Member Article

Early Resolution and the Office of Fair Trading

With Watson Burton LLP Law Firm

EU competition law has been evolving over recent years and increasingly investigations regarding infringements of competition law reach an early resolution or settlement. As a result, the OFT, which regulates competition law in the UK, is developing its own policy and guidance for early resolutions in competition law, most notably through early resolution agreements. Essentially, an early resolution agreement is a negotiated confidential settlement in which the parties agree the level of fine, which is substantially reduced, in return for co-operation with the investigation and an admission of liability.

History

The circumstances in which early resolution agreements have been used in the past have varied. In the Independent Schools case, 50 independent schools investigated for fixing school fees entered into a blanket negotiated agreement.

In December 2007 the OFT announced that it had entered into early resolution agreements with several major supermarkets and dairy processors in relation to allegations of collusion on the pricing of dairy products. By entering into individual agreements with the companies, the OFT displayed an innovative approach to achieving flexible solutions.

Benefits

Benefits for the OFT include: obtaining a quick result; reducing costs and avoiding the possibility of lengthy appeals. For example, the resolution of the majority of the dairy investigations was achieved within two months of the OFT issuing its statement of objections. In contrast, in the replica football kit case, the matter was not concluded until some six years after investigations began. For companies early resolution can mean legal fees are reduced, the administrative burden of the investigation is alleviated and certainty is provided by having agreed the level of penalty.

Problems

It is unclear exactly how this new policy fits with the existing guidelines on penalty. Further, because the agreed reduction remains confidential, there is a lack of transparency. There is also the potential that settlements may be challenged on grounds of unequal treatment between parties.

Future

The OFT believes early resolution, in some circumstances, is an effective way of enforcing competition law whilst reducing the burden of investigations. The OFT has recognised that balancing the competing aspects is not straightforward and, therefore, continues to be cautious as it builds its experience and develops policy.

If you have any queries relating to this article, or any other Regulatory matter, please contact Caroline Rye at Watson Burton LLP on 0191 244 4368 or email caroline.rye@watsonburton.com.

This was posted in Bdaily's Members' News section by Ruth Mitchell .