Judgment (Liability)

Judgment on the liability aspect of an appeal brought by the Appellants (“Tesco”) against a decision of the Office of Fair Trading (the “OFT”) taken on 26 July 2011, entitled “Dairy retail price initiatives” (Case CE/3094-03) (the “Decision”). In the Decision, the OFT found that a number of competing undertakings, including Tesco, had indirectly exchanged their future retail pricing intentions in respect of British-produced cheddar and territorial cheeses, via their common suppliers (the “hub and spoke exchanges”). The OFT concluded that Tesco, among others, had participated in two single overall concerted practices, one in 2002 (the “2002 Cheese Initiative”) and the other in 2003 (the “2003 Cheese Initiative”), which had as their object the restriction of competition in breach of the Chapter I prohibition, contained in section 2(1) of the Competition Act 1998. As regards Tesco, the 2002 Cheese Initiative was found by the OFT to comprise nine separate hub and spoke exchanges. As regards Tesco, the 2003 Cheese Initiative was found to comprise five separate hub and spoke exchanges. During the course of the proceedings before the Tribunal, the different hub and spoke exchanges came to be referred to as ‘Strands’.

Before assessing the individual Strands, the Tribunal addressed a number of issues relating to the evidence relied upon by the OFT in the Decision and on appeal, including the evidential value of early resolution agreements entered into by the addressees of the OFT’s Statement of Objections (later addressees of the Decision) other than Tesco, as well as the OFT’s decision not to call witnesses. The Tribunal also considered the appropriate legal test to be applied in order to establish a concerted practice consisting of hub and spoke exchanges in light of previous case law of the Tribunal, the Court of Appeal and the EU courts. In analysing whether the evidence relied upon by the OFT in relation to each Strand was sufficient to the support the findings made in the Decision, the Tribunal considered that it was appropriate to have regard to all the circumstances and that is important to consider the Strands in context, in particular in light of events that have gone before.

For the reasons set out in the Judgment, the Tribunal dismissed Tesco’s appeal as to liability as regards Strands 2, 3 and 7 of the 2002 Cheese Initiative. The Tribunal found that the evidence relied upon by the OFT was sufficient to establish, on the balance of probabilities, the concerted practices found in the Decision in which: (i) Sainsbury’s indirectly communicated its future retail pricing intentions for cheese to Tesco, via McLelland (Strand 2); (ii) Tesco indirectly communicated its future retail pricing intentions for cheese to Sainsbury’s, via Dairy Crest (Strand 3); and (iii) Tesco indirectly communicated its future retail pricing intentions for cheese to Asda, via McLelland (Strand 7).

The Tribunal found, however, that there was insufficient evidence to support the findings made by the OFT in the Decision in respect of Strands 1, 4, 5, 8 and 9 of the 2002 Cheese Initiative (Strand 6 was not found by the OFT to amount to an infringement). As such, the Tribunal set aside the OFT’s findings that Tesco had infringed the Chapter I prohibition in those respects.

As to the 2003 Cheese Initiative, the Tribunal found that there was insufficient evidence to support a number of the conclusions reached by the OFT and that none of the five Strands, as found in the Decision, were proved as against Tesco. The Tribunal, therefore, set aside the OFT’s finding in the Decision that Tesco had participated in the single overall concerted practice referred to as the 2003 Cheese Initiative.

In relation to those parts of the 2002 Cheese Initiative, which the Tribunal upheld as infringements by Tesco of the Chapter I prohibition, the Tribunal directed that it receive further submissions as to: (i) whether those three Strands are sufficient to amount to participation by Tesco in the single overall concerted practice referred to in the Decision as the 2002 Cheese Initiative, or whether those instances should be viewed as three separate, isolated infringements; and (ii) the level of the financial penalty imposed on Tesco.

*Note the full corporate names of undertakings other than Tesco, which are referred to above can be found in the Judgment.