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OFT successful in resisting further Tobacco appeals


Gallaher and Somerfield -v- OFT

The OFT has succeeded in overturning a decision by the Competition Appeal Tribunal that four companies in the Gallaher and Somerfield/Co-op groups could appeal out of time against fines totalling £54 million imposed on them in April 2010.

During the OFT’s investigation the Gallaher and Somerfield companies entered into Early Resolution Agreements (“ERAs”) in which they admitted the infringements alleged, and agreed to co-operate with the OFT, in return for reduced penalties.  The terms of the ERAs entitled Gallaher and Somerfield to withdraw from them if, having seen the OFT’s ultimate Decision, they wished to appeal to the CAT.  Whilst another ERA party (Asda) took this course, Gallaher and Somerfield did not. 

However, several other addressees of the OFT’s Decision, including Imperial Tobacco, did appeal to the CAT and were successful (see news item here).  Eight weeks into the hearing, the OFT sought to pursue a “refined case” which it contended formed part of its original Decision.  However, the CAT rejected the OFT's submissions and acceded to Imperial's application to set aside the Decision and allow the appeals.

Gallaher and Somerfield then applied to the CAT for permission to appeal out of time, alleging that (a) the unusual course of events in the Imperial Tobacco appeal (including concessions which they alleged the OFT had made) amounted to “exceptional circumstances” justifying a late appeal, and (b) in Gallaher’s case, that it had been misled by the ERA into believing that the OFT’s case against it did include something resembling the OFT’s refined case.  In a decision made on 27 March 2013 the CAT (Marcus Smith QC sitting alone) granted Gallaher and Somerfield permission to appeal out of time, holding that the ERAs gave rise to a legitimate expectation that the OFT “had the wherewithal to make good the factual basis on which the Decision rested” and would be “able to defend (even if not necessarily successfully) its Decision on the merits”.

The Court of Appeal (Laws, Patten and Vos LJJ) have now reversed this finding, concluding that the CAT’s finding of a legitimate expectation was unjustifiable; that the main focus under the exceptional circumstances test should be on the reasons why the would-be appellants did not appeal in time; that the later events on the appeals by Imperial Tobacco and others were not exceptional circumstances justifying a late appeal by Gallaher and Somerfield; and that the CAT’s misapplication of the exceptional circumstances test was an error of law (thus justifying intervention by the Court of Appeal).

The judgment is here.

Andrew Henshaw QC appeared for the OFT.