UK: ABA 2010 Antitrust Year in Review: UK Section

Last Updated: 24 May 2010
Article by Stephen Kon, Jai Bhakar and Dr. Gordon Christian

Legislative Developments

In one of the few legislative developments in UK competition law in 2009, the Enterprise Act 2002 (Merger Fees) (Amendment) Order 2009, which doubles the currently applicable merger fees, came into force on October 1, 2009.1 The fees are payable to the Office of Fair Trading (the "OFT") on filing to recover the costs of the regulatory consideration of mergers. The merger fees will increase from £15,000 to £30,000 for mergers where the business acquired generates a UK turnover of less than £20 million (approximately US$32 million), from £30,000 to £60,000 where the UK turnover is between £20 million and £70 million (approximately US$32 million and US$112 million) and from £45,000 to £90,000 where the UK turnover exceeds £70 million2 (approximately US$112 million). The new fee levels will apply to all mergers where the parties involved in the merger cease to be distinct enterprises after October 1, 2009.


In June 2009, the OFT published the final version of its new jurisdictional and procedural guidance on mergers, replacing existing OFT guidance.3 According to the OFT, the guidance has been updated to reflect its practices since the Enterprise Act 2002 came into force. The guidance deals with a number of important issues, such as the types of transactions and levels of control that can give rise to jurisdiction for the OFT to review a merger, the circumstances in which merging parties may wish to (voluntarily) notify a transaction to the OFT and how the OFT deals with and assesses possible first-phase remedies.

On October 1, 2009, the OFT launched a consultation on revised guidance concerning exceptions to its duty to refer certain mergers to the Competition Commission (the "CC").4 The most common exception, and one which the OFT has used on several occasions recently, is the de minimis exception, which provides that in limited circumstances (essentially where the relevant market is smaller than £10 million and no significant competition issues arise), the OFT can use its discretion and not refer a merger to the CC as the merger affects a market of insufficient importance to justify a reference. The OFT is currently considering comments made by interested parties on the revised guidance, and intends to publish the final version guidance shortly.

On June 16, 2009, feeding into the UK Government's Digital Britain review,5 the OFT published its report on the local and regional media merger regime in the UK. The OFT report, which particularly focuses on whether the local and regional newspaper merger regime is fit for purpose, recognized that this industry is facing long-term structural changes. Advertising revenues are steadily declining as advertisers who would traditionally use the local and regional press increasingly migrate to the online space.

However, the OFT review concluded that the current media merger regime, which is broadly the same for newspapers as it is for other industries, is well placed to take into account developments, such as competition from the Internet, because it is evidence-based and capable of reflecting market realities. The regime is also flexible in that it can take account of valid "failing firm" arguments, as well as efficiencies and any other benefits to customers brought about through a merger. The OFT has therefore recommended that no legislative changes to the media merger regime are currently needed.

Cartels and other Anticompetitive Practices

After a long inquiry into the most complex single case investigated by the OFT to date, on September 30, 2009 the OFT fined 103 construction companies a total of £129.5 million (approximately US$207 million) for rigging bids for building work between 2000 and 2006.6 The OFT found that the construction firms involved in the cartel had manipulated approximately 200 tender processes for building projects worth more than £200 million (approximately US$319 million). The bid-rigging was carried out mainly through the practice of "cover pricing", which is where competing bidders in a tender process agree that one or more of the bidders will put in artificially high tender prices which will not win the tender but will create the misleading impression of competition for the contract. The OFT also used its announcement to issue further guidance to procurers of construction services as to how to minimise the risk of future tenders being distorted by bid-rigging activities.

On September 30, 2009, the OFT fined six companies in the construction recruitment sector £39.27 million (approximately US$63 million) for engaging in anticompetitive behavior.7 The total level of fines before reductions for leniency were taken into account was £173 million (approximately US$ 276 million). In 2003, a new market entrant called Parc began competing in the construction recruitment market with a new business model, namely to act as an intermediary between construction companies and different construction recruitment agencies for the supply of candidates. Instead of competing with Parc, the recruitment agencies formed a cartel, referred to as the "Construction Recruitment Forum". This forum met five times between 2004 and 2006, and as a result the recruitment companies agreed to boycott Parc and also cooperated on the fees they would charge to both the intermediaries and the agencies' customers.

In August 2008, the OFT announced that it was starting criminal proceedings under the Enterprise Act 2002 against four former British Airway's executives: Martin George, Andrew Crawley, Ian Burns and Alan Burnett. It is alleged that these four executives participated in a cartel between British Airways and Virgin Atlantic that fixed prices for fuel surcharges on long haul passenger flights8 and that between July 1, 2004 and April 20, 2006 they agreed with named executives of Virgin Atlantic to dishonestly make or implement arrangements that facilitated the cartel. Virgin Atlantic secured immunity from prosecution for its executives.

At a pre-trial hearing which took place on July 13, 2009, the four British Airways executives pleaded not guilty to the criminal charges. If found guilty, they face up to five years in prison, unlimited fines, director disqualification orders and confiscation of any assets unlawfully gained. The trial is scheduled to start at Southwark Crown Court on April 12, 2010.9

Ian Norris is the former CEO of Morgan Crucible, an engineering company. In the United States, Mr. Norris is alleged to have been engaged, between 1989 and 2000, in a conspiracy to fix, maintain and coordinate the price for the supply of carbon, contrary to section 1 of the Sherman Act 1890. Mr. Norris is also alleged to have obstructed the investigation into the cartel (from April 1999 to August 2001) by the US Department of Justice (the "DOJ") and a federal grand jury. On December 31, 2004, at the request of the US government, a request warrant was issued in England, after which extradition papers were served. Since that time, Mr. Norris has fought extradition through a series of appeals in the UK courts.

In relation to the US price fixing charges, on March 12, 2008, the UK's highest court, the House of Lords (as it then was) found that the price fixing charges did not constitute an extraditable offence under the Extradition Act 2003 as price-fixing was not, in itself, a criminal offence in the UK at the relevant time.10 In relation to the obstruction of justice charges, the High Court held that such charges amounted to an extraditable offence in their own right (being broadly equivalent to attempting to pervert the course of justice). The High Court also ruled that extraditing Mr. Norris would not breach his right to "respect for his private and family life" under the European Convention of Human Rights. In relation to this latter point, Mr. Norris appealed against the High Court's judgment. A hearing took place on November 30, 2009 before the UK Supreme Court,11 and judgment is yet to be handed down.

Abuses of a Dominant Position

Since the OFT's Chapter II decision in the Cardiff Bus case in November 2008,12 there have been no further Chapter II decisions from the OFT. The few developments that have occurred concern sectoral regulators.

On January 20, 2009, the Office of Gas and Electricity Markets ("Ofgem") announced that it had opened an investigation into alleged breaches of the Chapter II prohibition by the electricity distribution company Electricity North West Limited ("ENW").13 Ofgem is investigating allegations that the terms imposed by ENW on independent networks connecting to ENW's pre-existing network may be foreclosing the market to competitors in the area in which ENW is the incumbent distribution network operator.

Court Decisions

On April 8, 2009, the High Court ruled against the inclusion of a representative element in the claim for damages brought by Emerald Suppliers Limited and Southern Glass House Produce Limited (the "Claimants") in relation to losses caused by certain alleged anti-competitive practices by British Airways. The Claimants allege that British Airways illegally inflated prices for the air freight services used by the Claimants to import cut flowers from abroad. The Claimants sought a declaration that damages are, in principle, recoverable from British Airways, both on their own behalf and also on behalf of all other parties who may have purchased (directly or indirectly) air freight services at prices inflated by the anti-competitive practices. Following British Airways' application, the High Court agreed to have the representative element of the claim struck out and to limit the declaration to the Claimants' right to claim damages only. This is because the High Court considered that, at present, it is impossible to say with any degree of certainty that a given person is a member of the class the Claimants purport to represent, and some members of the class may not have suffered any damage, as the loss may have been passed on to their customers. The Claimants have filed an appeal with the Court of Appeal against this decision. The Court of Appeal is scheduled to hear the appeal on March 2, 2010.14

The CC's final report into the UK groceries market was published in April 2008. The report concluded that action was needed to improve competition in a number of highly concentrated local markets, and therefore included a recommendation for the inclusion of a competition test in planning decisions on larger grocery stores.15 Essentially, in certain circumstances the competition test would prevent supermarkets' groceries developments, including extensions to existing stores, by retailers with a strong presence in a local area, to make competing developments from rival retailers easier.

Tesco appealed the CC's recommendation to the Competition Appeal Tribunal (the "CAT") on June 30, 2008. On March 4, 2009, the CAT upheld Tesco's appeal against the competition test on two grounds. First, the CC had not properly assessed the economic costs of the competition test. Secondly, the CC had failed sufficiently to address the competition test's proportionality and effectiveness. Although the CAT did not conclude that the competition test would necessarily be ineffective or unreasonable, it remitted the matter back to the CC for further consideration, particularly on the costs and benefits of the competition test. It is expected that the CAT's judgment in this case will require the CC to give more careful consideration to the effectiveness, proportionality and likely costs and benefits of remedies put forward.

On October 2, 2009, after reconsidering the issue, the CC formally re-recommended to the Department of Communities and Local Government and the devolved administrations in Scotland, Wales and Northern Ireland that they take the necessary steps to introduce a competition test in planning decisions concerning larger grocery stores, albeit with an exception for certain store extensions.

In its final report on BAA's ownership of seven UK airports (including Heathrow, Gatwick and Stansted) published on March 19, 2009, the CC ruled that as a result of significant competition issues identified, BAA must sell Gatwick Airport, Stansted Airport and one of Edinburgh or Glasgow Airports.16 This is the first time that the CC has imposed structural remedies following a market investigation.

BAA has appealed the CC's decision to the CAT on two separate grounds, namely apparent bias and proportionality.17 In relation to the first ground, BAA emphasised that this is a case of apparent bias, not actual bias. BAA submitted that the CC's decision is unlawful due to the participation of a member of the inquiry panel having links to an undertaking interested in acquiring airports that BAA is required to sell. In relation to the second ground, BAA submitted that in assessing the proportionality of the divestiture remedies, the CC failed to take account, or carry out an assessment, of material considerations relating to the costs of divestiture, particularly in the context of the current financial and economic environment. On this basis, BAA asked the CAT to quash the CC's decision regarding divestiture of Gatwick Airport, Stansted Airport and one of Edinburgh or Glasgow Airports.

On 21 December 2009, the CAT handed down its judgment,18 upholding BAA's claim that the market investigation was tainted by apparent bias. One of the members of the CC's investigation group had links with the owners of Manchester Airport, who were involved in the investigation and were also potential bidders for airport assets to be divested by Gatwick. The CAT concluded that a fair-minded and informed observer would conclude that the deliberations, the thinking and the ultimate outcome of the market investigation were affected by apparent bias. The CAT, however, rejected BAA's argument that the CC had failed to have regard to the principles of proportionality in fixing the time periods for the divestment of three airports. The CAT has not quashed the CC's final report but awaits confirmation from the parties as to whether they have agreed on next steps. If not, the CAT will hear submissions on appropriate relief in due course.


1. The Enterprise Act 2002 (Merger Fees) (Amendment) Order 2009, available at

2. OFT Merger Fee Statement (September 2009), available at

3. OFT Press Release, June 30, 2009, "OFT publishes revised guidance on Merger jurisdiction and procedure", available at

4.OFT Press Release, October 1, 2009, "OFT consults on exceptions to duty to refer", available at

5. OFT Press Release, June 16, 2009, "OFT publishes review of media merger regime," available at

6. OFT Press Release, September 22, 2009, "Construction firms fined for illegal bid-rigging", available at

7. OFT Press Release, September 30, 2009, "OFT fines recruitment agencies for a collective boycott and price fixing cartel", available at

8. OFT Press Release, August 7, 2008, "OFT announces criminal charges in airline fuel surcharges cartel case", available at

9. OFT Enforcement and Regulation update, available at

10. See Ian Norris v The Government of the USA and the Secretary of State for the Home Department ([2009] EWHC 995) High Court, Divisional Court, judgment of May 15, 2009, available at

11. Supreme Court case detail summary, available at

12. OFT Press Release, November 18, 2008, "Cardiff bus engaged in predatory conduct against competitor, OFT decides", available at

13 Ofgem Press Release, January 20, 2009, "Ofgem Opens Investigation into Electricity Network Company", available at

14. Her Majesty's Court Service, case tracker, available at

15. CC Press Release, April 30, 2008, "Groceries Market Investigation - Final Report", available at

16. CC Press Release, March 19, 2009, "BAA ordered to sell three airports", available at

17. Competition Appeal Tribunal, Summary of Application Under section 179 of the Enterprise Act 2002, Case Number 1110/6/8/09, 22 May 2009, available at

18. Competition Appeals Tribunal, BAA v Competition Commission, case 1110/6/8/09, judgment, available at

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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