Packet Media Ltd v Telefonica Uk Ltd
| Jurisdiction | England & Wales |
| Judge | Mr John Baldwin QC |
| Judgment Date | 14 December 2015 |
| Neutral Citation | [2015] EWHC 3873 (Ch) |
| Court | Chancery Division |
| Date | 14 December 2015 |
| Docket Number | Case No: HC-2015-002463 |
[2015] EWHC 3873 (CH)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
7 Rolls Building
Fetter Lane
London, EC4A 1NL
Mr John Baldwin QC
Case No: HC-2015-002463
Mr James Segan (instructed by Jury O'Shea LLP) appeared on behalf of the Claimant
Mr Brendan McGurk (instructed by DWF LLP) appeared on behalf of the Defendant
In this action the Claimant (PML) seeks injunctive relief and damages for abuse of a dominant position in a part of the mobile telephony industry, and it made an application for interim injunctive relief on 20 th July 2015. HHJ Hodge QC granted such relief but his order contained an express proviso permitting the Defendant (O2) to apply to discharge the injunction. The reason for this proviso was that the judge had reached his conclusion on whether there was a serious issue to be tried without having the benefit of evidence from O2 on the point.
This is O2's application to discharge the injunction granted last July. O2 also applies for summary dismissal of the claim, pursuant to CPR Part 24, alternatively, CPR 3.4(ii) (a) and/or CPR 3.4(ii)(b). In partial response, PML has made an application for permission to adduce expert evidence and, in particular, a report of a Mr Williams.
The claim form issued on 17 June 2015 relies on two causes of action. The first complained of breach of Regulation 7 of the Radio Equipment and Telecommunications Terminal Equipment Regulations 2000 and the second a breach of the Competition Act 1998, section 18. In his judgment of 20 July 2015, reported at 2015 EWHC 2235 (Ch), HHJ Hodge set out the background and I adopt some of his paragraphs:
"2. The background to the claim is that PML provides telecommunication services and, in particular, services involving the sale or leasing of global system for mobile telecommunications (or GSM) Gateway equipment and the re-selling of air time so as to enable end customers to engage in what is said to be single-user self-use of GSM Gateways. The defendant is a mobile network operator (or MNO) which functions under the trading name of O2. I shall refer to the defendant by that trading name.
4. Particulars of claim were served dated 1st July 2015. Having identified the parties, they identify the nature of the claimant's business. PML is said to offer a range of telecommunications solutions to its customers enabling them to "self-use" GSM Gateways. A GSM Gateway is said to be an item of telecommunications equipment that incorporates one or more SIM cards and is thereby enabled to originate calls, or send Short Message Service (or SMS) text messages, on that MNO's network.
5. A GSM Gateway is not itself a phone but rather is installed as part of the user's switching equipment with the effect that when the user makes a call, or sends an SMS message, from a fixed phone line to a mobile phone number (known for short as "F2M traffic"), that call is diverted from the fixed line through the GSM Gateway connecting with the receiving mobile network via the air interface. The call or SMS then attracts a lower cost than if it had been made as a conventional fixed line communication to be terminated on a mobile network.
6. In the UK any person who wishes to establish, install or use a GSM Gateway to deliver an electronic communications service by way of business to another person is required to obtain an individual wireless telegraphy licence for that purpose from the Office of Communications (or Ofcom).
7. In a judgment in October 2013 in the case of Recall Support Services Limited v Secretary of State for Culture, Media and Sport [2013] EWHC 3091 (Ch), reported at [2014] 2 CMLR 20, Rose J held, in proceedings brought by persons including the claimant, that the licensing regime was contrary to Article 5 of the Authorisation Directive 2002/20 in so far as it prevented GSM Gateways from being used to deliver a commercial service to individual end users.
8. The Court of Appeal upheld this judgment in October 2014: see [2014] EWCA (Civ) 1370, reported at [2015] 1 CMRL 3 However, Ofcom has not yet amended the 2003 Regulations and so the position remains that under domestic United Kingdom law the only lawful use of the GSM Gateway without a licence is "self-use". The claimant's business in GSM Gateways is said to concern such "self-use" of GSM Gateways by PML's customers.
9. PML's service to such customers, insofar as they use the O2 network, has two elements. First, PML leases or sells GSM Gateways to its customers for them to install and use in their premises and maintains that equipment once sold or leased. Secondly, PML also re-sells air time on O2's network to its customers by providing them with SIM cards to use in those GSM Gateways. PML obtains those SIM cards from two of O2's official authorised re-sellers, 2 Circles Communications Limited (referred to as "2 Circles") and Fidelity Group Limited (referred to as "Fidelity").
10. PML's customer base is said to include National Health Service Trusts and substantial private companies. Those customers are said to save significant amounts of public and private money by lawfully self using GSM Gateways in this way.
11. The SIM cards for O2's network which PML supplies to its customers are obtained from 2 Circles and Fidelity. PML has no direct contractual relationship with O2. PML's contracts with 2 Circles and Fidelity both make specific provision for the circumstances in which PML re-sells SIM cards to its customers for those customers to "self-use" a GSM Gateway. Both contracts require the prior written consent of the relevant re-seller. It is said that PML has obtained the consent of both 2 Circles and of Fidelity for PML's customers to install and use SIM cards for the purpose of lawfully "self-using" GSM Gateways.
12. On 5th June 2015 O2 sent a letter to PML's solicitors entitled Notice of Suspension by which it gave PML seven days written notice of the suspension of the services to the SIM cards that it and/or its customers are using in Gateways on the network which O2 is currently aware of. That notice related to connections through both 2 Circles and Fidelity. It identified 2, 045 SIM cards, of which 1,065 are said to be currently being used in PML's customers' Gateways, 43 were not connected with O2, 18 were duplicated numbers and 919 were not used.
13. The Notice of Disconnection stated that O2 intended to switch off service to the disputed SIMs because PML and/or its customers had not applied, nor been authorised, to use the Gateways on the network pursuant to O2's Gateway Policy. That is said to be reference to an undated policy which was first supplied by 2 Circles to the claimant on 6th October 2014 and by Fidelity on 7th October. Under the O2 policy, self-use of GSM Gateways (called "private" use in the policy) is stated to be permissible so long as authorised in advance by O2, and subject to various technical requirements.
22. By an application notice issued on 17th June 2015 PML seeks interim relief in the form of an order that until further order, O2 is not to suspend or discontinue service to any or all of the SIM cards identified in O2's letter to PML of 5th June 2015."
HHJ Hodge considered the cause of action alleging breach of the Regulations and concluded, in paragraph 77 of his judgment, that there was no serious issue to be tried.
The judge then turned to the claim under section 18 of the Competition Act 1988 which is in these terms:
18 — Abuse of dominant position.
(1) Subject to section 19, any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in a market is prohibited if it may affect trade within the United Kingdom.
(2) Conduct may, in particular, constitute such an abuse if it consists in —
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
(b) limiting productions, markets or technical development to the prejudice of consumers;
(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of the contacts.
(3) In this section —
"dominant position" means a dominant position within the United Kingdom; and
"the United Kingdom" means the United Kingdom or any part of it.
The concept of "dominant position" was elaborated by 1978, at the latest, in the case of United Brands v The Commission ( Case 27/76). I was referred to a helpful passage in an OFT publication dated 2004 and entitled "Abuse of a Dominant Position Understanding Competition Law" which was accepted to be accurate today, having been adopted by the Competition and Markets Authority (CMA). I refer, in particular, to the following passage:
AssessingDominance
" 4.10 The European Court has defined a dominant market position as:
'…a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers.'
4.11 An undertaking will not be dominant unless it has substantial market power.
4.12 Market power arises where an undertaking does not face sufficiently strong competitive pressure. Both suppliers and buyers can have market power. However, for clarity, market power will in this guideline refer to...
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