COMPETITION BULLETIN

The Competition Appeal Tribunal today delivered that rarest of beasts: a judgment awarding damages in a follow-on claim. After its decade-long fight, Albion Water has been awarded around £2 million for Dŵr Cymru’s abuse of dominant position in relation to the price it was prepared to charge Albion for the use of its water pipes.

The 130-page judgment consists largely of a detailed analysis of the counterfactual – i.e. what would have happened, and what profits would Albion have made, if Dŵr Cymru had not behaved abusively. It is, however, worth highlighting two points which will be of more general interest.

First, the question arises of what assumptions should be made about the dominant undertaking’s behaviour in the counterfactual scenario. It was common ground that the counterfactual has to assume that the dominant undertaking does not behave abusively or unlawfully in any other way. However, Dŵr Cymru argued that the counterfactual should assume that the dominant undertaking would have charged as much as possible without committing an abuse – in other words, that it would have pushed the price right up to the edge of what was lawfully permitted.

The Tribunal rejected that submission as “wrong in principle” and “entirely impracticable” [69]. It would be extremely difficult to identify the precise boundary between lawful and unlawful conduct. The correct approach, according to the Tribunal, is to assume that the dominant undertaking would have offered a “reasonable” access price [71]. (I note in passing that the same Tribunal chairperson (Vivien Rose) has previously adopted a similar approach to identifying the counterfactual for the different purpose of deciding whether there has been abusive conduct.)

The second point worthy of note is what is said about Albion’s exemplary damages claim. The Tribunal did not pull its punches when describing Dŵr Cymru’s behaviour.  See, for example, this overview at [286]:

“Certainly, the picture Dŵr Cymru itself presents of what happened casts it in a very poor light. If Mr Williams and Mr Edwards are to be believed, two junior members of the team were left to calculate the common carriage price – the first of its kind in England and Wales – apparently without any guidance, instruction or competent supervision from senior management. The person appointed to be sponsor of the project was someone who, on his own evidence, did not understand what was going on and did not have the expertise to fulfil the role to which he was appointed. […] It has allowed any documents containing a proper record of decisions to be destroyed or mislaid through IT and management changeovers. […] the Board did not institute any effective mechanism for ensuring compliance with the law or independent quality control of the price calculations being made. We find that this constituted a conspicuous and reprehensible failure of corporate governance.”

However, despite such “reprehensible” failings, the Tribunal did not award exemplary damages. It held at [288] that exemplary damages should only be awarded if there is some evidence that the company actually knew that the price was unlawfully excessive, or that it did not care whether it was excessive or not. Dŵr Cymru’s sin was incompetence rather than malice.