CA-2025-000517 - [2025] EWCA Civ 1061

Lord Justice Green:

A.Introduction / the Judgment

In a judgment dated 19^th December 2024 (“the Judgment”) the Competition Appeal Tribunal (“theCAT”) dismissed the claim of a Class Representative, Mr Le Patourel (“the CR” or “the applicant”), for aggregate damages under section 47A Competition Act 1998 (“CA 1998”) against BT Group Plc and British Telecommunications (“BT”). Earlier in the proceedings, the CAT had certified the claim as appropriate for a collective action upon an opt-out basis. That ruling was upheld by this Court: [2022] EWCA Civ. 593(“Le Patourel I”).

The claim was that BT had abused a dominant position, contrary to section 18 CA 1998 by excessive and unfair pricing to two categories of customers in the market for the provision of landline telephone services to residential addressees. These are known as Standalone Fixed Voice or “SFV services”. They are provided where the customer contracts with BT for access to the telephone network for voice calls only. The charges comprise a fixed line rental charge and a variable charge for calls made. In paragraph [3] of the Judgment the CAT described the two categories of SFV customer and the alternative way in which telephony services are provided, namely through bundling with broadband services:

“Within the provision of SFV Services there are, according to the CR, two customer groups. The first consists of Voice Only Customers (“VOCs”). A VOC buys an SFV service and does not buy a broadband service from either the same or any other provider. As at 2019, there were 1.2m such customers, representing about 5% of total residential customers. The second customer group encompasses Split Purchase Customers (“SPCs”). As at 2019, there were 1.1m SPCs. Such customers also take a broadband service pursuant to a separate contract, either with BT or with some other provider. What they do not have is a “bundle”, i.e. a package of telephone and broadband services provided together by the same supplier under one contract. The market for bundles, comprising voice and broadband, and which the CR says is separate from the SPC market, is known in the industry as “Dual Play” (“DP”). There are also several other bundles sold alongside voice by BT and others, including services such as TV, mobile etc.”

The nub of the claim was that the prices charged by BT for the SFV services were excessive when compared to the cost of provision. Section 18 CA 1998 prohibits the charging of “unfair” prices. There is no single method laid down in case law for determining fairness: see for a recent analysis Cinven Capital Management and others v CMA [2025] EWCA Civ 578 (“Cinven”) at paragraphs [18]-[26]. One central method is known as “Cost-Plus”. Under this the cost (“the Cost”), together with an appropriate return on capital employed (“the Plus”), of providing the good or service in question is established. The resultant Cost-Plus figure is then compared against the selling price to determine a differential. The selling price might be established on an annualised basis or as an average price over a fixed period, such as the period of the alleged infringement. This is described as the Limb 1 test. The CAT then determines whether the differential is justified, and hence fair or unfair in law. This is described as the Limb 2 test. It performs this test by reference to a range of factors largely focusing upon whether consumers attribute “value” to various aspects or features of the good or service in question and any other consideration put forward by the undertaking in question. It may also, where evidence permits, take into account how markets behave (e.g. as to prices) in comparable, workably competitive, markets. The CAT then determines whether the sum total of all the relevant factors to which some value can be attributed adds up to a cumulative value which bears a “reasonable” relation to the selling price.

In the Judgment, the CAT identified the main issues arising for determination. The liability issues were: (i) market definition; (ii) dominance on the part of BT; (iii) whether the prices charged by BT were excessive in the sense that that they were above Cost-Plus (the Limb 1 test); and (iv), if they were, whether they were nonetheless justified and fair (the Limb 2 test). The quantum issues were: (i) whether there was a failure to mitigate by the class; (ii) what the correct approach in principle was to quantification of the overcharge; (iii) what the size of the class was; (iv) whether damages should be increased to include inflation; (v) whether compound interest should be awarded as damages for loss of use of monies; and (vi) how much should be awarded by way of simple interest.

At face value the CR had an attractive case: Ofcom had earlier found, provisionally, that BT was overcharging and BT agreed to take remedial action as part of the basis upon which Ofcom closed the case (for a summary see Le Patourel I paragraphs [10] – [20]); the CR calculated that the excess of selling price over Cost-Plus was between 74 – 90% for each of the claim years except 2021-22 when it was 60% with an average of 68%, margins which in other cases had been found to amount to unfair and abusive pricing; the (unbundled) SFV services were to be compared and contrasted with the bundled service also offered by BT where prices were materially lower and (it was said) there was no logical explanation for these contrasting prices save that BT was exploiting unfairly those customers who took SFV services; BT was clearly in a dominant position given its persistently very high market shares which enabled it to impose unfair prices; and, the burden of proof placed upon BT by the law to justify these prices was high which in the circumstances it had failed to meet.

The trial lasted 28 days in court between January and March 2024. The Judgment runs to [1428] paragraphs.

In the light of the case law the CAT, endorsing the position of the parties, sensibly sought to adopt a streamlined approach to the evidence. It explained its approach to determining abuse in Judgment paragraphs [53] – [56] where it resolved a debate about where within the overall test issues of “value” were to be taken into consideration. The CAT limited the “Plus” (in Cost-Plus) to determination of an appropriate rate of return on investment (a Limb 1 exercise), and it analysed all issues relating to value and justification for the differential (under Limb 2). Paragraph [53] explained:

“For our part, and notwithstanding the flexibility open to a court or competition authority as to where to take into account the question of economic value, we consider the approach taken by the parties to be a helpful one. This is for two reasons. First, it enables the Limb 1 exercise, complex and challenging as it may be, to focus on the linear process of deciding (a) the relevant competitive benchmark, (b) the excess of the price (if any) over that benchmark, and (c) whether such excess is significant and persistent (for the latter, see paragraphs 54-55 below). One would perhaps hesitate to describe such a process as “mechanical” where the underlying questions can be the subject of hotly contested expert evidence and where they involve various value judgments, and moreover where there is a margin of appreciation afforded, at least to a competition authority. Nonetheless, we consider that it is, from an analytical point of view, “cleaner” and more efficient if the question of economic value can be considered as part of the Limb 2 unfairness exercise which, on any view, is clearly less “mechanical” than the Limb 1 exercise, and where a multiplicity of different factors can be taken into account.”

The CAT found that BT was dominant in the market for SFV services. It set out market share figures for various segments of the SFV market at paragraphs [116] – [117]. These ranged from over 50 – 98%. In law, these were sufficient to create a strong presumption of dominance which was engaged at 50%: see Judgment paragraphs [454] – [461] and [494] – [495]. The CAT held that there was evidence of switching, which prima facie might suggest that there were material constraints upon BT’s market power, but held that on the facts this was insufficient to rebut the strong presumption of dominance, citing Case C-457/10 Astra Zeneca v Commission (6^th December 2012) at paragraph [176]:

“The Court has already clarified that, although the importance of the market shares may vary from one market to another, the possession, over a long period, of a very large market share constitutes in itself, save in exceptional circumstances, proof of the existence of a dominant position (Hoffman-La Roche v Commission, paragraph 41) and that market shares of more than 50% constitute very large market shares (Case AKZO v Commission, paragraph 60).”

There were other competitive constraints upon BT’s market power but these, equally, were insufficient to rebut the presumption: Judgment paragraphs [462] – [493].

In relation to BT’s pricing, detailed conclusions on the differential in the period 2015-2022 were set out in paragraphs [915] – [930]. The CAT held that over the period the magnitude of the excess was “significantly and persistently in excess of the competitive benchmark” (Judgment paragraph [928]). Importantly, the CAT held that the differential (the excess) was [33.9%] – [49.9%] for all the claim years save the last one when it was 25%, yielding an overall average excess of 38% (Judgment paragraph [933]), not however [74%] – [90%] with an average of [78%] as the CR submitted.

The CAT then proceeded to determine the Limb 2 question viz, whether the differential it found was justified and hence fair: Judgment paragraphs [931] – [1301]. On the facts the differential was justified, and prices were hence therefore fair in law, with the consequence that there was no abuse of dominance. The claim for damages failed.

The CAT refused permission to appeal, and the applicant now seeks permission from this Court. The issues arising are complex and the Court directed that the application be heard orally with the benefit of detailed written submissions.