Introduction

The case of Tesco Stores Ltd, Tesco Holdings Ltd, and Tesco Plc v. Office of Fair Trading ([2012] CAT 31) is a pivotal competition law judgment in the United Kingdom. This case revolved around allegations of anti-competitive behavior by Tesco and other major supermarket chains in the cheese market during 2002 and 2003. The Office of Fair Trading (OFT) investigated and fined Tesco for participating in concerted practices that restricted competition by indirectly exchanging future retail pricing intentions through common suppliers.

Tesco appealed the OFT's decision, contesting both the findings of infringement and the level of penalties imposed. The Competition Appeals Tribunal (CAT) ultimately allowed the appeal in part, setting aside certain findings made by the OFT and providing nuanced insights into what constitutes a concerted practice under the Competition Act 1998.

Summary of the Judgment

The Tribunal meticulously analyzed the OFT's findings concerning multiple instances, referred to as "Strands," of alleged anti-competitive conduct. The key findings are as follows:

• Strands 2, 3, and 7 of the 2002 Cheese Initiative: The Tribunal upheld these strands, finding that Tesco and Sainsbury's had indirectly exchanged pricing intentions via their supplier, McLelland, which were then conveyed to other competitors, thus restricting competition.
• Strands 1, 4, 5, 8, and 9 of the 2002 Cheese Initiative: These were set aside due to insufficient evidence to prove that the requisite state of mind (intent or foresight) was present in the communications between the parties.
• 2003 Cheese Initiative: The OFT's findings were wholly dismissed, as there was no substantial evidence linking Tesco to anti-competitive practices in this instance.

Consequently, Tesco's appeal was allowed in part, with the Tribunal deciding against the OFT's broader findings but affirming specific instances where the evidence was robust enough to demonstrate anti-competitive conduct.

Analysis

Precedents Cited

The judgment references several key precedents that elucidate the boundaries of competition law:

• Case 48/69 ICI v Commission ("Dyestuffs"): Established that concerted practices involve cooperation without formal agreements, substituting practical cooperation for competitive risks.
• Joined Cases 40/73, etc., Suiker Unie v Commission (1975): Clarified that the independence of undertakings does not preclude adaptation to competitor conduct but prohibits any coordination influencing market behavior.
• Case C-49/92 P Commission v Anic Partecipazioni (1999): Introduced the "Anic presumption," whereby exchanges of information are presumed to influence conduct unless rebutted by evidence.
• Case C-8/08 T-Mobile Netherlands BV v Raad van Bestuur: Further refined the understanding of state of mind in concerted practices, emphasizing the need to infer intent or foresight from the context of information exchanges.
• Cases 1021 & 1022/1/1/03 Allsports Ltd and JJB Sports plc v OFT (Football Kits): Highlighted the case-specific nature of assessing concerted practices and the non-exhaustive criteria for determining such practices.
• Toys and Kits (Court of Appeal decision [2006] EWCA Civ 1318): Emphasized the versatile nature of concerted practices and the importance of context in assessing intent or foresight.

Legal Reasoning

The Tribunal's legal reasoning centered on the concept of "concerted practice" under the Competition Act 1998. To establish a breach of the Chapter I prohibition, it was necessary to prove:

• Communication of Future Pricing Intentions: Retailers must have communicated their future pricing plans to common suppliers with the intention or foresight that this information would be passed on to competitors.
• State of Mind: The disclosing party must have intended or foresaw that the information would be used to influence market conditions, thereby restricting competition.
• Transmission and Use of Information: The suppliers must have transmitted the information to competing retailers, and those retailers must have used it in determining their own pricing strategies.

The Tribunal applied an objective standard when assessing state of mind, considering the context and the nature of the communications. It emphasized that mere disclosure does not constitute a breach unless there is evidence of intent or foresight to restrict competition. In cases where evidence was insufficient to establish these elements, the Tribunal set aside the OFT's findings.

Impact

This judgment has significant implications for the enforcement of competition law, particularly in how indirect communications between retailers and suppliers are scrutinized. Key impacts include:

• Clarification of Concerted Practices: Reinforces that concerted practices can occur without formal agreements, based on the context of information exchanges and the intent behind them.
• State of Mind Assessment: Highlights the necessity of establishing intent or foresight in proving anti-competitive conduct, thereby setting a high evidential threshold for enforcement authorities.
• Role of Suppliers: Underscores the influential role suppliers can play in facilitating indirect communications between competing retailers, thus serving as potential conduits for anti-competitive practices.
• Evidence Reliance: Demonstrates that documentary evidence alone may not suffice to prove anti-competitive intent, especially when the transmission of information lacks direct corroboration through witnesses.

Practitioners must now be more vigilant in monitoring and potentially regulating the nature of communications between retailers and suppliers to prevent similar infractions. Additionally, companies must ensure compliance with competition law by avoiding even indirect communications that could be interpreted as concerted practices.

Complex Concepts Simplified

Conclusion

The Tesco v Office of Fair Trading judgment serves as a benchmark in UK competition law by delineating the boundaries of what constitutes an anti-competitive concerted practice through indirect communications. The Tribunal's nuanced approach underscores the necessity of concrete evidence demonstrating intent or foresight to restrict competition. While the OFT retained some findings regarding specific strands of the 2002 Cheese Initiative, the overall appeal by Tesco was largely successful in challenging the breadth of the OFT's initial rulings.

Moving forward, this case mandates that retailers and suppliers exercise caution in their communications, ensuring that no indirect exchanges could be construed as efforts to manipulate market conditions unfairly. It also emphasizes the importance of robust evidence in proving anti-competitive conduct, thereby shaping future regulatory and compliance strategies within the retail sector.

Ultimately, the judgment reinforces the principle that competition law is not only concerned with overt collusion but also scrutinizes the subtle, indirect channels through which businesses might conspire to undermine fair competition.