Judgment

Neutral citation:

[2012] CAT 11

Published:

3 May 2012

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Summary:

British Telecommunications plc, Vodafone Ltd (“Vodafone”), Hutchison 3G (UK) Limited and Everything Everywhere Ltd (“EE”) appealed to the Tribunal against the price control conditions contained in OFCOM’s 2011 Statement on mobile termination rates (“MTRs”) (“the Statement”). Those price control conditions set a target average charge for each mobile network operator for each of the years of the price control, covering the period from 2011 to 2015. The level of the price control imposed by OFCOM was based on its estimates of the long-run incremental cost (“LRIC”) of providing wholesale mobile call termination services in 2014/15 which it derived from its cost model.

All of the appeals raised price control matters which, in accordance with section 193 of the Communications Act 2003 (“the 2003 Act”), the Tribunal was required to refer to the Competition Commission (the “Commission”) for determination. By an order of 30 June 2011 the Tribunal, therefore, referred seven reference questions to the Commission, which required the Commission to determine, on the merits, whether OFCOM had erred in its approach to setting the price controls.

On 9 February 2012 the Commission notified the Tribunal of their determination of those price control matters (“the Determination”). Broadly, the Commission determined that OFCOM had erred in relation to the matters raised in Reference Questions 3, 4 and 6. The Commission concluded that OFCOM had erred in using a four-year (rather than three-year) glide path for achieving LRIC-level MTRs and in relying on overstated radio equipment costs in its costs model. In answering Reference Question 3, the Commission also found that Vodafone had identified certain errors in OFCOM’s analysis but the Commission did not consider that these allegations had been properly pleaded. As it was requested to do by the Tribunal’s Reference Question 7, the Commission set out how the charge controls should be adjusted to reflect the errors that it identified. It dismissed the remainder of the arguments relating to Reference Questions 1, 2 and 5, and upheld OFCOM’s decision to adopt a LRIC model for setting the price control and as to the level of the price control based on LRIC.

Vodafone and EE applied to the Tribunal under section 193(7) of the 2003 Act for a direction that the Determination was one that would fall to be set aside, applying the principles applicable on an application for judicial review. For the reasons given in the Judgment, the Tribunal unanimously dismissed those grounds. In particular, the Tribunal rejected EE’s argument that the Commission had misunderstood its function under section 193 of the 2003 Act, which had allegedly led it to endorse OFCOM’s conclusions on points when it should not have done. The Tribunal further held that the Commission had a sufficient evidential basis for its decision and that the Commission acted properly, rationally, and in accordance with its statutory duties, in determining the Reference Questions on the evidence before it. The Tribunal considered that many of Vodafone’s criticisms of the Determination used the language of judicial review only in order to support what was, in substance, an impermissible attempt to challenge the Determination on the merits. The Tribunal did, however, hold that those errors identified by Vodafone’s unpleaded ground of appeal ought properly to be corrected and, accordingly, gave permission for Vodafone to amend its notice of appeal.

Pursuant to section 193(6) of the 2003 Act, the Tribunal decided the price control matters arising in each of the appeals in accordance with the Determination, save that the Commission’s conclusions with respect to the unpleaded points applied as if they had been pleaded by Vodafone. Further, pursuant to section 195(4) of the Communications Act 2003, the Tribunal proposed to make an Order remitting the matter to OFCOM with appropriate directions that OFCOM implement the Statement, as corrected by the Determination.

This is an unofficial summary prepared by the Registry of the Competition Appeal Tribunal.