P & S Amusements Ltd v Valley House Leisure Ltd & Anor

Competition-law defences to a contractual claim must identify the primary facts supporting every statutory condition. Repeating the language of the Competition Act 1998 is inadequate.

An agreement may fall within examples of restrictive conduct in section 2(2), or conduct described in section 18(2), without satisfying the operative requirements of sections 2(1) or 18(1). The relevant market, dominance where required, effect on trade and appreciable effect on competition must be considered.

A beer tie affecting one tenant does not establish an appreciable restriction of competition without evidence of wider market impact. A late amendment may be permitted where the proposed implied-term claim has a real prospect of success and can be determined within an outstanding damages inquiry.

The claimant landlord granted a 20-year underlease of a bar and nightclub containing an exclusive beer-purchasing obligation. The tenant later stopped buying from the landlord’s nominated supplier and relied on sections 2 and 18 of the Competition Act 1998 as defences.

In an earlier split trial, Park J held that the tenant remained bound by the beer tie, was in breach, and that the landlord was entitled to an inquiry as to damages. The tenant subsequently changed supplier. The landlord sought summary dismissal of the competition-law defences, permission to amend its claim to plead an implied term concerning discounts, and a declaration that the term existed.

1. The court applied the summary-judgment test in CPR rules 3.4(2) and 24.2(a)(ii). The issue was whether the tenant had a real prospect of successfully defending the claim. The court had to distinguish a real prospect from a fanciful one and avoid conducting a mini-trial.
2. The section 2 defence was summarily dismissed. Section 2 required an agreement, decision or concerted practice; a possible effect on trade within the United Kingdom or the relevant part; and an object or effect preventing, restricting or distorting competition. The pleading did not allege the necessary primary facts. The matters relied on, including pricing and dissimilar conditions, did not themselves satisfy section 2(1).
3. The court accepted that the effect on competition had to be appreciable. The evidence showed strong competition among Blackpool bars, and there was no realistic prospect of proving that this landlord’s beer tie had an appreciable effect on competition. De Limitis v Henniger Brau AG illustrated the need to assess the collective effect of relevant beer ties and the individual agreement’s significant contribution to any market foreclosure.
4. The section 18 defence was also summarily dismissed. The relevant conduct had to be attributable to an undertaking in a dominant position, and the pleaded examples in section 18(2) were not automatically abuses. The landlord was not dominant. Even if a nominated supplier was dominant, the evidence did not show unfair or abusive pricing or conduct affecting trade.
5. The landlord was entitled to an injunction requiring the tenant to purchase designated beers from the nominated supplier and to an inquiry as to damages. Permission was granted to plead an implied term preventing the tenant from negotiating discounts in a way that prejudiced the landlord’s anticipated discount, because the claim had a real prospect of success and arose on the damages inquiry. No summary declaration was made, since the tenant also had a real prospect of defending the implication.

Park J had determined the earlier split trial on liability on 2 February 2006. The present court gave consequential and interlocutory directions following that judgment.