BHB Enterprises plc v Victor Chandler (International) Ltd

Under Competition Act 1998, section 18, and Article 82 of the Treaty of Rome, high prices are not necessarily unfair prices. A pleading alleging abuse through unfair pricing must identify the material facts supporting unfairness, rather than merely comparing price with production cost or capital cost. Assessment may require consideration of the product’s economic value, its value to the parties, the interests of consumers and the wider market conditions. In a commercial licence, contractual provisions should be construed consistently with business common sense where a literal construction would produce an commercially irrational result.

BHB Enterprises plc claimed payments under a data licence from Victor Chandler (International) Ltd. Victor Chandler contended that the licence was void or unenforceable following the European Court of Justice’s judgment in the William Hill proceedings. It also sought to join PA News Limited and amend its pleadings to allege breach of contract, unlawful interference and abuse of a dominant position through excessive pricing.

The court considered whether PA could refuse to supply the racing data, whether the proposed competition-law case was adequately pleaded, and whether interim injunctive relief should be granted.

1. Contractual construction. The PA/VCI agreement made use of the Pre-Race Data conditional upon the customer having appropriate licensing or other arrangements with BHB. The references to arrangements being “required” or “necessary” were not confined to legal necessity. That construction was supported by commercial common sense and by the contractual acknowledgement of BHB’s asserted rights. The reasoning in Antaios Compania Naviera S.A. v Salen Rederierna A.B. [1985] A.C. 191, as cited with approval in Mannai Investment Co. Ltd v Eagle Star Life Assurance Co. Ltd. [1997] A.C. 749, supported that approach.
2. PA was also entitled to refuse supply where BHB imposed restrictions or prohibitions, or where VCI challenged BHB’s rights or failed to enter into or renew the necessary licence. PA was a middleman and would not breach its agreement with VCI by refusing supply after BHB instructed it to do so. Accordingly, VCI had no cause of action against PA, and the consequential claims against BHB for procuring breach or unlawful interference could not succeed.
3. Pleading competition-law abuse. Allegations under section 18 of the Competition Act 1998 and Article 82 of the Treaty of Rome require particular care because they are burdensome and may require extensive expert evidence. Mere assertion is insufficient. The pleading must state clearly and succinctly the major facts relied upon.
4. The proposed pleading alleged high charges, production costs and projected licensing income, but did not plead facts capable of showing that the charges were unfair. Section 18 concerns the imposition of unfair prices, not merely high prices. The court rejected the proposed per se approach under which a dominant undertaking abuses its position whenever its price substantially exceeds production and capital costs. United Brands v Commission [1978] ECR 207 required the inquiry to proceed beyond the profit margin to whether the price was unfair.
5. In assessing unfairness, the court may consider the product’s value, its value to vendor and purchaser, the effect on consumers and all market conditions. The proposed amendment was therefore refused. Leave to join PA was refused, and the application for interim injunctive relief consequently required no further consideration.