On 1 November, the Competition Appeal Tribunal ("CAT) quashed the
OFT's decision made in August not to make a market investigation
reference to the Competition Commission ("CC") in relation to the UK
grocery sector.

The Association of Convenience Stores lodged a complaint with the
OFT in autumn 2004 into the conduct of the large supermarkets and, in
particular, their expansion into the area traditionally served by small
shops. In August this year, the OFT told the Association that, in terms
of s.131 of the Enterprise Act 2002, it had concluded that there were
no reasonable grounds to suspect any distortion of competition in the
sector. The OFT therefore had no power to refer the sector to the CC
and the complaint was rejected. The Association appealed this decision
to the CAT under s.179 of the Enterprise Act 2002. By the time the case
was heard by the CAT, the OFT had decided to withdraw its decision on
the grounds of 'insufficient reasoning' and undertook to reconsider
matters. The OFT envisages issuing a new decision by June 2006. The CAT
therefore agreed to quash the decision and to remit the matter to the
OFT for further consideration.

In issuing its decision, the CAT took the opportunity to comment on
the timetable envisaged by the OFT for its reconsideration of the case
and on the role of the OFT in carrying out its duties under s.131.

The CAT observed, first of all, that the 'reasonable grounds to
suspect' hurdle might not be as high as would be inferred from the
OFT's extended timetable for carrying out its investigation. After all,
the CAT pointed out, the OFT's investigation was only a preliminary
examination of the case; a full examination would be carried out, if
appropriate, by the CC. This observation seems to echo similar
criticisms previously made by it in the merger context (see e-bulletin
article on IBA Health in issue 24). As the CAT put it, the OFT's
approach seemed to involve some risk (if the complaint was ultimately
well founded) of "shutting the stable door after the horse has bolted".

Looking ahead at the OFT's proposal to spend eight months
reconsidering the case, the CAT's candid assessment was that this would
be unreasonable in light of the test that the OFT had to apply and the
fact that, to use the CAT's words, "the authorities are not starting
from first base". The CAT iterated that it had the power under s.179(5)
of the Act to give directions to the OFT, including directions as to
the timetable within which the OFT should come to its decision.
However, the CAT did not consider that it had sufficient information to
allow it to take that approach in the present case.

The CAT also noted that, in terms of s.179(2)(b) of the Enterprise
Act 2002, it had power to review not only decisions of the OFT but also
any failures to take decisions. This, in the CAT's view, included a
power to review failures to reach decisions within a reasonable time.
Accordingly, if the OFT was to drag its feet with the continued (or any
other) investigation, complainants such as the Association would be
able to apply to the CAT for assistance.

As things stood, the CAT was content to leave matters as they were,
by quashing the original decision and exhorting the OFT to move as
swiftly as possible to reach a new decision. The CAT has, however, laid
down a clear marker to the OFT (and complainants) as to its
expectations for the future.

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