The Supreme Court held that the Office of Fair Trading acted lawfully in repaying a competition penalty to one company which had received a mistaken assurance, while refusing the same repayment to other companies which had not. Equal treatment is not a free-standing principle of domestic administrative law, and the different treatment was a rational response to the fact that only the assured company had a realistic prospect of succeeding on a late appeal.
In March 2003 the Office of Fair Trading began investigating alleged price-fixing in the tobacco market, contrary to section 2(1) of the Competition Act 1998. In April 2008 it issued a statement of objections to 13 parties, including Gallaher as a manufacturer and Somerfield as a retailer. It invited discussions which could lead to a reduced penalty in return for admissions and co-operation. Gallaher, Somerfield and TMR were among those who entered early resolution agreements. The agreements required admissions and further co-operation, and indicated penalties subject to a possible reduction of up to 20 per cent. A party could end the agreement before the final decision and lose the discount, or appeal afterwards, in which case the OFT reserved the right to seek a higher penalty and its costs.
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The process was not then governed by statutory rules or a published document. An internal OFT paper treated fairness, transparency and consistency as integral to settlement. A speaking note told parties that, once the first party signed, the agreed penalty calculation would be the benchmark for the others because the OFT would observe equal treatment. Gallaher and Somerfield concluded agreements in July 2008. When the infringement decision was issued in April 2010, they paid the reduced penalties and did not appeal.
The assurance and the later settlement
During its negotiations, TMR asked about the effect of a successful appeal by another party. An uncontradicted email recorded that, so far as principles established on such an appeal were contrary to or undermined the decision against TMR, the OFT would apply those principles to TMR and therefore presumably withdraw or vary its decision. Two other parties later asked similar questions and received non-committal replies. Gallaher and Somerfield neither received nor were told about TMR’s assurance.
Six addressees appealed. On 12 December 2011 the Competition Appeal Tribunal allowed all six appeals. TMR relied on the assurance and threatened proceedings. The OFT considered that its statements might have created an understanding that the decision would be withdrawn or varied, and that TMR might consequently obtain permission to appeal out of time and succeed. In August 2012 it agreed to pay TMR a sum equal to the penalty paid, together with a contribution towards interest and legal costs, without withdrawing the decision. It published an explanation referring to the particular assurances given to TMR.
Gallaher and Somerfield asked for withdrawal of the decision and repayment. After the TMR settlement became public, they issued judicial review claims. Those claims were stayed while they sought permission to appeal out of time. The Tribunal may extend time only in exceptional circumstances. It granted permission, but in 2014 the Court of Appeal reversed that decision. Vos LJ stressed finality: the respondents had entered the agreements with their eyes open, understood the terms, and deliberately chosen not to appeal.
The decisions below
Collins J dismissed the judicial review claims. He accepted that fairness and equal treatment applied to the negotiations, but held that the assurance had been given by mistake and without regard to finality. A mistake should not generally be replicated at public expense, and that consideration objectively justified refusing payment to the claimants.
The Court of Appeal allowed their appeal. Lord Dyson MR regarded compliance with equal treatment as common ground. He agreed that the assurance was a mistake, but held that the resulting unequal treatment was stark. A mistake did not automatically justify different treatment. Taking all the circumstances into account, including the OFT’s later decision to honour the assurance and repay TMR while paying the claimants nothing, he found a plain breach of equal treatment and fairness. The court declared both the failure to offer the assurance in 2008 and the refusal of payment in 2012 unlawful, and ordered repayment of the claimants’ penalties with interest and costs.
The applicable public-law principles
Lord Carnwath, with whom Lord Mance, Lord Sumption, Lord Hodge and Lord Briggs agreed, held that domestic administrative law does not recognise equal treatment as a distinct justiciable principle. Consistency is generally desirable, as Lord Bingham had said, but it is not absolute. Lord Hoffmann’s analysis in Matadeen v Pointu distinguished equality as a democratic and rational principle from a rule on which judges must always have the last word. In domestic law, inconsistent treatment is generally assessed through rationality. The respondents’ authorities illustrated irrational discrimination or procedural unfairness, not a separate equality doctrine. Section 60 of the 1998 Act, requiring consistency with corresponding EU competition questions, did not convert general administrative-law issues into EU equal-treatment questions.
On these facts, the OFT did owe a duty to offer equal treatment during the 2008 negotiations: it was applying one set of legal and policy criteria to a limited group and had expressed that commitment. The parties therefore had a legitimate expectation of equal treatment. That did not itself dictate the remedy for what happened by 2012.
Simple unfairness is likewise not a ground of review. Lord Diplock distinguished unlawful conduct from a lawful discretionary act complained of merely as unfair or unwise. Procedural unfairness is established, but substantive unfairness judged against all the circumstances is not an independent criterion. Expressions such as “conspicuous unfairness” or “abuse of power”, used in cases including Unilever, do not create one. They are best understood through ordinary grounds, particularly irrationality and legitimate expectation.
Why different treatment was justified
The respondents could properly complain that they were not informed of the assurance and might otherwise have sought one. That administrative failure did not by itself create a financial claim. Even if the failure to replicate the assurance breached their expectation of equal treatment, it did not justify reversing penalties which had been lawfully imposed and accepted, or compel equivalent payment in 2012.
The decisive question was whether the 2012 decision was objectively justified; the same result followed on a rationality test. The difference between the parties was potentially crucial. All those entering agreements knew that others might appeal successfully. Gallaher and Somerfield knowingly accepted that risk. TMR obtained an assurance and claimed to have relied on it. The OFT could reasonably conclude that refusing to honour it would give TMR a strong application to appeal out of time, whereas the respondents had no such case, as the Court of Appeal later confirmed. That was a sufficient objective justification and a rational basis for different treatment.
Lord Sumption emphasised that TMR had received an assurance on which it could reasonably rely. An authority acting rationally could take account of the consequences of withdrawing that assurance without extending it to everyone else.
Lord Briggs considered the alternatives open to the OFT. Honouring the assurance only for the company that had received it was a rational response to the mistake.
Verdict: The Court unanimously allowed the Authority’s appeal and restored the dismissal of the claims. The OFT had acted lawfully in honouring the assurance to TMR without repaying Gallaher and Somerfield.
Source: R (Gallaher Group Ltd and others) v Competition and Markets Authority [2018] UKSC 25
