UK competition class actions: first claim to go to trial dismissed

Le Patourel v BT is a collective action brought on an opt-out basis on behalf of 3.7 million customers of the UK telecoms operator BT (“the class”), with the total claim value exceeding £1 billion.  

The class representative (“CR”), Mr Le Patourel, alleged that the class had suffered loss due to BT’s unfair pricing of residential landline services.  The claim relied heavily on preliminary conclusions reached by the UK telecoms regulator Ofcom in 2017, which had resulted in voluntary undertakings from BT to address Ofcom’s concerns about BT’s pricing being above a competitive level.   The claim was however brought on a standalone basis (as opposed to follow-on) as those preliminary findings were not binding on the CAT.

Three particular points of interest from the judgment are considered below: the approach to excessive pricing, the significance of Ofcom’s preliminary conclusions, and the CAT’s comments on the assessment of quantum.

Abusive excessive pricing: the high bar remains

The CAT applied the long established two limb United Brands test to determine whether the prices were excessive in comparison to a competitive benchmark (limb 1), and if so, whether the prices were unfair and therefore abusive (limb 2).

Under limb 1 of the test, the CAT considered the relevant notional competitive benchmark and the extent of any price excess over that benchmark. After analysing the parties’ submissions in depth, the CAT found that a reasonable margin for the competitive benchmark was 13.5%. It took the view that an excessive price was significant if it was 20% or more than the competitive benchmark. On the basis that the prices charged ranged from 25% to 49% above the benchmark, the CAT found that those prices were significantly and persistently excessive.

The CAT then went on to consider limb 2 of the test, namely whether BT’s pricing was unfair in and of itself and against comparators. The CAT examined the economic value of BT’s services and concluded that BT provided distinctive value to its SFV customers.  That value was derived not only from particular services offered by BT but also from the value of BT’s brand (in particular, customers exhibited loyalty to BT despite having the ability to switch provider). 

Overall, the CAT concluded that BT’s pricing was not unfair – therefore there was no abuse of dominance and the claim failed.  

Excessive pricing cases have tended to be relatively rare outside the pharmaceutical sector.  As such, this case provides a useful insight into the CAT’s approach in a different regulated sector.  It also affirms the high bar for establishing abusive excessive prices.  

It will be interesting to see the CAT’s stance in the various other excessive pricing collective actions that are pending before it, not least the Rachel Kent v Apple claim currently being heard (as at January 2025).   

Ofcom’s provisional findings: the CAT’s broad discretion 

While Ofcom’s 2017 provisional findings carried weight in relation to the CAT’s decision to grant certification to the claim, they were not regarded as materially significant by the CAT at trial.  This was for a variety of reasons, including their provisional nature, the fact that they were made in a different legal context (market review rather than competition investigation) and that the evidence and submissions before the CAT during the proceedings were more extensive and relevant to the case.   Notably, the CAT explicitly cautioned against attempting a “rigid read-across” from the provisional findings of a regulatory body.  It is apparent that success in gaining certification is by no means a guarantee of success at full trial.     

The CAT’s approach in relation to Ofcom’s findings illustrates the broad extent of its discretion to take issues and submissions into account in proceedings before it.  This can also be seen in the context of the extensive economic evidence presented during the proceedings.  Whilst acknowledging the helpful contributions of the parties’ experts, the CAT did not ‘pick’ one side or another – rather it considered both sides’ arguments in detail, noting where it saw deficiencies in approach, and produced its own ‘blended’ methodology including elements of both.      

Quantum: door open to compound interest?

Although the claim failed on liability, the CAT made some passing remarks on the assessment of quantum, since the parties had made their arguments in full, and in case of any appeal.  

In particular, the CAT considered whether it would have awarded compound interest on a damages award. It concluded that although the CR had made arguments for compound interest, the stringent legal test in Sempra Metals had not been satisfied. The CAT did note however that it had reached this conclusion with “no particular enthusiasm…as it does not reflect the prominence of compound interest in the real world”.  The door therefore remains open in future for compound interest awards provided the legal test is met.

Implications for the UK collective actions regime 

One big question is the extent to which this judgment may dampen claimants’ and funders’ enthusiasm for bringing opt-out collective actions at the CAT.   Whilst it would not be sensible to draw any firm conclusions on the basis of this single early case, the fact that the claim failed, and more generally the outstanding questions that remain around the distribution of awards to funders may mean that class representatives and funders review potential collective actions with increased scrutiny.  On the other hand, there have been two new claims issued in the last month alone, which does not indicate a slow-down any time soon for the UK collective actions regime.  

Authored by Chris Hutton, Karman Gordon, James Dayman, Elspeth Aylett.