Step-by-step

Published On 17/09/2012 | By Tamara Hunter | Mergers

The UK OFT has published new guidance on the setting of penalties for competition law infringements, reflecting its experience of applying penalties and recent judgments, international developments and comments from public consultation.

The most recent blow to the OFT’s fining policy came in April this year, when the OFT reduced to fine imposed on British Airways in relation to the pricing of passenger fuel surcharges.   In 2007, a penalty of £121.5m was determined, the largest penalty imposed by the OFT for competition law breaches.  However, following the collapse of the OFT’s criminal case against British Airways employees, and a number of court decisions regarding the way in which the OFT has calculated penalties, the penalty was reduced to £58.5m.

The guidance sets out the six step process the OFT will use to calculate penalties:

  1. Calculate a starting point, having regard to the seriousness of the infringement and the undertaking’s turnover – the new maximum starting point is 30% of the undertaking’s relevant turnover
  2. Adjust for duration
  3. Adjust for aggravating factors (such as repeated unreasonable behaviour that delays enforcement, being the instigator, or the involvement of directors and senior managers) or mitigating factors (if the entity was acting under severe duress, or cooperated with the OFT)
  4. Adjust for specific deterrence and proportionality – including whether the penalty is proportionate ‘in the round’.  This is a new step designed to ensure that the penalty is not disproportionate or excessive
  5. Adjust if the maximum penalty is exceeded and to avoid double jeopardy – the maximum penalty is 10% of the undertaking’s worldwide turnover in its last business year; and
  6. Adjust for leniency and settlement discounts.

The guidance also sets out the requirements for leniency in cartel cases.  Where immunity or a 100% reduction in the penalty is not available, the penalty may be reduced by up to 50% for undertakings that provide information which “add[s] significant value to the OFT’s investigation” before a statement of objections is issued.

Photo credit: Mr. Theklan / Foter / CC BY-SA

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About The Author

is a Senior Associate in the competition litigation group at King & Wood Mallesons. Tamara has advised on the competition law aspects of commercial transactions and disputes and assisted clients to respond to investigations by the ACCC and other regulators in the Asia Pacific region.

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