Joanna Bell: Administrative Blunders & Judicial Review: Analysing the UKSC Decision in Gallaher v Competition & Markets Authority

Administrative bodies such as the UK’s Office of Fair Trading (‘OFT’) (now the Competition and Markets Authority) are sometimes required to undertake investigations into alleged wrongdoing by groups of individuals or companies. If, in the course of the investigation, an administrative blunder occurs the effect of which is to put one of those individuals or companies into a significantly better position than the others what should the administrative body do about it? This issue arose in the important recent case of Gallaher v Competition & Markets Authority [2018] UKSC 25. After overviewing the facts of the case and the judgment of the UK Supreme Court this blog post will offer a critique of the decision. The Supreme Court in deciding Gallaher, it will be argued, adopted too limited a view of its judicial role in reviewing the OFT’s conduct. The result is a difficult precedent which implicitly accepts administrative mistakes as legally acceptable justifications for the differential treatment of individuals and which also fails to incentivise the prompt identification and correction of administrative blunders.

Gallaher: Facts & Judgment

The Office of Fair Trading (OFT) had, since 2003, been carrying out a complex investigation into allegations of price-fixing in the tobacco sector. In order to facilitate this investigation, the OFT introduced a process that allowed companies to admit liability in exchange for a reduced financial penalty. Negotiations for these Early Resolution Agreements (‘ERAs’) took place under significant time pressure and in 2008 a senior official within the OFT made a serious mistake. In the course of negotiating an ERA with one company, TMR, the official gave an assurance that, in the event of an addressee of the infringement decision successfully appealing the decision, TMR would benefit from any principles laid down in the appeal decision. This allowed TMR both the benefits of entering into an ERA and of pursuing an appeal. The official was wrong to give such an assurance since, as a matter of law, TMR would not benefit from an appeal against the infringement decision if it were not party to that appeal. The mistake also had serious consequences because in 2012 six companies successfully appealed the OFT’s infringement decision. Having taken advice that the assurance given to TMR would constitute an ‘exceptional circumstance’ that would allow TMR an out-of-time appeal, the OFT was left with little choice other than to make good its assurance by compensating for the £2,668,991 that would have been returned to it had TMR been party to the appeal.

Gallaher was a challenge brought by a handful of other companies which had been part of the investigation. These companies had engaged in ERA negotiations with the OFT but had not had the benefit of the same assurance offered to TMR. Gallaher and the other applicants to the challenge had therefore entered ERAs with the OFT without any assurance that they would benefit in any event from a successful appeal.

When Gallaher and the other companies learnt of the assurance which had been mistakenly offered to TMR it issued judicial review proceedings against the OFT. The OFT’s differential treatment of the various companies, Gallaher argued, amounted to a violation of the public law principle of consistency. The UK Supreme Court rejected this argument. It is useful to separate out their Lordships’ thinking on two issues. Firstly, was it lawful for the OFT, in 2008, to give an assurance to TMR but not to the other companies negotiating ERAs? Lord Carnwath, in giving the leading judgment, did not say much on this issue. To the extent that he did engage with it his view was that although the applicants had ‘grounds to complain of the administrative failure to inform them of the assurance given to TMR in 2008… [such] grounds for administrative complaint do not necessarily add up to a cause of action in law’ [42] and in any event the central issue before the court was the conduct of the OFT in 2012.  Lord Sumption further commented that ‘the OFT’s mistake [in 2008] was that they gave the assurance to TMR, not that they failed to give it to [the applicants]’ [54]. Secondly, then, was the OFT’s decision in 2012 to give TMR, but not the applicants, the benefit of the assurance lawful? Their Lordships thought so: due to the assurance it had received ‘TMR… had a strong case for permission to appeal out of time whereas the claimants did not’ [44] and this justified the repayment of the penalty to TMR but not to the companies in the position of Gallaher.


In considering the normative justifiability of Gallaher it is useful to consider the case against the background of three normative concerns. The first is a concern on the part of the courts to ensure that individuals are treated fairly in the sense that, in the course of interacting with administrative decision-makers, they are not misled or induced to rely on statements which are later withdrawn (a concern which is reflected in much of the case law on the UK doctrine of legitimate expectations). If the courts’ only concern in a case like Gallaher is to ensure fair treatment of the individual in this sense, then the conclusion of the Supreme Court is clearly sound. The applicants entered into their ERAs with a full understanding of the consequences of doing so. They were not, in any sense, misled into believing that they would obtain the benefits of a successful third party appeal. What they signed up for is what they got and the assurance issued to TMR did not have a bearing on this.

This, however, is not the only normative dimension against which Gallaher can be considered. A second is a concern to ensure parity in the treatment of individuals. In the course of rendering judgment, Lord Carnwath dismissed the idea that ‘consistency’ or ‘equal treatment’ constitutes a freestanding ground of review. Nonetheless he did see the courts, under the ‘unreasonableness’ head, as playing an important role in ensuring that administrative decision-makers are able to treat individual differentially only when they have a legally acceptable reason to do so (see further Mark Elliott’s commentary). It is, however, difficult to see how the Supreme Court’s decision on the facts of Gallaher itself promotes the idea that individuals must be treated consistently unless a good reason can be demonstrated for doing otherwise. The main issue is their Lordships’ failure to state a clear position on the conduct of the OFT in 2008. During the 2008 ERA negotiations the OFT had afforded to one group of companies a significant advantage that it did not afford other companies in a materially similar position. The only explanation the OFT was able to offer for this was that a senior official had made a mistake. By holding that the OFT’s conduct at this time probably did not ‘add up to a cause of action in law’ [42], the Supreme Court has implicitly accepted that an administrative blunder can, of itself, serve as a legally acceptable justification for the differential treatment of two individuals who are parties to the same investigation.

One thing which was possibly on the minds of the Supreme Court were the potential financial consequences of deciding the case against the OFT. It has been suggested that the costs of repaying the applicants’ penalties would have been ‘something north of £50 million.’ Considering that the allocated annual budget of, what is now, the Competition and Markets Authority for 2017/2018 was £65.94 million it is clear that a finding adverse to the OFT could have had a massive impact on its future operations. There were, however, ways, such as by exercising the judicial discretion to refuse relief, in which the Supreme Court could have avoided these consequences while also sending a message about the unacceptability of the OFT’s conduct in 2008.

The third normative consideration against which Gallaher can be usefully considered is a concern to ensure good administrative practice.  Where an administrative body is conducting an investigation concerning a number of different parties and an official makes a mistake the effect of which is to confer on one party an advantage not afforded to the others what can the authority do about it? There would seem to be at least three options. Firstly, the body could seek to correct the mistake by making clear to its beneficiary that they will not, in fact, be permitted the advantage. Secondly, the body could decide to extend the advantage to the other parties thereby ensuring consistency of treatment. Thirdly, the body could sit tight and hope for the best, perhaps in the hope that the blunder will never emerge or become material.

These options are not equals in terms of their desirability. Indeed, it would seem to be the case that almost always the first and second would be preferable to the third. One concern about Gallaher, however, is that by failing to make clear that the administrative blunder could not justify failing to extend the same assurance to all companies entering ERAs in 2008 the Supreme Court’s decision offers little incentive to administrative bodies to pick up and deal with their mistakes at the earliest stage. Imagine, for instance, that in the course of conducting an investigation in the future an OFT official again makes a mistake which extends a significant advantage to one party. Following Gallaher the OFT might see the most attractive course of conduct as being that of doing nothing to correct the error. Thus, in the first place, the OFT might hope that the mistake might not emerge or become material. In the second, in the event that a third party learnt of the mistake and sought to challenge the lawfulness of the OFT’s failure to respond to it, Gallaher suggests that the OFT could ultimately rely on the fact that a mistake was made to justify the failure to revoke the benefit or to grant the same to the applicant.


It is useful to conclude this post by offering two closing reflections. Firstly, Gallaher may be an example of the old maxim that ‘hard cases make bad law.’ Gallaher was surely a hard case in the sense that accepting in full the applicant’s argument would have had the effect of requiring the OFT to make payments which would have nigh-on demolished its administrative budget and it is possible that this was on the Supreme Court’s mind. Secondly, the Supreme Court in deciding Gallaher seems to have operated from a limited understanding of its role in judicial review and of the values it is charged with protecting. The court, more particularly, focused centrally on the issue of whether the applicants had been misled or had incurred detrimental reliance as a result of the OFT’s conduct and in doing so did not afford sufficient protection to two other values: consistency and good administration. The result is a difficult precedent which appears to allow administrative decision-makers to justify the differential treatment of individuals in substantially the same position by pointing to an administrative blunder and which fails to incentivise the prompt correction of administrative errors.

Dr Joanna Bell is a Lecturer and Fellow at St John’s College, University of Cambridge. The author would like to thank Mark Elliott and Oke Odudu for their extremely helpful comments on an earlier draft and the participants at a Centre for Public Law seminar held in November 2018 at the University of Cambridge for a very illuminating discussion. Any errors or omissions are, of course, the author’s own.

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