oft reinstates informal advice -...
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OFT reinstates informal advice
On 12 April 2006 the UK Office of Fair Trading published its Interim arrangements for informal advice and pre-notification contacts. These will remain in place until the OFT clarifies its long-term position prior to April 2007.
In November 2005, the OFT controversially announced that it was withdrawing informal advice and confidential guidance, citing a lack of resources. Both procedures are means by which the parties to a transaction can obtain the OFT’s view on whether the OFT is likely to refer a case to the Competition Commission. While informal advice is solely the view of the OFT staff in the Mergers branch, confidential guidance is the view of the OFT itself. Accordingly, while confidential guidance may be regarded as more reliable, it involves more internal procedures and so takes much longer.
In its recently published Interim arrangements, the OFT has reinstated the possibility of obtaining informal advice (but not confidential guidance), subject to two important conditions:
− First, informal advice will only be available where there is a good faith intention to proceed as evidenced by a likely ability to do so. For agreed transactions, this may require heads of terms or a letter of intent or, where circumstances require informal advice prior to notifying the target (e.g. in the context of a hostile public bid), evidence of Board level consideration by the acquiror.
− The OFT will only give informal advice where there is a genuine issue as to whether the OFT is likely to refer the transaction to the Competition Commission. In particular, for this condition to be satisfied, the OFT will require the application for informal advice to articulate the competition concern that might credibly justify a reference. It will not be sufficient simply to claim that the client is “very risk averse” or that “third parties might complain”.
While at first sight this second condition may seem alarming (some may fear this amounts to “self-incrimination”), it is likely to be little different from what we would regard as sensible practice. The maxim “garbage in, garbage out” has always been very relevant to applications for informal advice: unless all the facts are set before the OFT, the advice is unlikely to be reliable anyway. This is especially important in cases where the OFT is not familiar with the sector. In any case, as the OFT itself points out, favourable informal advice turned out to be wrong in more than one in five transactions referred to the Competition Commission under the Enterprise Act 2002. Nevertheless, this second condition will give some companies (and their advisers) cause to stop and think before making an application for informal advice in the future. No doubt this is precisely what is intended by the OFT.
In the past, informal advice often adopted a “one size fits all” approach, with a written application typically followed by a meeting at the end of which the OFT would advise whether it is “likely” or “unlikely” to refer. In future, the delivery and content of the OFT’s advice will be tailored to provide a more useful service. In some cases, a meeting may not be necessary but the OFT might suggest further discussion once a draft notification has been received. In other cases, the OFT may point to the specific evidence which it thinks is likely to be required to prove the parties’ case or to rebut likely third party complaints. The OFT recognises that this approach may sometimes result in a more modest or qualified advice, but they see it as being ultimately more accurate. They hope that this will help avoid the misleading certainty created by the simplistic “likely” or “unlikely” formulation (as demonstrated by the “more than one in five” statistic referred to above). As the OFT will now only give informal advice where there is a genuine issue, the cases where a clear view (and thus greater certainty) can be given
This communication is confidential and may be privileged or otherwise protected by work product immunity.
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will be less common. It is hoped, however, that the new approach will not deter the OFT from giving a clear view in those cases where a clear view can be given. While informal advice is clearly retained as a distinct procedure, it is notable that the same document setting out the Interim arrangements for informal advice also includes an encouragement of better use of pre-notification contacts generally.
As to timing, the OFT states that it will endeavour to indicate whether it will accept or reject an informal advice application within five working days. If a meeting is required, the OFT will endeavour to schedule that meeting within 10-15 working days of receipt of the original application. There is scope for urgent cases to be handled more swiftly.
The OFT’s reinstatement of informal advice, albeit subject to some important conditions, is welcome. How it plays out in practice remains to be seen.
A link to the OFT’s Interim arrangements in full is attached here.
http://www.oft.gov.uk/NR/rdonlyres/EDA33A6E-29FC-45F3-930B-3643C9A78344/0/informal.pdf Should you have any questions about this Memorandum or the wider implications of competition law, please contact your usual antitrust advisers at Linklaters or one of the following Linklaters contacts:
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Michael Cutting +44207456 [3514] [email protected]
Bill Allan +44207456 [3574] [email protected]
Tony Morris +44207456 [3416] [email protected]
Eamonn Doran +44207456 [3506] [email protected]
Christian Ahlborn +44207456 [3570] [email protected]
Gavin Robert +44207456 [3364] [email protected]
Paula Riedel +44207456 [3537] [email protected]
Nicole Kar +44207456 [4382] [email protected]
Oliver Black +44207456 [3418] [email protected]
Sharon Horwitz +44207456 [3510] [email protected]
This publication is intended merely to highlight issues and not to be comprehensive, nor to provide legal advice. Should you have any questions on issues reportedhere or on other areas of law, please contact one of your regular contacts at Linklaters.
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