Complaining to the OFT - Making and keeping them interested

This article appeared in International Company and Commercial Law Review in October 2006 and was written by Guy Lougher, Head of Competition, Pinsent Masons.

The Office of Fair Trading (OFT) is now in a position where each year it receives about 1,200 complaints alleging that there has been a breach of EC or UK competition law, but it has the resources to open investigations into less than 3% of that number (in fact about 25-40 cases) each year.  The OFT's response is to become much more selective about which cases it actively pursues, trying to focus its enforcement efforts on those matters of greatest public interest. 

In the long term, the OFT's new approach is likely to be positive for both complainants and defendants, as cases with real merit are more likely to be pursued vigorously and expeditiously.  This means that complainants will not be encouraged to invest resources in an investigation only for it to be abandoned in the later stages and also, that larger companies will be less likely to be forced into defending spurious claims. 

However, in the short term, the new, more focused approach taken by the OFT has resulted in teething problems.  In particular, the OFT's actions have been recently challenged before the Competition Appeal Tribunal (CAT) by companies whose complaints have been dropped by the OFT. 

The OFT's new priorities

For some time it has been increasingly obvious that the OFT would need to refine its focus in order to cope with its workload.  In March 2004 the OFT published its Annual Plan for 2004/2005, which noted that the OFT expected ‘to investigate between 45 and 65 cases where there are reasonable grounds to suspect an infringement’ of EC or UK competition law.  By the time of its 2006/2007 Annual Plan, published in March 2006, the OFT indicated that it expected to ‘begin investigations in 25-40 cases’.

In the meantime, the OFT had announced its intention to concentrate its enforcement efforts on five priority areas - construction and housing markets (including services related to them), healthcare, mass-marketed scams, credit markets and the interaction between government and markets (including public procurement).

The message of greater OFT focus was reinforced by the new Chairman of the OFT, Philip Collins, when in December 2005 he gave a speech setting out the future direction of the OFT.  He noted that the OFT's main challenges ‘are how we use our resources to best effect to resolve competition cases efficiently and fairly so that the benefits flow through to consumers without undue delay’. 

To ensure that the right complaints are investigated, the OFT has created a Preliminary Investigations Unit which is responsible for sifting through and prioritising competition enforcement cases.  The OFT has recently published its Competition Prioritisation Framework which sets out how it prioritises competition enforcement cases on the basis of:

• the likely customer detriment arising from the anti-competitive behaviour (for example, how many consumers are likely to be affected and to what extent?);
• its provisional view on the strength of the evidence provided by the complainant and the likelihood of success;
• what resources would be required to achieve the desired outcome;
• the nature and seriousness of the alleged infringement (for example, allegations of price-fixing or customer or market-sharing will generally be considered more closely than many other competition law breaches);
• whether there are any special or aggravating (or mitigating) features of the particular case identifying it as more (or less) suitable for an investigation;
• the precedent or policy value of the case (in particular, does the complaint relate to one of the OFT's priority areas?);
• whether enforcement action is likely to reduce or stop the detriment and deter other infringements;
• whether the OFT is the most appropriate body, and whether competition enforcement is the most appropriate instrument, for dealing with the case or whether other action (for example, private litigation) would be preferable.  In this respect, it is worth noting that the OFT is anxious to avoid being used as a cheap means of resolving commercial disputes.  In his December 2005 speech, Philip Collins referred to the OFT being used as a ‘punchbag’ by big companies in cases where there was no evidence of consumer detriment or of complaints from consumers.

Impact of the OFT's new priorities on cases

The OFT's use of these criteria will inevitably mean that some complaints which may involve genuine and serious infringements of competition law may not be investigated in any detail.  Similarly, the OFT is using these criteria to close cases that it has already opened in favour of focusing its resources on other ongoing cases or in investigating new complaints that better meet the OFT's prioritisation criteria.  In some instances, the OFT is now closing cases that it has been investigating for years and where considerable effort has already been invested by the OFT in seeking to reach an infringement finding. 

For those companies that have been defending themselves against long-running OFT investigations, the greater prioritisation is overdue but nevertheless welcome.  Complainants (especially where they are smaller companies) have predictably criticised the OFT's policy, arguing that the evidential difficulties and costs of litigation mean that they have no effective remedy other than to complain to the OFT. 

Complainants also argue that where the OFT has already opened an investigation, then an expectation has been raised that the OFT will pursue that investigation to ‘the end’.  The OFT disagrees, considering it has a wide discretion whether to investigate a suspected infringement.  The OFT argues that it may decline to investigate a new complaint, or to close an existing case, even where there is some evidence of anti-competitive behaviour, if it considers the case to be of low priority .

Either way, the result has been a spate of case closures by the OFT as it attempts to increase its capacity to investigate those cases it considers to be priorities.  As such, the crucial issue for potential complainants is how to get the OFT to investigate a complaint and, secondly, once an investigation has been initiated, how to ensure that the OFT continues to treat the case as a priority meriting further investigation.

Making the OFT interested in a complaint

The first consideration to bear in mind is that the OFT will only open an investigation if it considers that a complaint reveals a breach, or likely breach, of EC or UK competition law.  In addition, the more work a complainant undertakes before submitting the complaint, the less the OFT will need to do to investigate, which means the case will be less of a drain on the OFT's limited resources and in turn increases the possibility of the OFT considering that complaint.

It is important then, for a complainant to spend time and effort setting out the relevant facts and gathering the relevant evidence before making a complaint.  In particular a complainant should:

• ensure that the scope of the alleged infringement is clear, confirming the involved parties, the relevant markets and the competitive conditions on those markets.  This is particularly important in technically complicated cases;
• set out the facts clearly and concisely, ensuring that important facts don't become hidden in layers of less vital information (as too many complaints are excessively long and unfocused);
• provide factual and documentary evidence to support the allegations;
• focus on how the complaint fulfils the OFT's six prioritisation criteria and, in particular, how consumers will be harmed by the alleged anticompetitive behaviour;
• provide legal reasoning and economic analysis in order to outline exactly why the OFT should be investigating the complaint.  In more complex cases, the complaint may also need to identify any legal precedents that would be relevant to the OFT's appraisal of why the alleged behaviour infringes EC or UK competition law;
• explain why the complainant has no other remedies available to it.  For those cases that might affect trade between the UK and other States, the complaint will need to show why the European Commission or a competition authority in another EU Member State is not better placed to act; 
• address directly the issue about why the complainant is unable to pursue an action before the courts (important given the OFT's stated concerns about being used as a ‘punchbag’). 

Keeping the OFT interested in a complaint

Of the small percentage of complaints considered to warrant investigation by the OFT, less than half are currently likely to result in a final infringement decision, partly due to the OFT's policy of closing cases where higher profile or more serious complaints arise. 

Clearly it is preferential for a complainant if a case is kept open and results in an infringement decision.  The question is, how can a complainant try to keep the OFT interested in its complaint?

The most important thing a complainant must do is to maintain regular contact with the OFT.  If the OFT is being regularly updated about the facts in a case and is receiving new and interesting evidence in support of the allegations, then it is more likely to remain engaged with the case.  In particular a complainant should:

• report any new evidence which comes to light immediately;
• keep an eye on legal developments, as a point of law could arise at any time which may assist or contradict a complaint;
• look out for any development or evidence which may result in a case better fulfilling the OFT's prioritisation criteria;
• keep the OFT itself under constant review.  It is vital for a complainant to identify any new OFT focus on new priority areas or if the OFT starts a series of new, high profile investigations as this could lead to older, lesser priority investigations being closed unless action is taken; 
• maintain a dialogue with the OFT to try and ensure that the complainant is aware of arguments being made by others, and in particular by the entities being investigated, and the complainant should try to rebut conflicting factual or legal/economic arguments being put forward by others; and
• be alert (especially in factually or technically complicated cases) to any efforts by the entities being investigated to obfuscate the issues or to deflect the OFT's attention from the key considerations.

What happens when a case is closed

When the OFT intends to close an ongoing case that originated with a complaint, or to not investigate further a complaint, it will notify the complainant and will generally issue a provisional case closure letter.  The letter briefly describes the nature of the complaint, what the OFT has done about it and explains why it does not intend to pursue the matter further.  After an appropriate time for comment, the OFT will then decide whether to close the case or to take some other action (for example, to reopen the investigation).

Once the OFT has decided to close a case there are several options available to the complainant, other than simply dropping the matter.  A complainant may appeal to the CAT but the CAT will only have jurisdiction where the OFT's decision to close the case is considered to be tantamount to a decision on the merits of the case, i.e. as to whether there has been an infringement of EC or UK competition law. 

If the CAT has jurisdiction, it may then consider whether the OFT's decision was reasonable and justified by the evidence.  In such a situation, the CAT could remit the case back to the OFT which would then need to reconsider its decision, or the CAT could itself hear the evidence and decide whether there has been an infringement of EC or UK competition law.

However, if the OFT has not reached a decision on the merits of the case and has simply decided not to investigate the complaint (for example, because the case does not meet the OFT's prioritisation criteria), then the CAT does not have jurisdiction.  In that situation, the complainant's remedy would be to challenge the OFT's decision-making process via Judicial Review. However, even a favourable decision on Judicial Review will only correct any procedural deficiency, not the decision itself.  The case would be handed back to the OFT, which may well come to exactly the same decision the second time. 

Alternatively, a complainant whose complaint is rejected by the OFT could bring a damages action against the entity that infringed the competition rules in the High Court.  However, this could be a lengthy and costly process which could result in a financial burden for the complainant.

Conclusion

In conclusion, the OFT has decided to become much more selective about which complaints it will investigate, and is closing existing cases, in line with its prioritisation criteria.  Where a case is closed, a complainant with financial resources and a strong case can fight the case closure before the Courts. 

However, complainants with a genuine competition law grievance will find it more cost - and time-effective to devote more effort at the outset to ensuring that their complaint is properly presented in a way that maximises the chances of it being considered by the OFT.  To achieve that objective, the complaint must be clear, concise and focused, and the allegations must be supported by facts and (wherever possible) documentary evidence.  The complaint should also be accompanied by cogent legal and economic/financial evidence and should show how the behaviour is to consumers' detriment.  Such an approach is more likely to win and maintain the OFT's interest in the complaint.

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