06 Apr 2011

(by Andreas Stephan) The UK prosecutes far fewer antitrust cases (i.e. illegal agreements and abuse of dominance) than any other significant jurisdiction. These few cases also take a very long time to complete. As part of its consultation on changes to the competition regime, the UK government suggests that changes are necessary in order to improve the efficiency of enforcement. In particular, it asks whether we should streamline the current inquisitorial procedure or replace it with a more prosecutorial approach.

A Prosecutorial Approach?

The OFT currently enjoys the combined roles of policeman, prosecutor, judge and jury. While it must always be concerned with ensuring a decision stands up to appeal, there is no obstacle to it delivering as many competition decisions as it wishes. This inquisitorial approach is very similar the European Commission’s procedure – in fact appeals against EC decisions can only be made to the General Court on narrower grounds than UK appeals to the Competition Appeals Tribunal (CAT).

Under a prosecutorial approach, the competition authority builds a case which it prosecutes in an adversarial setting such as a court room or internal tribunal. Such antitrust procedures exist in the US, Australia, Canada and Ireland. The court is the decision maker, not the competition authority. A prosecutorial approach is likely to boost transparency, lend greater credibility to the enforcement regime and reduce the number of appeals. The court or tribunal’s first instance finding will take into account many arguments that parties currently feel are not properly heard until the appeal to the CAT. A prosecutorial approach would thus help address concerns from the business community over separation of powers.

However, a prosecutorial approach is unlikely to improve the frequency of cases because the OFT would have the added burden of convincing the court or tribunal that a decision should be adopted in the first place. It would thus introduce an obstacle to enforcement where there is currently none. If appeals under an adversarial system are heard by a general court, there will also be greater difficulty in getting economic evidence heard. One of the CAT’s strengths under the current system is its proficiency in both the law and economics of competition policy. It does not necessarily follow that it would be able to deal effectively with economic evidence when presented in an explicitly prosecutorial manner. Finally, it would take the UK further away from the EU model with which it is obliged to ensure compatibility.

The dangers of streamlining

A report by the National Audit Office certainly suggests that the OFT could operate more efficiently and provide the taxpayer with better value for money. However, beyond management and administrative efficiencies, the consultation document speaks of the possibility of ‘streamlining’ current procedures. Although such mechanisms do improve efficiency, there is always a cost in terms of rigour and accuracy. For example, in the OFT’s dairy price fixing case a number of firms under investigation agreed to settle the finding of an infringement. Later, the bulk of the infringement had to be dropped because two of the parties who refused to settle were successful in challenging it. Concessions of this kind risk coaxing firms into admitting guilt when they are not even sure they have done anything wrong; something which is extremely damaging to the perceived legitimacy of competition policy.

What about private enforcement?

The brief discussion of private enforcement in the consultation document appears to treat it as an ‘add-on’ to public enforcement. This appears to be at odds with the Secretary of State’s forward which stresses the need to promote private-sector challenges to anti-competitive behaviour. If we want private enforcement to go beyond the occasional follow-on damages case, then it is necessary to consider the wider context of an effective competition regime. For example, there will be cases where prospective claimants have better information about an anticompetitive act than the competition authority and a better incentive to prosecute. Private enforcement also promotes deterrence and a competition culture – especially by making businesses part of the system of enforcement. The consultation is too silent on these issues.

Are we just getting hung up on numbers?

More research is needed to determine exactly why other EU states have delivered far greater numbers of decisions than the OFT. As most EU member states also follow the Commission’s model (as opposed to a prosecutorial approach) procedures may not be flawed in the way the consultation document infers. As it recognises, numbers relating to the frequency and speed of UK antitrust cases may be misleading. For example, they do not measure the accuracy of decisions. Many would argue that a minimalist approach to competition law enforcement is, in any case, preferable – only intervening in markets when absolutely necessary. Sector specific regulators may be using other powers to address potential antitrust problems. UK businesses may be involved in less anticompetitive behaviour because of a stronger competition culture. In addition, the OFT may be engaging with businesses in order to ensure compliance, where other authorities prefer the finding of an infringement. The existence of these and other factors can only be confirmed by a more careful comparative evaluation of the UK competition regime.