Guidance on Conflicts of interest
Members should remind themselves of the content of this
when invited to serve on an investigation
1. This guidance applies to reporting panel members and specialist
panel members. A conflict of private interest (or duty) and
public duty arises where a member has any interest which might
influence, or be perceived as being capable of influencing,
his or her judgement even unconsciously. While in practice
a member's judgement may not be influenced by a direct pecuniary
interest, in law such an interest, however small, disqualifies
the member from acting. Moreover interests which can in law
disqualify a member are not limited to direct pecuniary interests
though we and the member concerned may be confident that his
or her judgement would not be affected. An example would be
a live business relationship with one of the parties, such
as a contract to supply goods or service. However, we are
not only concerned with the possibility of one of our decisions
being challenged in court on the grounds of conflict of interest,
embarrassing as such a case would be to the Commission and
the member involved. The Commission must be seen to be above
2. Given the range of matters which may be referred to the
reporting side of the Commission, and the wide range of situations
which arise, it has not proved possible to set out rules determining
the circumstances in which a member will or will not be appointed
to a group or required to step down from a group. Each case
must be decided on the facts. The procedure to be adopted
by the Commission is therefore that interests which might
give rise to a conflict should be disclosed to the Chief Executive,
who where necessary will seek legal advice on the matter.
3. Appropriate guidance on the matter has also been issued
to Commission staff and consultants.
Requirement to disclose interests
4. Members should disclose to the Chief Executive any interest
which might give rise to a conflict when the prospect of their
serving on a group dealing with a reference is first raised.
Similarly, such interests which emerge during the course of
an investigation should be disclosed immediately. Such an
interest may, but will not necessarily, result in the member
not being appointed to the group (or standing down if already
appointed). Examples of the types of interest which should
be disclosed are set out below.
5. Most commonly a conflict will arise through an existing
or recent financial, business, personal or family involvement
with (a) a company which is the subject of a reference; (b)
a company which is closely involved in a reference e.g. competitor,
customer or supplier of a company which is the subject of
a reference or, in the case of a merger reference, a competing
bidder; or (c) a company the value of whose shares may be
affected by the outcome of the investigation, eg a company
in the same industry. (The term "company" should
be understood to include any company within the same group,
a "one-man" business, a partnership, building society
6. A member should disclose an interest if he or she, his
or her spouse/partner, dependent children, or any person whose
financial affairs affect the member:
has a shareholding in, or ownership (whether full or partial)
- is a director of;
- is employed by; or
- has close business or other links with a company in category
(a), (b) or (c) described in paragraph 5 (bearing in mind
that a business link also needs to cover links which a member's
employer or partnership may have).
7. A member should also disclose an interest if he or she
has a close relationship with a person whose affairs may be
affected by the reference. In a case where a company which
is the subject of a reference is a regulated utility, in addition
to disclosing any interest in a company in category (a), (b)
or (c) described in paragraph 5, a member should disclose
an interest if he or she, or his or her spouse/partner or
dependent children, are employed by the relevant regulator,
eg OFGEM or OFTEL.
8. A member should disclose an interest where he or she is
responsible for the management of investments, where the investments
concerned include shares in a company in category (a), (b)
or (c) described in paragraph 5.
9. The terms "shareholding" and "shares"
should be understood to include:
- shares, whether bearing a right to vote or not;
- stock or debentures; and
- options and similar rights;
in each case whatever the value of the holding and whether
held as trustee or beneficially (for example under a family
trust or a Personal Equity Plan). Holdings in unit trusts,
investment trusts, unit linked policies, pension schemes or
similar arrangements under which the investor has interests
in a large number of enterprises would not normally give rise
to a conflict of interest unless any company involved in the
arrangements were itself affected by the inquiry. However,
if the trust or arrangement specialises in investing in a
particular industry which is affected by the reference or
if the member believes that there is a real possibility of
the value of his/her investment being affected by the outcome
of the reference, the interest should be disclosed to the
10. Share accounts with a building society would not need
to be disclosed except, for example, where they entitled the
holder to a "perk" in the event of a merger. Similarly,
bank accounts would not normally need to be disclosed in a
reference involving the bank, though they should be disclosed
where a person wishes to obtain or renegotiate a loan or overdraft.
11. A member's interest as an individual consumer (as opposed
to as a business customer) would not need to be disclosed
in normal circumstances where the value of the goods or services
obtained is small, or where most individuals are consumers
(e.g. in the case of a monopoly reference of the supply of
milk, salt or bread). If, however, the member were in a small
group of consumers they should be disclosed. This might be
the case if, for example, a member, his or her spouse, or
child, were a coeliac and as such required gluten free products
which were produced by companies involved in a merger reference.
Members should also disclose the fact of their being a customer
of a local or regional utility which might be affected by
the outcome of a reference.
12. All such interests should be disclosed to the Chief Executive.
Members should speak to the Chief Executive (or Director of
Resources and Planning) if they have any doubts as to whether
or not they have an interest which may give rise to a conflict
and should be disclosed.
Action to resolve a conflict of interest
13. In some circumstances it may suffice for an interest
which does give rise to a conflict to be disposed of in the
period between the public announcement of a reference and
the appointment of the group, subject to the approval of the
Chairman. This has happened in a number of recent investigations.
Moreover, in some circumstances it may be sufficient simply
to inform the parties involved in the investigations of the
interest (be it a shareholding or other interest). Again this
has happened on a number of recent occasions. However, where
the interest in question is that of a member, the normal course
of action will be for the member to dispose of or otherwise
terminate the interest, or, if the member has already been
appointed to the group, to resign from the group. Where the
interest in question is that of a person within paragraphs
7 and 8 above, other than a member, the normal course of action
will also be disposal or termination of the interest, or resignation
from the group unless the interest is de minimis. Interests
that are de minimis will normally be dealt with by disclosure.
An interest will, subject to periodic review, normally be
considered to be de minimis where its value at the time that
the appointment is made is not greater than £500. Where
an interest has been disclosed, members are requested to advise
the Chief Executive of material changes in the value of the
14. More substantial interests are, however, likely to preclude
a member from being appointed to a group or will require him
or her to step down from a group; examples of interests falling
into this category which have arisen include:
- A member was formerly the Chairman and Chief Executive
of a holding company. The member was also a non-executive
director of another company within the group, he held a small
shareholding in the holding company and he was in receipt
of a company pension. During the course of a merger investigation
a submission opposing the merger was received from a company
within the same group. The member immediately stepped down
from the group dealing with the reference.
- In a similar case, a member was not appointed to a group
when she discovered that a company of which she was a non-executive
director intended to give evidence during the investigation.
- Two members were not appointed to the group dealing with
a utility reference. One was chairman and Managing director
of a company which was carrying out work for the company which
was the subject of the investigation. The other worked for
a company which supplied equipment to that company.
- A member was not appointed to the group dealing with a
merger reference because a subsidiary of a company of which
he was a board member handled the public relations of one
of the companies involved in the merger.
- A member was not appointed to a group because his son was
involved in an advisory capacity to a company subject to a
- A member was not appointed to a group because he used to
work for the chairman of one of the companies involved in
the merger. Another was not appointed because he had once
been a close colleague of the Chairman of one of the companies
- A member was not appointed to the group dealing with a
monopoly reference because he was on the board of an organisation
(not a company) which might have had an interest in the outcome
of the investigation.
- A member was not appointed to a group dealing with a utility
reference because he sat on the board of another utility company
(albeit not involved in the same industry) which might have
been affected by the outcome of the investigation.
- A member withdrew from a group when he became aware that
a company of which he was non-executive chairman was negotiating
for a research contract with one of the companies involved
in the merger.
- A member withdrew from a group when he realised that a
company of which he was a non-executive director held a shareholding
in one of the companies involved in the merger.
Private interests and public duties
15. The principles set out in paragraph 2 above apply throughout
an inquiry. Where a member is appointed to a particular group,
he should avoid getting into a position where his private
interests conflict with his public duties. For example, neither
the member nor his firm or partnership should enter into a
business relationship with the parties during the course of
16. Members are reminded that dealing (or encouraging another
to deal) in securities while in possession of relevant price-sensitive
information acquired through membership of the Commission
(or disclosing such information) is potentially a criminal
offence under section 52 of the Criminal Justice Act 1993.
31 July 2002