Hutchison 3G UK Ltd v The Office of Communications & Anor

In assessing significant market power under the Common Regulatory Framework, the court must avoid circularity. A regulatory constraint that would itself determine whether market power exists cannot answer that question. The modified Greenfield approach therefore takes existing obligations such as end-to-end connectivity into account, but disregards ex post dispute-resolution powers where they would automatically prevent a finding of SMP. A 100 per cent share of an individual call-termination market raises a strong presumption of SMP, rebuttable only by clear and convincing evidence of countervailing buyer power. Commercial pressures on the buyer remain relevant, but knowledge and price sensitivity alone are insufficient. Once SMP is established, the same regulatory argument cannot prevent price control where the statutory risk of excessive charges is shown. The appeal was dismissed.

Hutchison 3G UK Ltd challenged Ofcom’s findings that it had significant market power in the market for mobile call termination on its own network. Ofcom had first made a similar finding in 2004, but the Competition Appeal Tribunal allowed an earlier appeal and remitted the matter. Following reassessment, Ofcom reached the same conclusion for 2004 and also found SMP for 2007 to 2011, imposing price controls. The Tribunal dismissed the relevant appeal in [2008] CAT 11.

The appeal concerned whether BT’s end-to-end connectivity obligation and Ofcom’s dispute-resolution powers gave BT sufficient countervailing buyer power to prevent SMP, and whether price control was justified under the Communications Act 2003. The court also considered whether the first issue concerning the lawful level of a dispute-resolution price required determination.

1. Appeal dismissed. Lord Justice Lloyd gave the principal judgment. Lord Justice Etherton agreed, and Lord Justice Ward agreed with both judgments.
2. The court applied the modified Greenfield approach to the assessment of SMP. The assessment must avoid circularity. Regulatory features which would themselves provide the answer to whether an undertaking has SMP must be disregarded. Otherwise, regulation intended to control market power would cause the market to appear effectively competitive and would prevent the regulation from being imposed. The end-to-end connectivity obligation had to be taken into account because it existed independently of an SMP finding. Ofcom’s dispute-resolution powers under section 185 of the Communications Act 2003 were different. They were a form of ex post regulation capable of restraining the MNO’s prices and therefore had to be disregarded for the SMP enquiry.
3. A 100 per cent share of an individual call-termination market created a strong presumption of SMP. Clear and convincing evidence was required to rebut it. The evidence showed that BT’s commercial pressures, its regulatory obligations, the absence of alternative sources of supply and other practical considerations substantially weakened its countervailing buyer power. The Tribunal was entitled to conclude, without remitting the matter to Ofcom, that those factors did not rebut the presumption.
4. The price-control issue was distinct. A finding of SMP did not automatically satisfy section 88, but Ofcom could impose price controls where the evidence showed that the operator had the ability and incentive to charge excessively and that the risk could harm end-users. Reliance on dispute resolution or the reasonable-terms limitation in the end-to-end obligation would have been circular and was unavailable.
5. The court declined to decide the first ground concerning whether Ofcom could set a dispute-resolution price appreciably above the competitive level. That issue arose only if the second ground succeeded. No reference to the European Court of Justice was necessary.

• Court of Appeal (Civil Division) dismissed the appeal from the Tribunal and upheld the findings of SMP and the imposition of price controls.
• Competition Appeal Tribunal dismissed Hutchison 3G’s appeal against Ofcom’s reassessment and 2007 market statement in [2008] CAT 11.
• Ofcom reassessed the 2004 position after the earlier Tribunal decision and found SMP again. It also found SMP for 2007 to 2011 and imposed price controls.