Abstract 

The UK Office of Fair Trading (OFT) has been a highly rated competition law enforcer. Yet its antitrust performance activities fall far short of this image. Here a critical assessment is made of the OFT’s antitrust enforcement activities, and the claim that there is quantitative survey evidence that the OFT has had a “significant deterrent effect”. It concludes that this evidence is flawed and not credible.

1. INTRODUCTION
The UK Office of Fair Trading (OFT) has attracted high ratings relative to the competition enforcement agencies of other countries.1 This contrasts with view of official bodies who have examined the OFT’s enforcement activities. They have concluded that over the last decade it has misallocated its resources, taken too long to conclude investigations often with no or a minor infringements found, and has under-enforced the law.2 In 2005 the National Audit Office (NAO)3 and House of Commons’ Public Affairs Committee (PAC)4 found major failings in the way cases were handled by the OFT, and recommended that it clear the large backlog of unresolved cases. The NAO’s progress report5 in 2009 concluded that things had improved considerably although there remained concerns. In March 2011, the UK Government published a consultation document6 which reiterated the view that the OFT was under-enforcing the law in comparison with other EU competition agencies. The OFT has challenged this analysis7, but the upshot has been the UK Government’s decision to merge the OFT with the Competition Commission to create a new Competition and Markets Authority (CMA).

Against this background, the OFT was required by the Government in 2006 to set out its priorities8 and to measure its performance.9 The OFT agreed with the Government (HM Treasury) to demonstrate that its enforcement generated at least five times its taxpayer funded costs in direct financial benefits to consumers and the economy.10 The OFT also commissioned two independent surveys – in 200711 and in 201112 – on the general deterrent effect of its enforcement activities. These have been used to claim that each OFT investigation deters at least five, and possibly more, prospective infringements. This finding has been seized on by other competition agencies, e.g. the European Commission.13 Others have put the claim more boldly. Davies and Ormosi assert, contentiously, that “It is widely acknowledged that the beneficial deterrent effects of competition enforcement are likely to be considerable, probably far outweighing the measurable benefits of the actual caseloads of” competition authorities.14

The focus of this paper is the OFT’s antitrust enforcement activities surrounding the prosecution of anticompetitive agreements (Chapter 1 prohibitions or their equivalent Article 101TFEU) and abuse of dominance (Chapter II prohibitions or their equivalent Article 102 TFEU) under the Competition Act 1998 (CA98). The OFT other enforcement responsibilities – merger clearance, market studies, and consumer protection – are not considered. Specifically, the discussion below undertakes a statistical analysis of the OFT’s antitrust enforcement activities over the decade 2000 to 2012, and an assessment of its survey research which it has claimed shows that its enforcement has had a significant general deterrent effect.

The discussion is organised as follows. Section II outlines a basic theory of deterrence. This is followed (Section III) by a statistical analysis of the OFT’s enforcement activities over the last decade. Section IV critically assesses the OFT’s survey evidence purporting to provide evidence of a significant general deterrent effect.


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