British Competition Authorities Revise Penalty Guidelines

The Office of Fair Trading (the “OFT”) – the United Kingdom’s consumer and competition authority – has announced new guidelines for setting penalties for violations of British competition laws.

The most drastic change contained in the new guidelines increases the maximum starting point for calculating a penalty from 10 to 30 percent of a company’s relevant turnover.

The OFT indicated that it is increasing the maximum penalty because it will improve the ability of the OFT to set penalties which better reflect the gravity of different types of infringements.  The OFT noted that increased penalties could be imposed “in particular for the most serious breaches of competition law, such as hardcore cartel activity and serious abuses of a dominant position.”  The revision of the guidelines also serves the purpose of bringing the “OFT in line with the approach of the European Commission and many European competition authorities.”

In addition to the increased penalties, the new guidelines also clarify the steps used to judge the severity of an antitrust violation.

For example, leniency programs and settlement agreements will now be taken into consideration when issuing fines in order to impose lesser penalties on companies that come forward to admit wrongdoings. 

The previous guidelines had been in place since 2004.  The revised guidelines “reflect our experience in applying the guidance in a series of cases, as well as recent court judgments,” according to Jackie Holland, Senior Director of the OFT Policy Group.

According to a 2010 study by the American Antitrust Institute, revising penalty guidelines to be more specific can help deter antitrust violations.  The study indicated that from 1990 to 2008 the European Commission’s fines minimally deterred antitrust violations because vague guidelines failed to accurately assess the amount of harm a company’s actions caused, and the most harmful violations were not fined severely enough.