OFT issues competition advice under new process

Updated May 2010

The Office of Fair Trading (OFT) has launched a new process which it hopes will provide prompt and effective advice to companies on competition matters. This new procedure, the Short-form Opinion, is intended to address concerns that some forms of legitimate and beneficial collaboration between companies are not going ahead for fear of infringing competition law and incurring possible civil and criminal sanctions. The Short-form Opinions cannot prejudge assessment by European authorities, national courts or even the OFT itself, but should constitute a useful resource for companies exploring collaborative ventures with market competitors.

The new procedure

The new Short-form Opinion process will only be available for a limited number of cases per year. Companies may submit a request to the OFT for such an opinion if all the following apply:

• There is a novel or unresolved question on the application of Article 101 of the Treaty on the Functioning of the European Union or the prohibition in Section 2 of the Competition Act 1998. If there is sufficient precedent in EU or UK case law, or decisions, practice or previously published opinions given by the European Commission's (Commission) competition services or the OFT to answer the question posed, this process will not be available.
• Clarification of this issue will benefit a wider audience.
• The request relates to a prospective agreement. Short-form Opinions are intended to facilitate agreements to go ahead rather than to rubber stamp faits accomplis or to adjudicate on hypothetical points of competition law.
• The request relates to a horizontal agreement between competitors. The OFT recognises that these types of agreements typically raise more significant competition law concerns that may discourage the parties from taking part in the agreement.
• The proposed agreement has a material link to the United Kingdom.
• The parties to the proposed agreement provide a joint statement of facts which provides sufficient information for the OFT to make its Short-form Opinion.

If companies choose to make use of the Short-form Opinion procedure, it is important that the statement of facts they agree on is full and accurate. The OFT has said that it will not verify the accuracy or completeness of the statement. In addition, it is this statement of facts on which the OFT will base its opinion.

Provided that the OFT receives a suitable request and decides that it will give a Short-form Opinion, it should provide a response within two to three months. As well as being given to the requesting parties, the Short-form Opinion and the statement of facts on which it is based will be published for the benefit of a wider audience.

Despite the promised benefits, the Short-form Opinion is not legally binding, however. It cannot prejudge the assessment of the same question by the Commission, the European Court of Justice, or the UK's Competition Appeal Tribunal. Nor does it bind other national competition authorities, national courts or even the OFT itself in assessing the same or similar issues in the future.

The first test-case

On 27 April 2010, the OFT issued its first advice under the new process, which was between grocery wholesalers Makro-Self Service and Palmer & Harvey. The OFT considered their proposed joint purchasing agreement, under which the companies would not be able to raise prices or reduce output in the sale or delivery of products downwards in the supply chain. The arrangement was judged to secure better prices from common suppliers through a collective purchasing agreement and so would be unlikely to restrict competition in the market.

While advising that, in general terms, the proposed deal between Makro Self-Service and Palmer & Harvey was compliant with competition law, the OFT did express concern on one point; this was the effect on competition of the firms exchanging data. On the OFT's advice the parties therefore agreed only to supply general and aggregated data.

On the basis of its first test-case, therefore, the Short-form Opinion procedure can allow companies to go ahead with legitimate and advantageous common ventures and help them structure their arrangements to comply with competition law.

For more information, please contact Nicola Kingaby.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at May 2010. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.