On the 26 January 2014, the CMA released a statement praising the High Court’s decision to reject appeals by supermarket Somerfield (now part of the Co-op group) and tobacco giant Gallagher concerning their payment of fines. The fines were originally levied by the CMA’s predecessor, the OFT, against Somerfield and Gallagher (amongst others) over agreements regarding the retail price of cigarettes. In these agreements, it was alleged that there was price collusion when the price of cigarettes was linked to movements in competitors pricing which the OFT considered to be anti-competitive.
However, in December 2011, the alleged participants other than Somerfield and Gallagher (who had both entered into early resolution agreements with the OFT) appealed and the OFT’s theory of harm was proven unfounded. In May 2013, following the expiry of the applicable limitation period for lodging an appeal, Somerfield and Gallagher appealed their fines on the basis that another of the parties who had also settled through an early resolution agreement was repaid their fine due to a negotiated position with the OFT.
On 26 January 2015, the High Court dismissed the Somerfield and Gallagher appeals on the basis that a public funds mistake (the break down of the case by the OFT and a subsequent promise by the OFT to another infringer to repay the fine) should not create a precedent for others to make further gains. Crucially the High Court looked at the behaviour of the appellants and the fact that they had entered into early resolution procedures agreements with no assurance of appeal or repayment. The OFT’s mistakes in negotiating with another party should not create a benefit for the appellants and the appeal was dismissed.
The dismissal of the appeals by the High Court will put to bed the issue of the OFT’s historical error and create certainty for the CMA (as the OFT’s successor) in upholding any fines they levy as a result of settlement procedures. The drawback of the High Court’s decision is of course companies under investigation may think twice about settling with the CMA if they think the CMA have a weak case. The current case proves that once a company have held their hand up to liability, their fines are likely final.
The CMA statement can be found here.