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CAT condemns the Competition Commission's Data Room Rules as unfair and in breach of principles of natural justice

08 October 2013

On 2 October 2013, the CAT handed down its ruling on an application by BMI Healthcare, HCA International and Spire Healthcare (the 'Applicants') for a review of the CC's decision relating to the operation of a data room in its private healthcare market investigation.

In its ruling, the CAT condemned the CC's Disclosure Room Regime as being in breach of its statutory duty to consult and in breach of the rules of natural justice.

The question

Essentially, the application was concerned with an inherent conflict faced by the CC in its investigations – i.e. the need to protect the confidentiality of information received by the CC against the requirement to give interested parties sufficient information to enable them to respond to the CC's provisional findings and, ultimately, to the decision(s) of the CC.

On 2 September, the CC published its provisional findings in significantly redacted format in order to protect third party confidential information.  In an attempted balancing act, the CC sought to use a limited Disclosure Room Regime, under which the parties' external advisors could access some of the sensitive material under strict conditions and time constraints.

The Applicants sought a review on the grounds of irrationality and procedural unfairness, articulating that the CC's decision was in breach of its statutory duty to consult under s.169 of the Enterprise Act 2002 and in breach of the rules of natural justice.

The CAT's answer

The CAT's review that, in three respects, the CC's rules governing the data room were unfair, in that they did not allow the Applicants an opportunity to put forward an informed response to the provisional findings:

  1. The advisors were only allowed to record notes in relation to their own client and to information that was already in the public domain. This is information to which the parties already had access – parties (and their advisors) would be most interested in confidential information that was not in the public domain and was not 'Own-Client Data';
  2. The advisors were not provided with the means of drafting a considered response to the confidential information whilst in the disclosure room and the facilities provided to them were insufficient to do so.  In particular, there was no real way in which the advisors could discuss points among themselves, they had no access to other material that they might need to look at, no opportunity to discuss matters with persons outside the Disclosure Room and no opportunity to test the robustness of the confidential information; and
  3. The period of time in which the advisors were allowed to access the disclosure room (between 9am and 5pm on 9th and 10th September 2013) was unreasonably short. The CAT ruled that the data room ought to have been open at reasonable business hours until the end of the consultation period and should provide for multiple visits.

The CAT did not consider that irrationality was an appropriate standard for assessing the CC's decision (in the judicial review sense), but if it were, stated that the procedure adopted would have been held to be irrational as well. 

Comment

The ruling neither prohibits nor requires the use by the CC of data rooms and confidentiality rings, but the CC will need to continue to balance carefully the needs of transparency with confidentiality.  Indeed, in its decision, the CAT cautioned that consideration of the potentially competing interests is a nuanced one, to be undertaken in light of all the circumstances; "the Commission stands in the front line when assessing such matters".

Nevertheless, it seems clear that the CC will need to look again at the mechanics of how to ensure fair access to the information that parties need in order to respond meaningfully to publication by the CC of its provisional findings.  Failure to do so is likely to result in further applications by aggrieved parties during the investigative stage of the CC's review – indeed, the CAT even intimated that any such applications should be brought as swiftly as possible following adoption by the CC of its preferred procedure in a given case.