Supreme Court – the end of ‘conspicuous unfairness’?

30/05/18, EU/Competition, Public Law

Gallaher and Somerfield -v- OFT

The Competition and Markets Authority has finally prevailed in its long-running dispute with four companies in the Gallaher and Somerfield/Co-op groups arising out of fines totalling £54 million imposed on them in April 2010 by the CMA’s predecessor, the OFT, for infringements of Chapter I of the Competition Act 1998 in relation to the pricing of tobacco products.

During the OFT’s investigation, Gallaher and Somerfield 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 Tobacco Decision, they wished to appeal to the CAT.  However, they did not appeal.

Several other addressees of the OFT’s Decision, including Imperial Tobacco, did appeal to the CAT and were successful (see News Item dated 12/12/11 at  Gallaher and Somerfield then applied to the CAT for permission to appeal out of time, relying on what they claimed were the unusual circumstances of the case.  These applications ultimately failed in the Court of Appeal (see News Item dated 9/4/14 at

During 2012 another retailer, TM Retail, which also had been the subject of an infringement finding in the Tobacco Decision but had not appealed, approached the OFT seeking recovery of the penalty it had paid.  TM Retail relied on statements made by the OFT during the ERA discussions with it in 2008, which TM Retail said meant it would benefit from any successful appeal by a third party.  Having investigated the evidence, the OFT settled with TM Retail on terms which included payment to TM Retail of a sum equal to the penalty it had paid.

Gallaher and Somerfield applied for judicial review on the basis that fairness and/or equal treatment meant that they should be put in the same position as TM Retail.

The claims were heard by Collins J ([2015] EWHC 84 (Admin)), who dismissed them on the ground that although the assurance given to TM Retail amounted to unequal treatment of TM Retail vis a vis Gallaher and Somerfield, (a) it had been inconsistent with the principles set out in AssiDomän Kraft Products v Commission (Case C-310/97P) (‘Wood Pulp II’) about an appeal’s lack of any effect vis a vis non-appellants, and with principles of certainty and finality; and (b) it was objectively justifiable for the OFT to decline to perpetuate its error, citing the observations of Jacob J in Customs and Excise Commissions v National Westminster Bank Plc [2003] STC 1072.

The Court of Appeal (Lord Dyson, Longmore and Lloyd Jones LJJ) reversed that decision ([2016] EWCA Civ 719), concluding that the OFT should not be permitted to resile from a mistake where to do so resulted in unfair and unequal treatment of the claimants. 

The OFT appealed, arguing that the Court of Appeal had failed to grapple with the issue of objective justification arising from the considerations of finality and legal certainty which were/would be infringed by the assurance given to TM Retail and its replication in favour of Gallaher and Somerfield.  Gallaher and Somerfield contended that such considerations could not prevail where they would result in conspicuous unfairness. 

The Supreme Court’s analysis of the case law on conspicuous unfairness concluded that “procedural unfairness is well-established and well-understood.  Substantive unfairness on the other hand—or, in Lord Dyson MR's words at para 53, ‘whether there has been unfairness on the part of the authority having regard to all the circumstances’ —is not a distinct legal criterion.  Nor is it made so by the addition of terms such as “conspicuous” or “abuse of power”. Such language adds nothing to the ordinary principles of judicial review, notably in the present context irrationality and legitimate expectation.  It is by reference to those principles that cases such as the present must be judged”.  Applying those principles, the OFT had not been shown to have acted unlawfully and the appeal was therefore allowed.

Links to the judgment are here and here.

Andrew Henshaw QC appeared for the CMA.

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