Introduction

The case of Kier Group plc (2) Kier Regional Ltd v. Office of Fair Trading ([2011] CAT 33) represents a significant development in the realm of competition law enforcement in the United Kingdom. Heard by the United Kingdom Competition Appeals Tribunal on October 21, 2011, this case revisits the principles governing the awarding of legal costs in appeals against penalties imposed by the Office of Fair Trading (OFT).

Ten appellants, including Kier Group plc and its affiliates, challenged penalties levied by the OFT for alleged infringements of competition rules. The central issue revolved around whether the OFT should bear the costs of these appeals, with the appellants seeking substantial reimbursements for legal expenses incurred during the appeals process.

Summary of the Judgment

The Tribunal, chaired by the Honourable Mr Justice Barling and comprising Professors Andrew Bain OBE and Peter Clayton, delivered a unanimous judgment focusing on the costs incurred by the appellants in their appeals against OFT-imposed penalties. While the appellants collectively sought reimbursement for significant legal costs, the Tribunal established a precedent by setting a cap of £200,000 on the recoverable costs for each appellant. This decision was grounded in the Tribunal's discretion under Rule 55 of the Competition Appeal Tribunal Rules 2003, aiming to balance fairness with the practicalities of legal expenditures.

Ultimately, the Tribunal awarded costs to all appellants, albeit with varying degrees of reduction based on the success and conduct of each party during the appeals. The judgment emphasized the importance of proportionality and the need to prevent undue financial burdens on public authorities like the OFT.

Analysis

Precedents Cited

The judgment extensively referenced several key precedents to inform its decision:

• Merger Action Group v Secretary of State for Business, Enterprise and Regulatory Reform [2009] CAT 19: Highlighted the broad discretion under Rule 55, emphasizing flexibility and the avoidance of rigid cost rules.
• Emerson Electric Co & Ors v Morgan Crucible Co plc & Ors (costs) [2008] CAT 28: Reinforced the Tribunal's ability to consider case-specific factors rather than adhering to a fixed starting point.
• The Racehorse Association and Others v OFT [2006] CAT 1: Established that "winners" in appeals are likely to receive cost awards, albeit not necessarily covering all expenses.
• R (Perinpanathan and ors) v City of Westminster Magistrates Court [2010] EWCA Civ 40: Influenced the Tribunal's stance on the applicability of the Booth principles, differentiating competition law appeals from administrative licensing decisions.
• GF Tomlinson Group Limited and Others v OFT [2011] CAT 32: Provided a comparative framework by setting a £200,000 cap in similar penalty-only appeals.

These precedents collectively informed the Tribunal's approach to balancing the recovery of costs with the need to maintain a functional and fair competition enforcement regime.

Legal Reasoning

The Tribunal's legal reasoning centered on the discretionary power granted by Rule 55 of the Competition Appeal Tribunal Rules 2003. Recognizing the need for flexibility, the Tribunal rejected the OFT's proposition to default costs to the losing party unless the OFT acted unreasonably or in bad faith. Instead, it maintained that successful appellants, identifiable as "winners" due to substantial reductions in penalties, should be entitled to recover their legal costs.

However, the Tribunal introduced a cap of £200,000 on recoverable costs to ensure proportionality and prevent excessive financial claims that could burden the OFT and, by extension, the public purse. This cap was deemed appropriate after considering the varying costs claimed by different appellants and the precedent set in GF Tomlinson Group Limited and Others v OFT.

Moreover, the Tribunal accounted for the extent of each appellant's success. While Kier and Ballast received the full cap due to their clear victories, appellants like Bowmer, Corringway, and Sisk received reduced amounts reflecting both their successes and the unsuccessful arguments they pursued, which warranted partial cost recovery.

Impact

This judgment has profound implications for future appeals against OFT penalties and potentially similar regulatory bodies. By establishing a £200,000 cap on recoverable costs, the Tribunal provides clarity and predictability for appellants regarding potential cost liabilities. This cap also ensures that the enforcement of competition laws remains financially sustainable, preventing regulatory bodies from being overburdened by exorbitant cost awards.

Furthermore, the decision underscores the importance of proportionality in cost recovery, encouraging appellants to present focused and substantial arguments without unduly inflating legal expenses. It reinforces the balance between deterring anti-competitive behavior and maintaining a fair and just legal process for challenging regulatory decisions.

Complex Concepts Simplified

Rule 55 of the Competition Appeal Tribunal Rules 2003

Rule 55 grants the Tribunal broad discretionary power to determine the allocation of legal costs between parties involved in proceedings. This includes the authority to order one party to pay another's costs wholly or partially, based on factors such as the parties' conduct and the success achieved in the case.

Cost Cap

A cost cap is a maximum limit set on the amount of legal costs that can be awarded to a party. In this judgment, the Tribunal established a cap of £200,000 to standardize and control the costs recoverable by successful appellants in appeals against OFT penalties.

Proportionality

Proportionality in legal costs refers to ensuring that the amount awarded corresponds reasonably to the success achieved and the expenses incurred. It seeks to prevent excessive or unjustifiable cost claims that could disrupt the fairness and efficiency of the legal process.

"Winner" Status

A "winner" in this context refers to an appellant who has achieved a substantial reduction in penalties or succeeded in key legal arguments during the appeal. Being identified as a "winner" typically entitles the appellant to recover legal costs, subject to limitations like the established cap.

Conclusion

The decision in Kier Group plc (2) Kier Regional Ltd v. Office of Fair Trading marks a pivotal moment in the adjudication of legal costs in competition law appeals. By instituting a £200,000 cap on recoverable costs, the Tribunal strikes a balance between rewarding successful appellants and safeguarding the financial integrity of regulatory bodies like the OFT.

This judgment enhances predictability for future appellants, encouraging efficient and focused legal representation while deterring the pursuit of excessive or unfounded cost claims. It underscores the Tribunal's commitment to proportionality and justice, ensuring that the enforcement of competition laws remains both effective and equitable.

Overall, this case sets a clear precedent that will guide the handling of costs in similar appeals, fostering a fairer and more sustainable legal environment within the UK's competition law framework.