘an unknown and unknowable range of potential claimants’. See the Court of Appeal’s judgment at [169]. The Court on this basis (reversing a judgment of Peter Smith J discussed in a previous blog of mine) struck out the Air Cargo claimants’ economic tort claims.

This is significant. Tort claims at common law might allow cartel victims to recover damages in respect of losses which EU/EEA law claim provides no remedy, for example where particular anti-competitive behaviour falls outside the territorial scope of EU/EEA law (see the Court’s judgment at [120]).  But the Court of Appeal at [174] made no secret of their pleasure, as a matter of policy, not to let the common law expand the scope of the remedies available to cartel victims under the law of the EU/EEA.

How then will claimants seek to recover such losses? There may be other routes to (some) recovery, such as the Air Cargo claimants’ “umbrella effect” argument, or claims based upon the competition law of foreign states which can be advanced in this jurisdiction (mentioned in the Court’s judgment at [157] and [120]). But the question of intention to injure in cartel claims must now be ripe for consideration by the Supreme Court. In particular, as Andrew Scott has remarked of Newson, pass-on appears to be attributed an unusual significance in this context. The captain of the Othello could not know whether the owners of the Tarleton would pass on their losses to others further down the chain, but he was liable nonetheless.

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Appealing energy price controls: guidance for beginners from the CMA

The CMA recently published its final determinations in two appeals brought by British Gas and Northern Powergrid against Ofgem’s electricity price controls for the next 8 years (decisions here and here). The appeals were the first under section 11C of the Electricity Act 1989 and the CMA’s decisions will therefore be the first port of call for any practitioners considering appeals against not only price controls but also any modifications made by Ofgem to electricity distributors’ licences. Continue reading

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PRIVATE ACTIONS: The CRA 2015 giveth; and the 2015 CAT Rules taketh away

Introduction

Today, on the 1st October 2015, when we are supposed to be celebrating the brave new world of the Competition Act 1998 (“CA”) as amended by the Consumer Rights Act 2015 (“CRA”), cartelists and other competition law infringers up and down the land[1] must be rubbing their hands in glee at the transitional provisions contained in Rule 119 of the Competition Appeal Tribunal Rules 2015 (“the 2015 CAT Rules” or the “New Rules”).[2]

The glee stems from the fact that these transitional provisions are very broad in temporal and material scope and yet very narrow in terms of gateway they provide into the new promised lands of flexible standalone claims,[3] and of collective redress leading to effective enforcement of private damages claims.   The problem, in essence is this: these transitional rules set in aspic for an unnecessarily long time the old CAT regime and all its manifest defects, defects which were the express cause for reform in the first place. Continue reading

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When should a decision be remitted to a different decision-maker?

The Court of Appeal’s answer to this question in HCA International Limited v CMA [2015] EWCA Civ 492  was, in effect: rarely. The judgment, which contains some serious criticism of the CMA even though it won the case, illustrates just how high the threshold is before a court will insist that a remitted decision should go to a new decision-maker. It is not enough for the original decision-maker to have made a mistake, however conspicuous. Rather, there needs to be a reasonable perception of unfairness or damage to public confidence in the regulatory process.

The background was the CMA’s private healthcare market investigation, which determined that HCA should divest itself of two hospitals in central London. That decision was premised in part on the CMA’s insured price analysis (“IPA”), which HCA argued (on an appeal to the Competition Appeal Tribunal) contained serious flaws. The CMA eventually accepted that its divestment decision should be quashed, and the CAT held that the matter should be remitted to the original CMA inquiry group for re-determination. Continue reading

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Arcadia v Visa revisited: the Court of Appeal takes a strict approach to limitation

Competition damages claims can be notoriously complex. According to the Court of Appeal, however, that is no reason to free them from the ordinary English rules of limitation – however strict those rules might be.

Unlike the large majority of European limitation rules, where time starts running from the date of the victim’s knowledge, the English rule under the Limitation Act 1980 (“LA 1980”) is that time starts running from the moment the wrong is done, unless the victim can show that the wrong was concealed from him. The claimants in Arcadia Group Brands Ltd & Ors v Visa Inc & Ors [2015] EWCA Civ 883 argued that various relevant facts had been concealed. Ultimately, their difficulty was that they did have sufficient facts available to them to plead their case. Continue reading

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Jurisdiction in competition damages actions: a first word from the CJEU

C-352/13 Cartel Damage Claims (CDC) Hydrogen Peroxide was the CJEU’s first judgment on the application of the Brussels I Regulation (44/2001) to competition damages claims. The case fell to be decided in the context of the EU’s various new measures to encourage private enforcement. The Advocate General was not convinced that this policy focus could be reflected in Brussels I – he considered that the Regulation was “not fully geared towards ensuring effective private implementation of the Union’s competition law” (at [8]). However, the CJEU embraced the challenge, and provided an interpretation of Brussels I that will do much to encourage private enforcement. Continue reading

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Asset acquisitions revisited

Earlier this year, I suggested that the law on when an asset acquisition might amount to a merger was somewhat opaque. The Court of Appeal’s decision in Eurotunnel II [2015] EWCA Civ 487 has brought some additional clarity, although the messy procedural history of that case has caused its own problems.

A quick re-cap on the background. Cross-channel ferry company SeaFrance went into liquidation in 2011. It could not be sold as a going concern, and there was instead an asset sale. Eurotunnel bought three ferries and various other assets.

The OFT (now the CMA) decided to investigate whether the acquisition was a merger. The basic question under the Enterprise Act was whether Eurotunnel had acquired “the activities, or part of the activities” of SeaFrance.

At the risk of stating the obvious, an asset is not an activity. However, there were some features of the asset sale – including the fact that the vessels were maintained ready to sail at short notice, and that a deal had been done to incentivize the re-recruitment of SeaFrance’s staff by any new owner – which the OFT considered meant that the relevant “activities” had been acquired. Continue reading

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Of Megabytes and Men: the private use exception under the judicial lens and lessons for state aid claims

On 19 June 2015, the High Court allowed a claim for judicial review against the decision to introduce a narrow ‘private copying’ exception to the Copyright, Designs and Patents Act 1988 (the “CDPA 1988”). The decision is of interest to EU and competition lawyers for two reasons: (1) its examination of the standard of review in public law cases with an EU law dimension and also (2) its analysis of the state aid issues which were raised. Continue reading

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Settling cartel damages actions: contribution defendants beware

Anyone who has ever tried to settle a cartel damages case will know that the law relating to settlements is fraught with difficulty. The recent judgment of the High Court in IMI Plc v Delta Ltd [2015] EWHC 1676 (Ch) highlights some of the problems. Continue reading

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Recovering penalties from directors and employees: Safeway revisited

Can a company which has been fined for anticompetitive conduct seek to recover the fine from the directors and employees responsible by suing them for damages?

The question is moot in light of last week’s Supreme Court judgment in Jetivia SA and another v Bilta Ltd (in liquidation) and others [2015] UKSC 23, which casts some doubt on the Court of Appeal’s decision on this issue in Safeway Stores Ltd v Twigger [2010] EWCA Civ 1472. Continue reading

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Fresh grounds and evidence before the CAT

On the face of it, BT was the main winner in this week’s ruling from the Competition Appeal Tribunal: see British Telecommunications plc v Office of Communications [2015] CAT 6. However, the decision, which makes interesting comments on the rights of parties to adduce new grounds and evidence on an appeal, raises important notes of caution to all parties which may wish to appeal or intervene in future cases. Continue reading

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The ECJ on the Bus Lane Wars

Minicab giant Addison Lee recently suffered another defeat in the latest battle in the bus lane wars – this time at the ECJ. The outcome is no great surprise, but the Court’s approach to the question of when inter-state trade is affected is likely to be of broader interest. Continue reading

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Gallaher and Somerfield: will the CMA change its approach to settlement?

The latest episode in the tobacco litigation saga has seen Gallaher and Somerfield’s attempt to benefit from the collapse of the OFT’s case in November 2011 rejected by the High Court in R (Gallaher Group Limited and Ors) v Competition and Markets Authority [2015] EWHC 84 (Admin). Although the CMA will breathe a sigh of relief, Collin J’s critical judgment will give it food for thought on how it conducts early resolution negotiations in competition infringement cases in future. Continue reading

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Eurotunnel: when buying assets is a merger

When is an asset acquisition a merger? As the Eurotunnel litigation shows, the answer is not clear-cut.

The background is the 2011 liquidation of the cross-channel ferry company SeaFrance. It could not be sold as a going concern, so instead there was an asset sale. Eurotunnel bought three ferries and various other assets including the SeaFrance logos, brand and trade name, computer software, websites and domain names, and IT systems. Continue reading

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The costs of intervening

There is an interesting little point on costs buried away in last week’s decision in the “Ethernet” disputes in the Competition Appeal Tribunal (see BT plc v Cable & Wireless Worldwide Plc and others [2014] CAT 20).

Parties which intervene in CAT proceedings generally know that they are unlikely to recover their costs, even if they intervene in support of the party which is ultimately successful. There are, however, various exceptions to that principle – – and, indeed, in the Ethernet case itself some of the intervenors recovered some of their costs from the unsuccessful party. Continue reading

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Applying interest in damages claims

The Competition Bulletin is pleased to welcome the latest in our series of blogs by Oxera Consulting on key economic concepts for competition lawyers. In this blog, Enno Eilts, a Senior Consultant, discusses issues connected with the calculation of interest in damages actions. Continue reading

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What’s the plot? Conspiracy and 19th Century comic opera (again)

Ever since Johnson v Moreton [1980] AC 37 (61E-G per Lord Hailsham: ‘we should have to adopt the carefree attitude of the Mikado…’), references to Gilbert and Sullivan have been gaining ground in the judgments of our higher Courts. When last year Arden LJ rejected the argument, advanced by the claimant victim of a cartel, that it suffices to establish the intention requirement for the tort of unlawful means conspiracy that the claimant forms part of a class of persons against whom a cartelist’s wrongful acts were targeted, she did so by reference to The Gondoliers:

‘it deprives the requirement of intent to injure of any substantial content. It is tantamount to saying it is sufficient that the conspirators must have intended to injure anyone who might suffer loss from their agreement. If I might say so, the submission is reminiscent of the circularity of words in the Gondoliers that “when everyone is somebody, then nobody is anybody”’.

(See W.H. Newson [2013] EWCA Civ 1377 at [41], blogged here by Andrew Scott). Continue reading

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“It’s too late baby, now it’s too late”: limitation, competition claims and knowledge

How much knowledge does a potential claimant need before time begins to run against a competition claim against a party alleged to have breached competition law? This was the key question addressed by Mr Justice Simon in the first case in which an English Court has had to consider the effect of s.32 of the Limitation Act 1980 (“LA”) in the context of a competition claim. Continue reading

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High Court tests the limits of confidentiality in EC infringement decisions

The European Commission came in for some stern criticism from the High Court this week, in a case which looks set to test the boundaries of confidentiality in EC infringement decisions: see Emerald Supplies v BA [2014] EWHC 3515 (Ch).

The background is the 2010 EC decision fining BA and eleven other airlines a total of €800m for operating a global cartel for air freight services. Hundreds of claimants are seeking damages, and they sought disclosure of a copy of the decision – which, remarkably, has not yet been made public by the EC. Continue reading

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Competition law and public services: insights from the OFT report into higher education

Recent public sector reforms have relied on choice and competition to increase the quality and quantity of service provision, whilst also controlling cost, through a programme known as Open Public Services. The use of choice and competition gives rise to public service markets, and ensuring that these markets function effectively is one of the Competition and Markets Authority’s declared objectives. Higher education constitutes one of the larger public service markets, and to understand how the market for undergraduate education in England functions, in October 2013, the OFT launched a Call For Information. Continue reading

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Skyscanner: CAT quashes commitments in the online booking sector

In a judgment handed down on Friday, the Competition Appeal Tribunal has quashed the Office of Fair Trading’s decision to accept commitments in the online hotel booking sector. As the first case to consider such commitments, Skyscanner Ltd v CMA [2014] CAT 16 contains some helpful guidance, albeit that Skyscanner’s success actually hinged on a fairly narrow point of regulatory law. Continue reading

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MasterCard miffed as CJEU dismisses appeal

Yesterday’s CJEU judgment in the MasterCard case is a major defeat for a company which faces a huge number of private damages actions from retailers. The judgment also examines some interesting legal points, including in particular relating to the use of “counterfactuals” in competition cases. Continue reading

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The Cost of Collusion

The Competition Bulletin is pleased to welcome a guest blog from Louise Freeman of King & Wood Mallesons LLP. Louise specialises in (among other things) complex competition litigation. In this blog, she addresses the implications of the recent CJEU decision in Case C‑557/12 Kone AG and others v ÖBB-Infrastruktur AG. Continue reading

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Dogma in telecoms, cream for the CAT: 08- numbers in the Supreme Court

The Supreme Court yesterday handed down judgment in British Telecommunications plc v Telefónica O2 UK Ltd & Ors [2014] UKSC 42. Reversing the decision of the Court of Appeal (blogged on here by Emily Neill), Lord Sumption for a unanimous Supreme Court held that there had been no basis for Ofcom to disallow BT’s introduction of “ladder pricing” in wholesale termination charges for certain non-geographic telephone numbers (specifically 080, 0845 and 0870, whence the litigation’s popular name among telecoms lawyers: “08- numbers”). Continue reading

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Avoiding the clinch: judicial respect for the rules inherent to sport

In a recent bout in the High Court, the specificity of sporting disputes once again came to the fore. In Bruce Baker v British Boxing Board of Control [2014] EWHC 2074 (QB), 25 June 2014, Sir David Eady was faced with the old chestnut of a request for a court to interfere with a national sporting body’s decision to sanction one of its participants. One interim application later, and the BBBC was still standing. Continue reading

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The English law of causation and the passing-on defence

One of the big questions of English competition law is whether there is such a thing as a “passing-on defence” – – i.e. whether the damages suffered by a purchaser of a cartelized product are reduced or mitigated if he “passes on” some of the overcharge to his own customers. Two follow-on damages actions were due to be heard this term, arising out of the synthetic rubber cartel and the gas insulated switchgear cartel, both of which raised the question of passing-on but both of which have now settled. Continue reading

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Competition law and covenants restrictive of land use

Covenants restricting use of land to particular commercial purposes are commonplace. Until recently, the potential for competition law to regulate them was limited, because “land agreements” were excluded from the reach of the Chapter I Prohibition under the Competition Act 1998. The exclusion has, however, been revoked by the Competition Act 1998 (Land Agreements Exclusion Revocation Order) 2010. The OFT has also provided guidance on the application of competition law in this field. Continue reading

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Non-Appealing Cartelists Beware

Tucked away at the back of last week’s Supreme Court decision on time-limits for follow-on claims is a very important development for private competition actions.

The context is section 47A of the Competition Act 1998, a provision which has generated an extraordinary amount of litigation in view of the fact that it was intended to streamline private damages actions. Continue reading

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Tobacco decision: the Court of Appeal emphasises finality

The Court of Appeal yesterday delivered a judgment that should finally draw a line under one of the Office of Fair Trading’s more troublesome cases – and which will presumably bring a great sigh of relief from the Competition and Markets Authority, the body that has now taken over the OFT’s functions. Continue reading

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