The UK's Office of Fair Trading has been heavily criticised by the Competition Appeals Tribunal (CAT) for the temporary ban it imposed on the extension of electronic trading hours at the London Metal Exchange (LME) earlier this year.
The temporary ban - which was the OFT's first use of an interim measures direction (IMD) - was imposed in February 2006 and prohibited the LME from extending trading hours on its Select platform to cover the Asian trading day.
The ban followed a complaint against the LME from Spectron Group, a voice broker in the energy trading market, which argued that any extension in the operating hours of the Select e-trading system would force its own eMetal platform out of the market. Spectron later withdrew its complaint but the OFT didn't life the ban until mid-May, three weeks after the LME lodged an appeal against the measures with CAT.
The tribunal has now awarded the LME appeal costs, thought to be around £250,000, following the ban.
In a statement CAT says the OFT's investigative process was "superficial and flawed and the IMD consequently ill-founded".
"We are concerned that armed with only a 'limited' understanding of Spectron's relevant business, and by extension the market in general, the OFT felt able to adopt an IMD based solely on information provided to it by Spectron without seeking information from 'the market', in particular from affected third parties," says the statement.
Commenting on the ruling, Simon Heale, LME chief executive, says: "The CAT is the only recourse when the processes of the OFT fail as they did in this case. The CAT's judgment says it all. To describe the OFT's investigative process as superficial and flawed is damning. I only hope that the OFT learns from this criticism so that other companies can avoid the damaging and completely unnecessary experience that we have gone through."
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