OFT Consults on Updated Penalty and Leniency Guidance

Jack Humphrey, Regulatory journalist
October 31, 2011 /

The OFT is consulting on two revised guidance documents, setting out proposals to update its approach to financial penalties and to awarding leniency in competition cases.

The proposed changes to penalty schemes are designed by the OFT to ensure that it sets fines that are sufficient to deter companies from engaging in anti-competitive activity, but that are also fair and proportionate.

The changes take into account the experience the OFT has gained in applying this guidance since its introduction in 2004, as well as reflecting accumulated learning from Competition Appeal Tribunal (CAT) and Court of Appeal judgments on appeals.

A key aspect of the new proposals is increasing the maximum starting point for penalty calculations to 30 per cent of relevant turnover. This increase will bring the OFT in line with the approach of the European Commission and several other competition authorities which have more recently revised their guidance and is something that the CAT, in one of its Construction judgments, suggested the OFT consider.

The higher starting point may in some cases lead to higher fines than at present. However, the OFT also proposes to introduce a new specific step at which it will consider whether the penalty is proportionate in the round. This is designed to ensure that overall fines are not disproportionate or excessive.

Other proposals are intended to enhance transparency and clarify the way in which the OFT will calculate penalties. These include making explicit that the turnover used for calculating the penalty starting point will be based on the last business year before the infringement ended, clarifying the stage at which leniency and settlement discounts are applied, and confirming the OFT’s policy on compliance discounts.

In parallel, the OFT is consulting on its draft leniency guidance. This has been updated to reflect the OFT’s experience of leniency since the last revision to this guidance in 2008.

Many of the revisions are designed to give greater clarity and improved transparency of the OFT’s existing policies and practices, rather than representing major changes. For example, additional detail is provided on the procedure for applying for leniency, the scope of leniency protection and the expected level of cooperation required from leniency recipients.

The guidance also clarifies the OFT’s policy in relation to seeking waivers of legal professional privilege from leniency applicants. The OFT proposes that it will not request waivers of privilege in civil cases, but cannot exclude the possibility in some criminal cases.

Final versions of both guidance documents will be produced in Spring 2012, after considering the views expressed by respondents to the consultation. The penalty guidance will require approval by the Secretary of State for Business, Innovation and Skills.

John Fingleton, Chief Executive of the OFT, said: “The OFT guidance on leniency and penalties are critical tools in encouraging greater compliance with competition law. Our aim is to improve them further, assisting companies and their advisers, and enabling public enforcement to be more effective.

“The proposed changes reflect our experience in applying the guidance in a series of cases, and take account of the views of parties we have engaged with and Court decisions. They also incorporate international best practice and we hope they will give businesses and their advisors even greater clarity and transparency on our approach going forward.”

The OFT will now be consulting extensively on the proposals before reaching a final view on its proposed changes.

 

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