BT Group Plc confronts legal defeat in Justin Le Patourel's opt-out class action lawsuit, marking a historic missed opportunity for such claims in the UK.

BT Group Plc confronts legal defeat in Justin Le Patourel's opt-out class action lawsuit, marking a historic missed opportunity for such claims in the UK.

Competition Appeal Tribunal Rejects Excessive Pricing Claim Against BT

In a landmark decision, the Competition Appeal Tribunal (CAT) has unanimously dismissed an excessive pricing claim against BT, ruling that the prices charged for unbundled residential telephone landline services do not constitute an abuse of a dominant position. The judgment, dated 19 December 2024, serves as a reminder of the complexities and unpredictability of litigation and the importance of realistic settlement offers before trial.

The CAT's assessment was guided by the legal framework under Article 102 of the Treaty on the Functioning of the European Union (TFEU), involving a detailed price-cost analysis, evaluation of BT's justification for price levels, and consideration of market dominance and competitive effects.

Key Factors Considered

The CAT's decision hinged on several key factors:

1. Dominance and Market Power: BT's dominance in the relevant market was established, allowing it to set prices independent of competitive pressures.
2. Excessiveness of Price: The CAT compared BT's prices to a competitive benchmark price, such as the cost of provision plus a reasonable margin. Prices were deemed excessive if they significantly surpassed what would be expected in a competitive market without justification.
3. Lack of Objective Justification: Prices might be deemed abusive if BT could not demonstrate legitimate reasons for the high prices, such as increased costs, investments, or innovation benefits.
4. Impact on Consumers or Competitors: The Tribunal examined whether the excessive pricing led to unfair detriment to consumers or prevented equally efficient competitors from competing effectively.
5. Absence of any De Minimis Threshold: According to EU competition law, there is no minimum harm threshold for finding exploitative abuse; even smaller instances can qualify if the pricing is excessive and unjustified.
6. Methodological Flexibility: The CAT employed flexible methodologies based on economic and financial analysis to assess whether prices were excessive.
7. Equally Efficient Competitor Test: The Tribunal considered the costs and ability of a competitor of similar efficiency to compete, as part of determining abuse of dominance by excessive prices.

Notable Findings

The CAT established its own competitive benchmark instead of using the competitive benchmarks arrived at by the parties' two experts. It attributed considerable weight to Ofcom's provisional conclusions at the certification stage of the case but attached limited weight to those conclusions at trial. The CAT also considered evidence of class members switching to other providers or bundled services, which undermined the contention that BT's customers were captive or inert.

The CAT did not find any evidence of anti-competitive or exploitative intent on BT's part. The judgment underscores the case-specific considerations to determine whether excessive prices are unfair and the relatively high bar to establishing abuse.

Implications

The success at the certification stage for class representatives in the UK's opt-out class action regime does not guarantee success at trial where the merits of the claim will be subject to rigorous scrutiny by the CAT. Le Patourel, coupled with the recent public spat in Merricks between the class representative and his funder over the quantum of the agreed proposed settlement, should come as a reality check encouraging greater scrutiny of prospective claims by litigation funders.

Imogen Laycock and Sally Staunton from White & Case contributed to the development of this publication about the Le Patourel case. Raif Hassan, Charles Balmain, and Marlin Heitmann from White & Case are contacts for Litigation, International Arbitration, Antitrust/Competition, Financial Restructuring and Insolvency, Sovereigns, and Enforcement of Arbitral Awards & Judgments. The relative ease of obtaining certification since the Supreme Court's decision in Merricks has encouraged major investment by litigation funders in the UK's opt-out class action regime.

[1] Leadiant decision in the Netherlands [2] Equally Efficient Competitor Test [3] Concepts like margin squeeze or the inability of competitors to match prices

1. The Competition Appeal Tribunal (CAT) rejected an excessive pricing claim against BT in the services sector, determining that BT's prices for unbundled residential telephone landline services did not constitute an abuse of dominance.
2. The CAT's ruling serves as a reminder of the complexities and unpredictability of litigation, emphasizing the importance of realistic settlement offers before trial.
3. The assessment was guided by the legal framework under Article 102 of the Treaty on the Functioning of the European Union (TFEU), involving a detailed price-cost analysis, evaluation of BT's justification for price levels, and consideration of market dominance and competitive effects.
4. The CAT's decision hinged on several key factors, such as BT's dominance in the relevant market, the excessiveness of the price, the lack of objective justification, the impact on consumers or competitors, the absence of any de minimis threshold, and methodological flexibility.
5. The CAT employed flexible methodologies based on economic and financial analysis to assess whether prices were excessive.
6. The Tribunal considered evidence of class members switching to other providers or bundled services, which undermined the contention that BT's customers were captive or inert.
7. The CAT did not find any evidence of anti-competitive or exploitative intent on BT's part, and the judgment underscores the case-specific considerations to determine whether excessive prices are unfair and the relatively high bar to establishing abuse.
8. The success at the certification stage for class representatives in the UK's opt-out class action regime does not guarantee success at trial, where the merits of the claim will be subject to rigorous scrutiny by the CAT.
9. The judgement may lead to increased scrutiny of prospective claims by litigation funders, following the public spat between the class representative and his funder over the quantum of the agreed proposed settlement in the Merricks case.
10. The relative ease of obtaining certification since the Supreme Court's decision in Merricks has encouraged major investment by litigation funders in the UK's opt-out class action regime, and notable cases include the Leadiant decision in the Netherlands and the application of concepts like margin squeeze or the inability of competitors to match prices.

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