OFT guidelines on tougher penalties for breaches of competition law

The Office of Fair Trading (OFT) has issued new guidelines explaining how it will set tougher penalties for breaches of competition law.

The maximum starting point for penalty calculations will increase from 10% of relevant turnover to 30%.

The OFT says the change gives it the ability to set penalties which better reflect the gravity of different types of infringements, in particular for the most serious breaches of competition law, such as cartel activity and abuses of a dominant position.

It brings the OFT in line with the approach of the European Commission and many European competition authorities.

Other changes to the guidance clarify how penalties are calculated. They include:

• Clarification that the turnover used for calculating the penalty starting point will be based on the last business year before the infringement ended.
• A new formal step at which leniency and settlement discounts are applied.
• Additional detail on the OFT’s approach to awarding discounts for companies taking appropriate steps to comply with competition law. For example, in line with the materials the OFT has published to assist businesses’ efforts to comply with competition law, the guidance now notes that evidence of appropriate compliance activities both before and after an infringement could in principle warrant a modest reduction in penalty, depending on the facts of the case.

Jackie Holland, Senior Director of OFT’s Policy Group, said: ”We now have a wider range of starting points for penalties, in order to reflect better the seriousness of different types of infringements and deter anti-competitive activities, while ensuring that penalties are fair and proportionate.”

Please contact Neil O’Callaghan about the issues raised in this article, or any aspect of competition law.