New Guidance on Penalties for Breaching Competition Law

Jack Humphrey, Regulatory journalist
September 11, 2012 /

The OFT has published new guidance on how it will set penalties for breaches of competition law.

The guidance will allow the OFT to continue to set substantial penalties to deter anti-competitive activity while ensuring that penalties are proportionate in the specific circumstances of individual cases.

As required by law, the guidance has been approved by the Secretary of State.

Jackie Holland, Senior Director of OFT’s Policy Group, said: “We now have a wider range of starting points for penalties, in order to reflect better the seriousness of different types of infringements and deter anti-competitive activities, while ensuring that penalties are fair and proportionate.”

The OFT decided to update its guidance in the light of its experience of applying penalties and recent judgments of the Competition Appeal Tribunal and the Court of Appeal. The OFT has carried out a wide-ranging public consultation, involving lawyers, businesses and other interested parties, and drawing on international experience.

The new guidance sees the maximum starting point for penalty calculations increase to 30 per cent of relevant turnover, from 10 per cent. This change gives the OFT the ability to set penalties which better reflect the gravity of different types of infringements, in particular for the most serious breaches of competition law, such as hardcore cartel activity and serious abuses of a dominant position.

It brings the OFT in line with the approach of the European Commission and many European competition authorities.

The guidance introduces a new step in the calculation of penalties. The OFT will consider specifically whether a penalty is proportionate ‘in the round’. Previously proportionality was considered when applying the other steps of the calculation. This change is intended to ensure that, overall, penalties are not disproportionate or excessive in the particular circumstances of the case.

Other changes to the guidance clarify or provide additional transparency about how penalties are calculated, including:

Clarification that the turnover used for calculating the penalty starting point will be based on the last business year before the infringement ended.
A new formal step at which leniency and settlement discounts are applied.
Additional detail on the OFT’s approach to awarding discounts for companies taking appropriate steps to comply with competition law. For example, in line with the suite of materials the OFT has published to assist businesses’ efforts to comply with competition law, the guidance now notes that evidence of appropriate compliance activities both before and after an infringement could in principle warrant a modest reduction in penalty, depending on the facts of the case.

Holland added: “The changes reflect our experience in applying the guidance in a series of cases, as well as recent court judgments. They also incorporate international best practice. We hope that they will give businesses and their advisors even greater clarity and transparency about our approach to setting penalties.

“We are grateful to everyone who engaged with us during the consultation process.”


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