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United Kingdom Competition Appeals Tribunal
You are here: BAILII >> Databases >> United Kingdom Competition Appeals Tribunal >> Hutchison 3G UK Limited v Office of Communications [2008] CAT 2 (15 January 2008)
URL: http://www.bailii.org/uk/cases/CAT/2008/2.html
Cite as: [2008] CAT 2
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Neutral citation [2008] CAT 2
IN THE COMPETITION
Case Number: 1083/3/3/07
APPEAL TRIBUNAL |
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Victoria House
Bloomsbury Place
15 January
2008
London WC1A 2EB
Before:
VIVIEN ROSE
(Chairman)
PROFESSOR ANDREW BAIN
OBE
ADAM SCOTT TD
Sitting as a Tribunal in England
and Wales
BETWEEN:
HUTCHISON 3G UK
LIMITED
Appellant
-v-OFFICE OF
COMMUNICATIONS
Respondent
with
O2 (UK)
LIMITED
T-MOBILE (UK)
LIMITED
VODAFONE
LIMITED
ORANGE PERSONAL COMMUNICATIONS
SERVICES LIMITED
BRITISH TELECOMMUNICATIONS
PLC
Interveners |
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RULING ON APPLICATION FOR
PERMISSION TO APPEAL |
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1. The
Appellant (“H3G”) has requested permission to appeal against the
Tribunal’s decision, set out in its letter of 6 December 2007, rejecting
H3G’s application to amend its Notice of Appeal and/or to serve a Reply to
the Respondent’s Defence on price control issues. The application to amend
was made in relation to an appeal brought under section 192 of the
Communications Act 2003 (“the Act”) and is therefore governed by section
196 of the Act and by Rules 58 and 59 of the Tribunal’s Rules (S.I. 2003
no. 1372).
2. Section 196 provides
“196. Appeals from the Tribunal
(1) A decision of the
Tribunal on an appeal under section 192(2) may itself be
appealed.
(2) An appeal under this
section-(a) lies to the Court of Appeal or to the Court of Session; and
(b) must relate only to a point of law arising from the decision of the
Tribunal. …
(4) An appeal under this section
requires the permission of the Tribunal or of the court to which it is to
be made.
…”
3. The
Tribunal interprets section 196 as applying to appeals against
interlocutory decisions made in the course of an appeal brought under
section 192(2) as well as to appeals against the Tribunal’s final disposal
of the appeal. The Tribunal also applies CPR 52.3(6)(a) and (b) by analogy
so that permission to appeal is granted only where the appeal would have a
reasonable prospect of success or where there is some other compelling
reason why the appeal should be heard.
4. The Notice
of Appeal was lodged by H3G on 23 May 2007. Some of the background to the
case has been set out in the Tribunal’s previous interlocutory rulings and
judgments in the matter and need not be repeated here. It suffices to say
that the appeal is complicated procedurally for a number of reasons.
First, the appeal falls to be |
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determined using the procedure
set out in sections 193 – 195 of the Act. Broadly speaking, that procedure
requires the Tribunal to identify whether the appeal raises any “specified
price control matters” as defined. If it does, then those matters are to
be referred by the Tribunal to the Competition Commission for its
determination. Matters raised by the appeal which are not price control
matters are to be decided by the Tribunal. Once the Competition Commission
has notified the Tribunal of its determination of the price control
matters referred to it, the Tribunal must decide the appeal on the merits
and, in relation to the price control matters, must decide those matters
in accordance with the determination of the Competition Commission, unless
the Tribunal decides, applying the principles applicable on an application
for judicial review, that the Competition Commission’s determination would
fall to be set aside on such an application. H3G’s appeal raises some
non-price control matters and some price control matters and so will
involve both proceedings before the Tribunal to determine the former and
proceedings before the Competition Commission to determine the latter.
Ultimately the Tribunal will dispose of the whole appeal in accordance
with section 195 of the Act.
5. Secondly,
there is another appeal brought by British Telecommunications plc (“BT”)
against the same decision of the Respondent (“OFCOM”) which is under
challenge in the H3G appeal. The appeal brought by BT comprises entirely
price control issues and it is accepted on all sides that the reference to
the Competition Commission of the price control issues in both appeals
should be combined and dealt with by the Competition Commission at the
same time. Thirdly there are five interveners in the H3G appeal and the
same undertakings are also parties to the BT appeal. Finally, there is
another set of appeals, referred to by the Tribunal as the “Termination
Rate Dispute Appeals”, which raise issues which overlap with the issues
raised in the BT and H3G appeals and in which, to a large extent, the same
parties are all involved. These appeals do not engage the section 193 –
195 procedure and thus are to be determined by the Tribunal without
reference to the Competition Commission.
6. H3G made
its first application to amend its Notice of Appeal by letter to the
Tribunal dated 12 October 2007. The application covered a number of
different amendments, some of which were not contested by the parties. All
of the contentious amendments |
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proposed in that application
related to the parts of the Notice of Appeal that dealt with non-price
control matters to be determined by the Tribunal.
7. Amendment
of pleadings in Tribunal proceedings is governed by Rule 11 of the
Tribunal Rules. This provides
“11(1) The appellant may amend
the notice of appeal only with the permission of the
Tribunal.
(2) Where the Tribunal
grants permission under paragraph (1) it may do so on such terms as it
thinks fit, and shall give such further or consequential directions as may
be necessary.
(3) The Tribunal shall not
grant permission to amend in order to add a new ground for contesting the
decision unless—
(a) such ground is based on
matters of law or fact which have come to light since the appeal was made;
or
(b) it was not practicable to include such ground in the
notice of appeal; or
(c) the circumstances are exceptional”
8. The
procedure governing the amendment of pleadings in proceedings before the
Tribunal differs significantly from the Civil Procedure Rules which apply
in proceedings before the High Court and limits the possibilities of
amendment after an appeal has been introduced. This difference derives
from the fact that the Tribunal’s emphasis is on written procedure and an
appellant is expected to set out his arguments on appeal as fully as
possible in writing at an early stage: see Floe Telecom Limited v
Office of Communications [2004] CAT 7 paragraphs 33 – 37. The Tribunal
has a wide discretion over whether to allow amendments which fall within
Rule 11(1) of the Tribunal Rules (that is amendments which do not raise a
new ground for contesting the decision).
9. One of the
amendments for which permission was sought was the introduction of an
argument to the effect that the imbalance of call traffic between H3G and
the other mobile network operators which H3G argued OFCOM had wrongly
determined to be irrelevant was caused in part by the “on-net/off-net”
pricing strategies adopted by the other operators. The application to
amend was heard at an oral hearing on 6 November 2007 at which the seven
parties to the appeal were represented. At the end of that hearing the
Tribunal announced its decision, allowing some of the amendments
but |
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refusing permission to introduce
the on-net/off-net pricing point. The reasons for the decision were set
out in the Tribunal’s ruling handed down on 23 November 2007 reported as
[2007] CAT 33 (“the First Ruling”). Paragraphs 33 et seq of the First
Ruling explain further what is meant by the on-net/off-net pricing point
and why the Tribunal refused permission to amend in relation to that
point. H3G did not request permission to appeal against the First
Ruling.
10. By letter dated
30 November 2007 H3G sought permission (i) to amend the Notice of Appeal
to include the on-net/off-net pricing point; and/or (ii) to serve a Reply
to that part of OFCOM’s Defence on the price control matters which deals
with traffic imbalance and its possible causes. The first part of this
application differed from the application which had been rejected by the
First Ruling because the part of the Notice of Appeal into which H3G
sought to introduce the point was the part dealing with price control
matters which would in due course be referred to the Competition
Commission.
11. The Tribunal
rejected the application to amend and the application to serve a reply by
letter in short form since, in the Tribunal’s judgment, the applications
raised the same issues as had been determined against H3G in the First
Ruling.
Application to amend the Notice of Appeal
12. The Tribunal’s
decision to refuse permission to amend was taken in the exercise of its
discretion under Rule 11 of the Tribunal’s Rules. The question determined
by the Tribunal in the First Ruling was where the balance between the need
to deal justly with H3G and the need to ensure the efficient performance
of the Tribunal’s case management functions lay in relation to a new
argument which (a) had not been raised by H3G in its submissions to OFCOM
or in its comments on draft determinations during the lengthy consultation
period preceding OFCOM’s decision and which (b) would require substantial
further work and expense on the part of OFCOM and by those parties whose
tariff structures would need to be examined. These were factors which the
Tribunal was entitled to take into account in arriving at the conclusion
set out in the First Ruling. The same factors apply to the application to
amend made on 30 November 2007 and the Tribunal was entitled to exercise
its discretion to reject the application. |
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13. In the Tribunal’s judgment
the appeal does not have a real prospect of success within the meaning of
CPR r52(6)(a). There was no significant difference between this
application and the application rejected in the First Ruling:
(a) Timetable
constraints In the preliminary remarks at the opening of the hearing
of 6 November 2007, the Chairman of the Tribunal referred to a hearing in
January or February 2008 for, inter alia, the non-price control matters in
the H3G appeal as having been mentioned. However the 24 January 2008 date
for the start of the hearing of the non-price control matters had not been
set down by the time the Tribunal gave its decision refusing permission at
the end of the hearing on 6 November. That date was set by a later Order
of 20 November 2007. It was not part of OFCOM’s case that allowing the
amendment would disrupt the proposed timetable or render a January hearing
date impossible. None of the interveners argued that they would not be
able to manage the January date if the amendment were allowed: e.g. see
page 55 of the transcript of the 6 November hearing. Although the First
Ruling therefore referred (paragraph 39) to the strict timetable being set
for the service of further pleadings leading up to a hearing in the New
Year this was not a major factor in the First Ruling. Rather a major
factor was that OFCOM would have to undertake substantial work in
gathering new information and then in assessing any effect on the price
control determination. This point was independent of the question of
whether the work could be concluded in time for the January hearing.
Exactly the same point therefore applied to the renewed
application.
(b) OFCOM’s positive case
on traffic imbalance in its Defence It was accepted by all parties
that the issue of traffic imbalance and its causes was already raised by
H3G’s Notice of Appeal. OFCOM conceded that this proposed amendment did
not raise a new “ground” for the purposes of Rule 11 of the Tribunal’s
Rules but was a new argument in support of an existing ground in that it
put forward an additional explanation for the traffic imbalance alleged to
exist between H3G and the other MNOs. H3G argued in its 30 November letter
of application that OFCOM was now mounting a “positive case” on the causes
of traffic imbalance, namely that a possible cause of traffic
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imbalance may be H3G’s commercial
strategy of acquiring post-pay customers rather than pre-pay customers.
OFCOM responded in its letter of 4 December 2007 stating that this was
incorrect and the same point had been made in the decision which was
challenged in the H3G and BT appeals. OFCOM’s Defence makes it clear that
its case is that the traffic imbalance experienced by H3G is not a
directly relevant factor that should be taken into account in determining
the levels of the charge controls (paragraph 80) so that, on that case,
the causes of the traffic imbalance are irrelevant. The Tribunal does not
consider that the Defence on price control issues raises any new issue
which distinguishes this application from that rejected by the First
Ruling.
(c) OFCOM must already
have undertaken the necessary research The Tribunal similarly rejects
the assertion that the way the Defence is pleaded indicates that OFCOM
must have conducted the research needed to deal with the on-net/off-net
point. As is made clear in paragraph 37 of the First Ruling, the research
needed to counter the on-net/off-net point would be (i) an analysis of the
tariff structures of the other MNOs to see if there is indeed a
differential between the on-net and off-net retail price as H3G allege;
(ii) an analysis of how far customers are affected by such a differential
given their choice of tariff and pattern of usage; and (iii) an analysis
of whether customers and potential customers are aware of this effect in a
way that influences their choice of network: see pages 45- 47 of the
transcript of the 6th November hearing. Nothing in the Defence indicates
that sufficient research and analysis has been carried out.
(d) Price Control
Appendix is merely an outline It is accepted that once the price
control matters are referred to the Competition Commission, the parties
will be able to make further submissions and provide further evidence to
the Competition Commission to flesh out the points that are made in their
pleadings. To that extent, the Price Control Appendix is an outline
document. However, the fact that the pleading may be in outline does not
entitle the party to adduce additional arguments which are
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raised at all in that pleading. A
pleading, even in outline, is still intended to show the Tribunal and the
parties what issues are raised by the appeal.
(e) Reference in Price Control
Appendix to on-net/off-net in relation to market shares This point was
first raised by H3G in its application of 21 December 2007 for permission
to appeal. It was not mentioned by H3G in its letter of 30 November 2007
and it is therefore not a point that the Tribunal took into account in
arriving at its decision of 6 December 2007. In any event, the point being
made by the reference to on-net/off-net pricing in the Price Control
Appendix is a different point from that now sought to be introduced.
There, H3G refers to a pan-European data study in 2004 and a more recent
theoretical economics paper as proposing that on-net pricing strategies
may account for perceived long term differences in market shares between
market participants who entered the market at different times. H3G refer
to this in order to cast doubt on the accuracy of the market share
forecasts used by OFCOM in the economic depreciation methodology
incorporated in its long run incremental costs (LRIC) model. Countering
this point would not require OFCOM to undertake the investigation and
analysis referred to in paragraph (c) above.
14. H3G submit five reasons why
the only rational conclusion open to the Tribunal would have been that the
interests of justice required the grant of permission to amend. The
Tribunal does not accept that the reasons put forward establish that the
interests of justice could only be served by allowing the amendment. H3G
is able on the basis of its pleaded case to argue before the Competition
Commission (a) that the traffic imbalance is, contrary to OFCOM’s case, a
relevant factor in considering the price control and (b) that the traffic
imbalance is at least in part a symptom of a structural problem which is
beyond H3G’s control and which OFCOM has failed adequately to address,
namely the current arrangements for number portability which operate to
H3G’s disadvantage. The Tribunal does not accept that H3G suffers
significant prejudice by being precluded from arguing in these proceedings
an additional or alternative reason for the existence of the traffic
imbalance. |
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15. The Tribunal
also does not accept that the refusal to allow the introduction of this
point will inhibit the Competition Commission from investigating and
determining the “real issues” in dispute between the parties in these
proceedings. The scope of the issues in dispute is set by the grounds of
appeal set out in the notice of appeal, by reference to which the Tribunal
must ultimately decide the appeal on the merits in accordance with section
195(2) of the Act. This applies as much to those aspects of the appeal
which fall to be determined by the Competition Commission as it does to
the non price control matters to be determined by the
Tribunal.
16. Finally the
Tribunal rejects the argument that there is no prejudice to OFCOM in
allowing this amendment. In the Tribunal’s judgment the prejudice suffered
by OFCOM is the same as was considered in the First Ruling, namely the
fact that the new point could not be countered without substantial further
investigation and analysis. The fact that the specified price control
matters have not yet been referred to the Competition Commission and that
consideration of those matters is likely to take longer than is envisaged
for the consideration of the non-price control matters by the Tribunal
does not diminish this prejudice.
Application to serve a Reply
17. In its letter of 30 November 2007, H3G
stated:
“In order to ensure that it has
an appropriate basis for making the on-net/off-net pricing differential
argument before the CC, H3G submits that it should either be permitted to
amend its Notice of Appeal and/or to file and serve a Reply addressing
OFCOM’s newly pleaded case referred to above. By way of such amendment or
Reply, H3G would seek to explain how on-net/off-net pricing is among the
principal reasons for the traffic imbalance.”
18. H3G therefore
applied for permission under Rule 19 of the Tribunal’s Rules to serve a
reply to OFCOM’s outline Defence on the price control matters “in order to
address OFCOM’s pleas at paragraphs 81 and 87.” The paragraphs referred to
are those paragraphs of the Defence which H3G allege set out OFCOM’s
“positive case” on the reasons for traffic imbalance. It therefore
appeared from that letter that the sole purpose of any such Reply would be
to introduce the on-net/off-net price differential as a reason for the
alleged traffic imbalance. H3G has not suggested that it wishes to raise
any other points in such a Reply. Since the same points apply whether the
point is |
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raised in a Reply or an Amended
Notice of Appeal, there was no reason for the Tribunal to give separate
consideration to the second application.
19. No other
compelling reason why this appeal should be heard has been put forward by
H3G.
20. For these reasons, the Tribunal refuses
permission to appeal. |
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Vivien Rose |
Andrew
Bain |
Adam Scott |
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Charles Dhanowa
Registrar |
Date: 15 January 2008 |
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