COMPETITION BULLETIN

Ofcom will likely be delighted by the result in the Court of Appeal’s decision in Telefonica O2 UK Limited and others v British Telecommunications PLC [2012] EWCA Civ 1002, in which the Regulator appeared as an interested party.

Not only does the judgment uphold Ofcom’s various dispute determinations relating to ladder pricing by BT for termination of calls to certain non-geographic number ranges, but the judgment make Ofcom’s life easier in a number of respects.

First, and for the immediate future, Ofcom will likely benefit from a decrease in its dispute determination workload. The decision of the CAT which was challenged before the Court of Appeal had generated a web of interlinked disputes raised by various communications providers to be determined by Ofcom under the s.185 Communications Act 2003 procedure.

The 08 decision concerned ladder pricing on certain number ranges. BT had rolled out the model to other non-geographic ranges, such as the 0844, 0843, 0871, 0872, 0873 and 09 premium rate lines. That had generated a further dispute relating to the application of ladder pricing to those ranges.

Further still, in overturning Ofcom’s decisions that BT’s ladder pricing was not fair and reasonable, the CAT had given weight to BT’s contractual right to vary charges for its services contained in paragraph 12 of its Standard Interconnect Agreement (“SIA”). The CAT’s decision in that regard gave rise to a further round of disputes (the “SIA disputes”), raised by a number of mobile network operators who argued that the SIA contained an unfair asymmetry between the provisions applicable to changes made by BT as compared to the provisions applicable to changes made by communications providers.

The Court of Appeal roundly rejected the CAT’s approach to paragraph 12 SIA, holding that neither the actual or previous contractual position, nor any right of BT to impose a change, can be of overriding significance in the application of the fair and reasonable test ([74]). It was doubted whether there was a substantive difference between the charge change rights of BT and the other communications providers, despite the difference in the contractual wording, because BT’s contractual power was subject to the dispute resolution procedure and Ofcom’s ability to intervene under section 185 ([68]).

At the time of writing, there has been no update on the SIA disputes, but on the face of it, it appears unlikely that they will require determination following the decision of the Court of Appeal.

Second, and for the longer term, the Court of Appeal made a number of observations about the standard of review in an appeal to the CAT from a decision of Ofcom, which will no doubt be welcomed by the regulator. Elements of the Judgment were critical of the interventionist approach taken by the CAT. Lloyd LJ said that “if the regulator has addressed the right question by reference to relevant material, any value judgment on its part, as between different relevant considerations, must carry great weight… it does not seem to me that it was open to the Tribunal to balance the various potentially conflicting considerations… in a different way from that adopted by Ofcom, unless an error could be shown in Ofcom’s approach.”