On 26 October, the OFT issued a consultation on proposed new guidance on penalties and leniency. The new guidance reflects the OFT's experience in applying the existing guidance, last revised in 2004. It is also intended to address the issues raised in the Construction bid-rigging appeals, reported in our May 2011 Bulletin. Highlights include:

  • a higher maximum starting point (30% of relevant turnover in place of 10%), designed to provide more effective deterrence, and greater scope for reflecting the gravity of the infringement, as well as aligning OFT practice more closely with that of the European Commission and other national competition authorities. The OFT acknowledges that the change may result in higher penalties;
  • a clearer statement that repeated infringements within a period of 15 years will result in an increase in penalty of up to 100%;
  • the possibility for the OFT to increase the penalty for persistent delay in complying with time limits in its investigation. This reflects the OFT's frustration with what it sees as one of the major obstacles to faster decision-making. Whether or not exercised in practice, it sends a warning to businesses and their advisers; and
  • the OFT continuing to hedge its bets on compliance programmes - which justify either a reduction of up to 10% or, in exceptional cases (presumably where consciously disregarded), an increase.

Following the consultation, a definitive proposal must be approved by ministers before taking effect. Overall, the changes are clearly explained, and the key message from the OFT is that it intends to impose higher penalties in future.

The OFT's leniency guidance was last revised in 2008. This revision is intended to reflect partly the OFT's experience over the past few years, and partly the lessons learned as a result of the collapse of the trial of the BA executives, reported in our June 2010 Bulletin. Highlights include:

  • useful new flowcharts and checklists for applications;
  • a clearer explanation of the steps in a leniency application, and the information that must be provided to the OFT;
  • new guidance on the conduct of an internal investigation intended to secure evidence for the purposes of a leniency application. This is probably the most important revision to the existing guidance. The OFT has two concerns - to ensure that an internal investigation does not alert other cartel members, and to ensure that evidence is secured and maintained in a condition that it can use in its own civil and/or criminal investigation. So any internal investigation should be conducted to forensically very rigorous standards. In many cases, it will be advisable to discuss the conduct of the investigation with the OFT; and
  • the OFT proposes to revise its approach to privileged material. Its 2008 guidance indicated that it would expect waivers of legal privilege in some cases. It is now making clear that this will apply only in the case of criminal investigations.

Overall, the proposed revised leniency guidance is a welcome evolution of the 2008 document, reflecting the OFT's consistently stated and apparently genuine intention to operate the regime in an approachable, fair, transparent and clear manner, erring in favour of the applicant where there is a "close call". The only major criticism of the guidance is perhaps that it provides so much transparency that it has become opaque: at 126 pages it is considerably longer than its 85-page predecessor. As a minimum, it is worth being familiar with the guidance on internal investigations (on pages 119 and 120 of the draft). The charts in table A and the checklist of information requirements at Annexe D also provide useful summaries of the key issues.

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