British Telecommunications Plc v Office of Communications & Ors

A statutory dispute-resolution power is not implicitly confined to disputes likely to be completed within four months where Communications Act 2003 makes the four-month period a procedural requirement, subject to exceptional circumstances.

A cost-orientation obligation applying to each charge in a separately regulated market cannot be satisfied by aggregating prices and returns across a different market. That approach would defeat the distinct ex ante regimes. The regulated provider bears the burden of justifying its charges. Proof of specific economic harm is unnecessary where the provider has not justified the charge under the condition.

The repayment power under section 190(2)(d) is a principled regulatory discretion. It normally requires repayment of an overcharge, but may permit a lesser or no repayment where that better achieves the statutory and regulatory objectives.

BT supplied partial private circuits to communications providers. Ofcom had imposed separate ex ante regulation on the trunk and terminating segments of those circuits. Condition H3.1 required BT to show that every trunk charge was cost-orientated.

Ofcom determined that BT had overcharged for 2 Mbit/s trunk services between April 2005 and September 2008. Applying the distributed stand-alone costs test, it directed BT to repay £41.688 million plus interest. BT appealed under Communications Act 2003 section 192.

The Competition Appeal Tribunal dismissed BT’s jurisdictional challenge in a preliminary judgment and dismissed its substantive appeal. BT sought permission to appeal on whether Ofcom could determine the historic dispute, whether the cost-orientation condition required an aggregated assessment of whole circuits, and whether repayment was an unlawful or disproportionate remedy.

1. Appeal dismissed. The Court refused permission on the jurisdiction ground. It granted permission on the remaining grounds but dismissed the appeal. Etherton LJ gave the judgment, with which Rix and Lewison LJJ agreed.

2. There was no implied restriction in Communications Act 2003 section 185 preventing Ofcom from accepting a dispute likely to take more than four months. The Act expressly identifies excluded disputes, and duration is not one of them. The four-month provision appears later as a procedural requirement for determination and expressly allows exceptional circumstances. Article 20 of the Framework Directive did not prevent Parliament from giving Ofcom a wider dispute-resolution power.

3. BT could not justify a high charge for trunk segments by relying on lower charges for terminating segments or on the return earned from whole circuits. The 2004 regime identified economically distinct markets, imposed a price cap on terminating segments, and separately imposed cost orientation on trunk charges. Aggregation would conflate distinct regulatory schemes and could allow exploitative pricing in one market to be masked by pricing in another. BT bore the burden under Condition H3.1 and Article 13(3) of the Access Directive to justify each relevant charge.

4. The Tribunal and Ofcom had considered the 1997 and 2001 Guidelines and the likely competitive effects. On these facts, BT’s failure to satisfy Condition H3.1 was sufficient; a further finding of specific economic harm was unnecessary. In any event, overcharging was capable of harming purchasers and end-users and of distorting both competition and investment decisions.

5. Section 190(2)(d) is part of a statutory regulatory code and need not mirror damages or unjust-enrichment remedies. Ofcom’s discretion was not all or nothing. The starting point for breach of an SMP condition was repayment of the excess, but a payer could establish that partial or no repayment would better achieve the objectives of the Act and the CRF. No such reason existed here. There were no artificially cheap terminating charges requiring counter-restitution, and potential passing on did not undermine the finding of market harm or make repayment inappropriate.

• Court of Appeal (Civil Division) — by [2012] EWCA Civ 1051, refused permission on BT’s jurisdiction ground, granted permission on the other grounds, and dismissed the appeal.
• Competition Appeal Tribunal — in its Preliminary Issues Judgment of 11 June 2010, dismissed BT’s challenge to Ofcom’s power to determine historic disputes. In its Main Judgment of 22 March 2011, dismissed BT’s appeal against Ofcom’s determination and repayment directions.