Attheraces Ltd & Anor v The British Horseracing Board Ltd & Anor Rev 2

For excessive-pricing purposes, the economic value of a product supplied by a dominant undertaking is not necessarily limited to its cost of production plus a reasonable return. Cost plus is ordinarily a baseline and may be a default method where market abuse makes the existing price untenable. It is not, without more, a ceiling on lawful prices.

Article 82 is directed to protecting competition and consumers, not to regulating prices or securing a purchaser's profit. The value of the product to the purchaser, the nature of the product and relevant expenditure used to maintain its long-term value may be material. Differential prices are abusive only where equivalent transactions place a customer at a competitive disadvantage and distort competition.

BHB was the sole source of reliable UK pre-race data. ATR used that data with racing pictures in services supplied to overseas bookmakers. Following unsuccessful negotiations, BHB proposed charges based on a share of ATR's net revenues and threatened to instruct authorised suppliers to stop supplying the data unless ATR entered a licence agreement.

Etherton J held that BHB had abused its dominant position contrary to Article 82 of the EC Treaty and section 18 of the Competition Act 1998. He found excessive, unfair and discriminatory pricing, together with an unreasonable refusal to supply: [2005] EWHC (Ch) 3015.

BHB appealed. The central issue was whether the economic value of the pre-race data could lawfully be measured by its database-production cost plus a reasonable return.

1. Appeal allowed. ATR had not established an abuse of BHB's dominant position by excessive, unfair or discriminatory pricing, or by an unreasonable threat to stop supplying pre-race data.

2. The judge correctly treated the governing inquiry under Article 82 as whether the price had a reasonable relation to the product's economic value. He erred, however, in equating that value with the cost of compiling the data plus a reasonable return. Cost plus is not the definitive test. It is ordinarily a baseline below which a price will not be abusive and may be a default calculation where abuse makes an existing price untenable.

3. Economic value required consideration of the data's value to ATR as a revenue-producing product, as well as relevant expenditure by BHB in maintaining the quality, integrity and long-term value of British racing. The evidence did not show that ATR's ability to compete, or competition in the downstream market, had been materially compromised. Article 82 protects competition and consumers, rather than regulating the division of revenues between commercial parties.

4. Once excessive and discriminatory pricing were put aside, BHB's request for a share of ATR's net receipts was a question of the amount of the charge. It was not a separate abuse merely because earlier negotiations had inaccurately described ATR as an agent for overseas bookmakers.

5. BHB could require a separate contractual licence for use of commercially valuable pre-race data. The absence of a database or other intellectual-property right did not make reasonable contractual limits on the authorised use of supplied information anti-competitive. Nor was there double charging: ATR's agreement with PA did not authorise its ATRi use, and no part of the relevant payments by ATR or SIS to PA was payable onward to BHB.

6. The lower court was wrong to treat the lower charge agreed with Phumelela as an independent abuse. Differential pricing is not itself unlawful. ATR had to prove that the difference placed it at a competitive disadvantage and actually or potentially distorted competition; reduced profitability alone did not do so.

• Court of Appeal (Civil Division): allowed BHB's appeal and rejected the findings of abuse of dominant position: [2007] EWCA Civ 38.
• High Court, Chancery Division (Etherton J): held that BHB had abused its dominant position through refusal to supply and excessive, unfair and discriminatory pricing: [2005] EWHC (Ch) 3015.