Durkan Holdings Ltd (2) Durkan Ltd (3) Concentra Ltd (formerly known as Durkan Pudelek Ltd) v Office of Fair Trading -[2011] CAT 6- (22 March 2011)

Key Facts

Issues

• Whether the OFT correctly applied the 'Decision Year' turnover (year preceding the OFT's decision) rather than the 'Infringement Year' (year preceding the infringement's end) for penalty calculations under section 36(8) of the 1998 Act. The court found the OFT erred in using the Decision Year for Step 1 of the penalty calculation.
• Whether Durkan Limited committed Infringement 220 by supplying a cover price to Mansell. The court overturned the OFT's finding, concluding the evidence was insufficient to prove liability on the balance of probabilities, particularly given the lack of direct evidence from Durkan employees.
• Whether the OFT was justified in applying a higher 7% starting point for Infringement 135 (involving a compensation payment) compared to 5% for cover pricing without compensation. The court upheld the OFT's position, finding compensation payments more serious as they cemented anti-competitive relationships.
• Whether Durkan Holdings exercised 'decisive influence' over Durkan Pudelek, making them jointly and severally liable for the latter's Chapter I prohibition infringements (Infringements 135 and 240). The court examined the nature of the parent-subsidiary relationship, including strategic control, integration into the corporate group, and board involvement.
• Whether errors in Durkan's reported turnover figures for the Decision Year could be corrected to reduce penalties. The court found Durkan Holdings failed to demonstrate that the errors were inadvertent or that corrections would not undermine the OFT's methodology.

Holdings

• Fines for Infringements 135 and 240 varied to £789,000 and £1,647,000 respectively.
• OFT erred in using Decision Year turnover for penalty calculation.
• Other penalty challenges dismissed, including the 7% starting point for Infringement 135.
• Durkan Limited's appeal on Infringement 220 is allowed, fine overturned.
• Durkan Holdings found liable for Durkan Pudelek's infringements due to decisive influence.

Remedies

• The Competition Appeal Tribunal varied the fines for Infringement 135 and 240 to £789,000 and £1,647,000 respectively, after correcting the OFT's use of Decision Year turnover instead of Infringement Year turnover. Durkan Pudelek and Durkan Holdings are jointly and severally liable for these adjusted penalties.
• The Tribunal allowed the appeal against the finding of liability for Infringement 220, overturning the £3,294,715 fine imposed on Durkan Limited. Durkan Holdings' liability for this infringement was also similarly overturned.

Monetary Damages

Legal Principles

• The court emphasized the civil standard of proof (balance of probabilities) for establishing antitrust violations. This was central to evaluating the OFT's case against Durkan Limited for Infringement 220, where circumstantial evidence was deemed insufficient to meet this threshold.
• The court applied the principle of substance over form to determine that Durkan Holdings exercised decisive influence over Durkan Pudelek, making them a single economic unit for competition law purposes. This led to joint liability for the subsidiary's antitrust infringements despite formal separation.
• The tribunal applied a purposive approach to interpret the OFT's Penalty Guidance, finding that the 2004 revisions did not justify using Decision Year turnover for Step 1 penalty calculations. The court prioritized the Guidance's purpose of reflecting market harm over mechanical application of the new turnover rules.
• The judgment reaffirmed that the Office of Fair Trading (OFT) carries the legal burden to prove the existence of antitrust infringements on the balance of probabilities. This civil standard was applied to both the liability and penalty calculations in the case.

Precedent Name

• Akzo Nobel NV and Others v Commission
• Argos Ltd and Littlewoods Ltd and JJB Sports plc v Office of Fair Trading
• JJB Sports plc and All Sports Limited v Office of Fair Trading
• Kier Group plc and others v Office of Fair Trading
• Napp Pharmaceutical Holdings Ltd v Director General of Fair Trading

Cited Statute

• Competition Act 1998
• Competition Act 1998 (Determination of Turnover for Penalties) Order 2004 (SI 1259/2004)
• Competition Act 1998 (Determination of Turnover for Penalties) Order 2000 (SI 309/2000)
• Article 101(1) of the Treaty on the Functioning of the European Union (TFEU)

Judge Name

• Michael Blair QC
• Professor John Pickering
• Vivien Rose

Passage Text

• The fines for which Durkan Pudelek and Durkan Holdings are jointly and severally liable are hereby varied to £789,000 for Infringement 135 and £1,647,000 for Infringement 240.
• We therefore unanimously allow Durkan Limited's and Durkan Holdings' appeal in respect of Infringement 220. This means that the fine imposed on Durkan Limited of £3,294,715 is overturned.
• The OFT erred in using relevant turnover from the Decision Year rather than the Infringement Year when applying Step 1 of the Guidance.