© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
November 10, 2011 6:50 pm
Britain’s antitrust regulator will attempt to salvage its case against retailers and tobacco companies on Friday as a challenge to the price-fixing investigation and its record £225m fine comes to a head.
The Office of Fair Trading was told last week by the Competition Appeals Tribunal, which hears challenges to antitrust decisions, that the seven-week hearing would be adjourned to give the watchdog time to decide how to proceed after key witnesses undermined the regulator’s case.
The OFT had to decide whether to narrow its case against companies involved – including Imperial Tobacco, Asda and Shell – or abandon it entirely and ask the tribunal to send the whole investigation back for re-examination.
The regulator has chosen to streamline its case, people familiar with the situation said, as it believes that anti-competitive behaviour took place, even if its original stance must be revised. It will present its arguments on Friday to the tribunal, which will then decide whether to throw the case out or not. The OFT declined to comment on the legal proceedings.
The decision to adjourn the case is already an embarrassment and a tribunal decision to dispose of it would be a blow to the regulator at a politically sensitive time.
The government is currently weighing a change to competition investigations as part of its plans to restructure the antitrust authorities. It wants the OFT in all cases to present its investigatory findings to the tribunal, which would have the final say on determining any fines. The current system allows the OFT both to probe and penalise companies that it finds guilty of price-fixing or abusing their dominant position.
The regulator is also looking to rebuild its reputation in court after its first contested criminal trial collapsed in May 2010. It prosecuted four current and former executives at British Airways for allegedly fixing the price of fuel surcharges on transatlantic flights, only to be forced to abandon its case when thousands of previously undiscovered documents were found on the databases of Virgin Atlantic, which had blown the whistle on its rival.
The outcome of the tobacco case could also have implications for the completely separate BA case, legal experts explained, because companies including Asda originally settled with the OFT in the tobacco investigation in exchange for a lesser fine. Asda is now one of the complainants at the tribunal challenging liability.
BA also originally settled with the OFT in its civil case against the airline, agreeing in 2007 to a £121.5m fine. Since the collapse of the related criminal trial, Willie Walsh, the chief executive of BA’s parent company International Airlines Group, has raised doubts over whether the airline would pay all of the fine.
In the tobacco inquiry, the OFT fined 10 companies a total of £225m in 2010 after a seven-year probe, the biggest total penalty that the OFT had delivered. Imperial Tobacco received the highest fine, at £115m. The regulator dropped any case against Tesco, the UK’s largest supermarket, because of insufficient evidence.
The investigation focused on dealings from 2001 to 2003 between the retailers and the cigarette makers Imperial and Gallaher, which together enjoyed a market share of about 90 per cent.
The OFT claims Imperial and Gallaher had a number of bilateral arrangements with retailers under which if one manufacturer changed the price of a product, the supermarket would follow suit with a competing brand.
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in