Final settlement: Supreme Court allows appeal by CMA in tobacco retail pricing case

The Supreme Court has allowed the CMA’s appeal against a judgment of the Court of Appeal finding that the OFT was wrong to fail to extend to Gallaher and Somerfield the benefit of appeals in favour of other parties arising out of its 2010 tobacco retail pricing investigation.

The OFT repaid the fine imposed on TM Retail on the basis of assurances given in the course of early resolution that it would not be prejudiced by the outcome of appeals brought by other parties.  No such assurances were given to Gallaher and Somerfield who, in common with TM Retail, had also entered into early resolution agreements but who had not appealed against the OFT’s infringement decision in time.

The Court of Appeal had found that the OFT’s failure to repay the fines paid by Gallaher and Somerfield was a breach of the principle of equal treatment and was unfair.

The Supreme Court found that even if the OFT had acted contrary to a legitimate expectation, the differential treatment was objectively justified and not irrational.  It did not provide a basis for reversing the fines that had been paid by Gallaher and Somerfield.

The Supreme Court found that the parties who entered into early resolution knew that there was a possibility that other parties might appeal successfully.  Gallaher and Somerfield took that risk without obtaining any assurances from the OFT as to how they might be affected by any successful appeal.

The problem for Gallaher and Somerfield was that they did not obtain explicit assurances from the OFT or appeal the original infringement decision in time. 

The OFT accepted that it made a mistake in offering the assurances to TM Retail that it did, so the fact pattern in this case is unlikely to be repeated.  Despite its more historical significance, the Supreme Court’s decision underscores the principle of finality of settlement.  It will be a rare case where settling parties can reopen a settlement that they have entered into voluntarily in return for an abbreviated procedure and settlement discount.

Source:  R (on the application of Gallaher Group Ltd and others) (Respondents) v The Competition and Markets Authority [2018] UKSC 25