Competition – Investigation – Fairness and equal treatment – Defendant body investigating possible collusive tendering in construction industry – Defendant introducing fast-track offer to encourage admission of liability in exchange for discounted penalty – Offer made to claimant – Claimant unable to accept offer by deadline – Defendant refusing to extend or reopen offer – Claimant seeking judicial review of refusal – Whether refusal constituting breach of principles of equal treatment and fairness – Application allowed
The claimant residential property developer was, until a management buyout in January 2003, the parent company of the Pearce Group, a subsidiary of which was a construction company (PM). PM ceased trading in 2003. All documents from the Pearce Group and PM had been transferred to the purchaser in 2003 and no Pearce employees remained with the claimant. The defendant, a body corporate established by section 1 of the Enterprise Act 2002, had wide powers to investigate and enforce competition law.
In 2004, it began investigating possible collusive tendering in the construction industry in England. The investigation principally concerned parties that were invited to tender for contracts and that engaged in activities comprising: (i) cover pricing; and (ii) agreements to pay compensation in return for specific anticompetitive activities. The defendant inspected the premises of 64 construction companies, following which a large number of those companies sought lenient treatment under the defendant’s leniency programme, by which the defendant imposed reduced financial penalties on parties that declared their involvement in cartel activities and co-operated with an investigation. Against the background of a significant investigation and a surfeit of information, the defendant decided to streamline the investigation and to close the general leniency scheme. It launched the fast-track offer (FTO), under which companies that had not already sought leniency could come forward and disclose their anti-competitive behaviour in exchange for a 25% reduction in any penalty that was imposed.
The claimant received an FTO but was unable to verify the allegations or to admit or deny liability by the specified deadline. It requested the FTO to be kept open until it was able to make an informed decision. The defendant replied that the FTO had been made available to all relevant parties on an equal basis. As such, it would be contrary to the principle of equal treatment and due process if the FTO were to be reopened or further extended for the claimant’s benefit. The claimant applied for judicial review of that decision, contending that the defendant had breached the principles of equal treatment and procedural unfairness.
Held: The application was allowed.
The defendant had infringed the principle of equal treatment and fairness because it had failed to give the claimant the same opportunity as other parties to make an informed decision on whether to accept the FTO.
It should have been evident to the defendant that, prima facie, the claimant was objectively in a different position from most, if not all, of the other recipients of the offer. The claimant was an historic indirect parent that, on making enquiry, explained that it was unable to obtain information about the tenders listed by the defendant. It had sold the part of the business that had engaged directly in the alleged infringements and no personnel from that time, common to both businesses, remained. That meant that the defendant had to address the principles of equality and fairness. It was not sufficient that the claimant received a similar offer as other companies. The defendant’s adamant refusal to have regard to the claimant’s contentions concerning its unusual situation, maintained up to and during the hearing, breached the principles of fairness and equal treatment. The defendant should have considered what steps it could have taken, if any, to accommodate what on the surface appeared to be the claimant’s objectively different position.
No objection in general terms could have been raised to the FTO. Enforcement authorities such as the defendant had a wide discretion in the conduct of investigations. The FTO was developed especially for this investigation, which was unprecedented in terms of the number of parties and infringements. It was for the defendant to decide the appropriate method of investigation; the methods used in one might not be appropriate in another. The defendant was under no legal obligation to craft any particular form of penalty reduction offer or settlement negotiation in the course of an investigation, and the decision as to whether to do so was a matter falling within its wide discretion.
However, equal treatment required that those in a similar position should be treated equally and those in a different position should be treated differently. The claimant was an indirect historic parent company that, on its account, had had failed to discover information on the tenders set out in the annex to the FTO. That, on the surface, suggested a case for different treatment.
It was no answer for the defendant to say that since there was no benefit to its investigation in terms of admissions it could simply ignore the claimant’s case. Nor was it appropriate for the defendant to suggest that the claimant could have made a commercial decision to accept the FTO, not knowing its position but assured that it would obtain the 25% reduction if later penalised. Seeking what were essentially blind admissions to what were said to be infringements of the law was a breach of the principle of fairness.
Treating the claimant differently and fairly did not mean that the defendant needed to reveal the gist of the case against the claimant. That would be inimical to the legal principle that enforcement authorities were entrusted with wide discretionary powers in the conduct of an investigation. The aim of the FTO was to reduce the burden on the defendant in the conduct of what was its largest investigation. However, the defendant should have acknowledged that the claimant might be in an objectively different position to other FTO recipients, and that, if established, that fact would be taken into account as a relevant consideration in fixing a penalty. The defendant had a wide discretion as to what effect, if any, that would have on any penalty imposed.
Richard Gordon QC and Marie Demetriou (instructed by Ashurst LLP) appeared for the claimant; Daniel Beard and Gerry Facenna (instructed by the Office of Fair Trading) appeared for the defendant.
Eileen O’Grady, barrister
