Expert evidence in subsidy control challenges: Tribunal draws a firm line

The Competition Appeal Tribunal (CAT) has recently clarified its stance on the admissibility of expert evidence in proceedings brought under the Subsidy Control Act 2022.

In a case involving the Gambling Commission’s approval of Camelot’s £70m marketing reinvestment proposal, the Tribunal refused an application by The New Lottery to introduce econometric expert evidence.

This decision reinforces the principle that judicial review (the standard by which subsidy challenges are to be heard) is about legality and rationality - not a forum for re-litigating technical merits.

Background

The dispute arose from the Gambling Commission’s decision to approve Camelot’s reinvestment plan, which was assessed against the Commercial Market Operator (CMO) principle. The New Lottery challenged the decision, arguing that Camelot’s econometric analysis was flawed and sought to rely on a new expert report to demonstrate irrationality.

The CAT was asked to consider whether such expert evidence should be admitted in this case - a question that has significant implications for subsidy control challenges where economic analysis often underpins whether the CMO principle is satisfied by a particular measure.

The Tribunal’s reasoning

The CAT reaffirmed the restrictive approach set out in “regular” judicial review cases when it comes to the admissibility of new expert evidence. In particular:

• The CAT focused on the idea that the key was assessing whether the Gambling Commission made a rational decision based on the evidence it knew or ought to have known at the time it made the decision. Therefore, the admission of new expert analysis did not assist with the assessment of rationality.
• It was also clear based on the report and a draft report produced by an expert from the Gambling Commission that there was a basis for rational disagreement between experts on a lot of the substance of the new report. On this basis the CAT held that the Law Society test had not been passed, which is if there is room for a reasonable difference of opinion, then an irrationality argument will not succeed, so any rational disagreement between experts will effectively render the expert evidence inadmissible.

Implications for challengers and public authorities 

This ruling has practical consequences for both parties considering a subsidy challenge under the Subsidy Control Act and also for public authorities seeking to rely on CMOP to conclude they are not giving a subsidy.

For challengers it is worth noting the following:

Limited role for economists

Even where decisions involve complex economic principles - such as compliance with the CMO principle - expert reports will rarely be admitted. Therefore caution should be taken before instructing any sort of additional economic analysis when challenging a subsidy decision as it is likely to have limited value.

Focus on process, not substance

Challenges in relation to compliance with the CMO principle (and likely also compliance with the subsidy principles) should be focused more on the process carried out by the public authority at the time in order to advance traditional judicial review grounds such as irrationality, rather than looking to disagree with the ultimate conclusion made by the public authority.

For public authorities it is worth noting:

Get the evidence at the right time to justify your decision

Somewhat contrary to the CAT’s judgment in Weis v Greater Manchester Combined Authority, the CAT ruling in this case implies that the key test on a rationality-based claim is whether the decision was rational based on the information the public authority knew or ought to have known at the time of its decision. This adds weight to the fact public authorities should consider carefully whether economic analysis is needed before relying on the CMOP, as otherwise it could lead to an argument from a challenger that it was not rational to proceed without such analysis.

It is unlikely retrospective analysis will “cure” a breach

It seems unlikely, based on the CAT’s decision in this case, that a public authority generating a report after the decision has been made which demonstrates that, in fact, the measure satisfied CMOP will act as a defence from a rationality claim. Again this contradicts the judgment arrived at in Weis, (where the CAT seemed to analyse the features of the loans and conclude itself that the CMO principle had been complied with), so it will be interesting to see what happens when the Court of Appeal hears the appeal relating to Weis in the new year.