Competition and Markets Authority v Flynn Pharma Ltd & Anor

Factual and Procedural Background

The Appellants successfully challenged a competition-law infringement decision issued by the Respondent before the Competition Appeal Tribunal (“CAT”). The CAT set aside part of the decision, remitted certain issues for reconsideration, and ordered the Respondent to pay a proportion of the Appellants’ costs. On further appeal, the Court of Appeal revoked that costs order, holding that, absent “good reason”, no adverse costs order should be made against a regulator acting in the public interest. The present judgment arises from the Appellants’ appeal to the Supreme Court, which was supported and opposed respectively by several interveners from industry and regulatory sectors.

Legal Issues Presented

1. Whether a general principle exists that tribunals should begin with a “no order as to costs” presumption when a public body loses litigation conducted in the exercise of its statutory functions.
2. Whether the CAT erred in adopting “costs follow the event” as the starting point in Competition Act appeals, having regard to concerns about any potential “chilling effect” on regulators.

Arguments of the Parties

Appellants’ Arguments

• No binding authority establishes a universal “no order as to costs” rule for public bodies; the Booth line of cases merely identifies “chilling effect” as a relevant factor, not a presumption.
• The CAT, as a specialist tribunal, is best placed to gauge any real risk of chilling effects and has justifiably adopted a “costs follow the event” starting point in Competition Act appeals.
• The Respondent’s funding model, which permits penalty income to offset litigation costs, negates any genuine financial deterrent.

Respondent’s Arguments

• The Court of Appeal correctly applied a principle, derived from Bradford v Booth and subsequent cases, that regulators acting reasonably in the public interest should not ordinarily face adverse costs orders.
• Imposing costs on regulators risks discouraging vigorous enforcement (“chilling effect”) and diverts public funds from statutory objectives.
• The CAT gave insufficient weight to this principle when awarding costs against the Respondent.

Table of Precedents Cited

Court's Reasoning and Analysis

Judge Rose, delivering the unanimous judgment, held that the Booth line of authorities does not create a blanket rule immunising regulators from adverse costs. Instead, those cases establish that the possibility of a “chilling effect” is an important factor that may justify a “no costs” outcome in some statutory contexts. Whether such a risk is real depends on:

• The statutory scheme governing the regulator;
• The regulator’s funding model and exposure to adverse costs;
• The nature of the decision under challenge.

The Court identified material distinctions between local-authority licensing or professional-disciplinary cases (where Booth usually applies) and Competition Act infringement decisions:

• The Respondent exercises substantial, quasi-criminal powers and imposes very large penalties; accountability through merits appeals is integral to the statutory structure.
• The Respondent offsets litigation liabilities against penalty income, so the financial risk of adverse costs is negligible; therefore, no credible chilling effect was demonstrated.
• Appellants already incur unrecoverable investigative expenses; fairness requires meaningful cost-recovery when they succeed.

Further, the CAT’s extensive experience and flexible toolkit—issues-based orders, percentage reductions, cost caps and active case management—already mitigates any chilling effect without resorting to a rigid default rule. The Supreme Court emphasised that appellate courts should respect the CAT’s specialist assessment unless it is shown to be irrational or contrary to explicit statutory direction.

Holding and Implications

Appeal ALLOWED.

The Supreme Court reinstated the CAT’s original costs order and rejected the Court of Appeal’s “no costs against regulators” starting point. The judgment confirms that:

• No universal presumption shields public bodies from adverse costs; each tribunal must evaluate chilling-effect arguments within its own statutory and procedural context.
• The CAT’s established practice—beginning with “costs follow the event” in Competition Act appeals but adjusting flexibly—was lawful and appropriate.
• Regulators remain accountable for erroneous decisions; successful private parties can ordinarily expect to recover reasonable and proportionate costs.

The decision maintains legal certainty for future Competition Act litigants and avoids creating asymmetric cost rules that could discourage meritorious appeals without establishing any new precedent beyond the competition-law context.