BT escapes liability in £1.3 billion class action in UK Competition Appeal Tribunal… for now

On 19 December 2024, the UK Competition Appeal Tribunal (CAT) delivered its long-awaited judgment in Justin Le Patourel v BT Group Plc and British Telecommunications Plc [2024] CAT 76. The CAT dismissed the claim in full, finding that BT had not abused its dominant position in the relevant market, offering helpful guidance on the application of the legal test for establishing excessive pricing.

Key takeaways

• In its judgment, the CAT effectively applied orthodox abuse of dominance principles to a novel claim, and at least in the context of excessive pricing cases, maintained a high bar to determining whether conduct is abusive.
• In terms of outlining how excessive pricing cases are to be assessed, the CAT's judgment provides welcome guidance on what constitutes an excessive price outside of the pharmaceutical sector, where prior cases had found excessive prices were hundreds to thousands of times higher than the relevant pricing benchmark.
• While the CAT accepted that BT's prices were excessive, it concluded that BT's prices were not unfair. When assessing unfairness, the CAT took a very broad approach to the fact-specific question of what might constitute economic value, making it harder to show that BT's excessive prices were in and of themselves unfair. However, the CAT showed it will still give weight to the extent of excess when assessing unfairness, but not on the facts of this case.
• The CAT had little regard to Ofcom's Provisional Conclusions (published on 28 February 2017) on the services in question, which was a critical but non-binding piece of evidence underpinning Mr Le Patourel's case. The CAT's attitude may cause future claimants to rethink the extent of their reliance on regulatory findings in similar 'hybrid' claims.

Background

In January 2021, former Ofcom official Justin Le Patourel brought an opt-out collective claim against BT, alleging an abuse of a dominant position by BT in charging excessive prices to approximately 2.3 million landline customers in the UK. Mr Le Patourel's claim was a standalone claim, nonetheless relying on evidence from an Ofcom report, but not following on from any final decision handed down by a regulator.

In September 2021, the CAT certified Mr Le Patourel's claim as an opt-out proceeding, making this claim one of the first standalone claims to be certified as a collective proceeding (read our previous article on this here). BT then appealed the CAT's decision to certify the claim specifically on an opt-out basis (as opposed to appealing the certification itself). This appeal was unanimously rejected in May 2022 (read our previous article on this here).

The claim eventually progressed to an eight-week trial held in the CAT between January and March 2024, the first of its kind under the collective action regime.

The CAT's judgment

In its judgment, the CAT dismissed Mr Le Patourel's claim in full, finding that BT had not abused its dominant position in the market. Some of the CAT's key findings are discussed below.

Market definition and dominance

The CAT found that BT was dominant in the market for Standalone Fixed Voice services (i.e. landline telephone services provided to residential addresses), choosing not to adopt a wider market definition which included bundled services, as BT had contended.

The more complex question of abuse

After considering what the appropriate benchmarks should be, the CAT found that BT had been charging significantly and persistently excessive prices throughout the claim period.

Importantly, however, for abuse to be made out, the CAT also needed to consider whether these excessive prices were also unfair. Only then would both limbs of the relevant test from the ECJ's judgment in United Brands be satisfied. The CAT recently reiterated the cumulative nature of this test in its judgment in the Phenytoin litigation ([2024] CAT 65), delivered only three weeks before Le Patourel, where the CAT highlighted the excessiveness limb's primary function as "gateway" to the unfairness limb.

In this instance, the CAT did not consider BT's prices to be unfair. Therefore, abuse of dominance (i.e. liability) could not be made out and Mr Le Patourel's claim failed.

In coming to this decision, the CAT stressed that prices being excessive does not result in a presumption that those prices are in and of themselves unfair; many factors are to be considered in determining unfairness. The CAT did, however, take into account the fact that the extent of excess it had found (an average excess of 38%) was less than half of what Mr Le Patourel had contended (an average excess of 78%), which significantly diminished Mr Le Patourel's case that the excessive prices were inherently unfair.

When looking at other factors relevant to unfairness, the CAT found that BT provided distinctive economic value to its customers such that its prices, despite being excessive, still bore a "reasonable relation to their economic value".

In this regard, the CAT took a very broad approach to what might constitute economic value. The CAT found, on the specific facts before them, that value came not just from things BT provides which are of some positive value to customers (known as "Gives" and including, for instance, onshoring of call centres), but also from the significant brand value BT holds, evidenced by the loyalty of BT's customers, which the CAT argued could not merely be dismissed as these customers being captive or inert (which the CAT specifically found was not the case).  

The CAT's finding on excessiveness and unfairness in this case follows a number of recent UK decisions on excessive pricing, including the Phenytoin litigation referenced above. These recent cases all concerned CMA investigations in the pharmaceutical sector where the CMA found, and the CAT ultimately agreed, that prices marked up hundreds to thousands of times higher were excessive. The CAT's judgment in Le Patourel therefore provides welcome guidance on the CAT's approach to determining whether excessive prices are unfair in cases involving much more modest 'excesses'. Indeed, the CAT found in this case that an average excess of 38% above the competitive level was sufficient to render BT's prices excessive.

The question of quantum

While Mr Le Patourel's claim failed on liability, the CAT helpfully took the opportunity to express its views on arguments relating to quantum.

Mr Le Patourel had sought to calculate the relevant loss per customer as the difference between price for any given month and the relevant competitive benchmark. BT had argued that this would overcompensate class members, because: (a) a lawful price in any counterfactual analysis would be any price not amounting to a significant excess above the competitive benchmark; and (b) it should not be assumed that BT would have confined itself to a lawful price no more than the (by definition, lawful) competitive benchmark. In effect, BT was arguing that the counterfactual price was not the competitive benchmark, but the highest price above the competitive benchmark that was not unfair.

The CAT concluded it would have dismissed BT's argument in this regard, referencing Albion Water Limited v Dŵr Cymru Cyfyngedig [2013] CAT 6, in which the defendant submitted that the starting point for assessing quantum should be the highest of three competitive benchmarks which by definition would be lawful, but the CAT disagreed and found that the 'average' benchmark should be used instead.

The CAT also said (among other things) that it would have rejected BT's argument that business customers should be excluded from the class such that quantum would be reduced, and dismissed the prospect of deducting any pass-on amount from quantum.

These findings on quantum in Mr Le Patourel's favour may weigh on his decision of whether or not an appeal of the CAT's judgment as to abuse would be worthwhile.

There are two other points of particular note in the CAT's decision:

• The first is the fact that the parties' economic experts appear to have taken very different approaches to the analyses they presented in respect of the same issues, to the point that the CAT did not always have two alternative sets of calculations capable of being easily compared and contrasted. This also resulted in the experts contending that the others' analysis should be entirely rejected by the CAT. This can be a bi-product of experts becoming 'ships passing in the night', which the CAT has made clear in other cases that it wishes to avoid. Further active management of the terms of permission to rely on expert evidence and the intensity of the joint statement phase of expert evidence may be on the cards in 2025.
• The second is that the CAT also said it would have refused compound interest as a head of loss for class members. The CAT reasoned that while it did have the power to order compound interest when damages are assessed on an aggregate basis, Mr Le Patourel failed to meet the strict evidential requirements laid down by the Supreme Court in Sempra Metals v IRC [2008] 1 AC 561.
• The CAT appeared to have some reluctance in expressing the view, noting at paragraph 1423: "We reach that conclusion with no particular enthusiasm, given that, as the Tribunal observed in Royal Mail, to restrict the award of compound interest does not reflect the prominence of compound interest in the real world. Not to compensate consumers here seems anomalous" (emphasis added). Class representatives in future consumer-facing claims are likely to focus on this and hope that the door remains ajar to claim compound interest as a head of loss.

Next steps and wider implications

Mr Le Patourel has expressed his disappointment at the CAT's decision and announced that he is "carefully considering" the prospect of appeal. Meanwhile, BT welcomed the ruling and reiterated that it takes its "responsibilities to all of [its] customers very seriously".

Against a backdrop of more standalone and hybrid competition class actions being pursued in the CAT often based on novel theories of harm, this judgment is an example of the CAT effectively applying orthodox abuse of dominance principles and giving little weight to prior regulatory findings. It will be a reminder to claimants, and those funding them, that neither certification nor prior non-binding regulatory findings are necessarily an indicator of ultimate success on the merits.

Authors: Tim West, Max Strasberg, Hayden Dunnett and Brihadeesh Murali