Gallaher Group Ltd & Anor, R (on the application of) v Competition and Markets Authority

Public authorities exercising competition-law powers must comply with public-law fairness and equal-treatment requirements. In settlement negotiations, any non-party-specific inducement to enter an early resolution agreement must be disclosed to all similarly situated parties. A benefit given to one party through mistake need not be replicated where public funds are involved, provided the refusal is objectively justified. Finality and legal certainty prevent a party that did not appeal within time from obtaining the benefit of a successful third-party appeal.

Two judicial review claims were brought by Gallaher and Somerfield against the Competition and Markets Authority, formerly the Office of Fair Trading. Each claimant had entered an early resolution agreement admitting alleged infringements of the Chapter 1 prohibition under the Competition Act 1998 and had paid a substantially discounted penalty.

During separate negotiations, the OFT assured another retailer that it would receive the benefit of a successful third-party appeal. The claimants argued that fairness and equal treatment required equivalent payments. The central issues were whether the assurance had been given, whether it had to be extended to the claimants, and whether finality, legal certainty and the public-funds principle justified refusal.

1. The claims were dismissed. The OFT's handling of the other retailer's negotiations was defective, but the claimants were not entitled to equivalent payments.
2. The OFT's powers under the Competition Act 1998 were subject to public-law duties of fairness and equal treatment. Its January 2008 policy correctly required fairness, transparency and consistency in settlement negotiations. A non-party-specific term capable of inducing parties to enter an early resolution agreement had to be disclosed to all parties in materially comparable positions.
3. The failure to answer the retailer's e-mail of 10 July 2008 amounted to acceptance of its understanding that it would benefit from a successful third-party appeal. That was an assurance. It had been given without proper consideration of finality and legal certainty and was inconsistent with the approach in Wood Pulp II.
4. Finality and legal certainty applied to both liability and penalty. The claimants had expert advice and had knowingly chosen not to appeal. Their decisions therefore remained binding, subject to any proper operation of the contractual penalty-adjustment provision.
5. A mistaken payment from public funds to one party did not require the mistake to be repeated. Avoiding payments to persons not legally entitled to them provided objective justification for refusing equivalent payments.

The claimants had sought permission from the Competition Appeal Tribunal to appeal out of time. On 27 March 2013 the Tribunal granted permission, but the Court of Appeal allowed the OFT's appeal and quashed that decision on 7 April 2014. The judicial review claims then proceeded in the Administrative Court.

• Court of Appeal: the application to appeal out of time was refused on finality and legal-certainty grounds.
• High Court (Administrative Court): the judicial review claims were dismissed.