In a further judgment in the Phenytoin litigation, the Court of Appeal has today ruled on the approach to costs in successful Competition Act Appeals (see CMA v Flynn Pharma Ltd [2020] EWCA Civ 167). The Court ruled that where a Competition Act appeal succeeds, the starting point is that the CAT should not award costs against the CMA and in favour of a successful appellant. That starting point may be departed from for good reason, such as financial hardship or where the CMA has acted unreasonably.

The judgment overturns an established line of CAT authority including GISC, the Racecourse case and Eden Brown, as well as Phenytoin itself, in which it had been held that the starting point in Competition Act appeals is that costs follow the event. The effect of the Judgment is that the CAT’s costs order in favour of Pfizer and Flynn (the successful appellants in the CAT) was quashed and replaced with no order as to the costs of the substantive proceedings before the CAT.

The Court of Appeal considered its 2018 judgment in relation to Communications Act appeals, BT v Ofcom [2018] EWCA Civ 2542. The Court held that BT v Ofcom and the preceding authorities established the starting point or default position that no order for costs should be made against a regulator who has brought or defended proceedings in the CAT acting purely in its regulatory capacity. The Court further held that the reasons given by the CAT for taking a different approach in Competition Act appeals were inadequate.

The Court is yet to rule on an application by the Respondents to the Appeal, Pfizer and Flynn, for permission to appeal to the Supreme Court.

The judgment is found here.

Rob Williams QC acted for the CMA, instructed by The Competition and Markets Authority.

Mark Brealey QC acted for Pfizer, instructed by Clifford Chance LLP.

In a judgment handed down on 7 May 2020 (R (OA and others) v LB Bexley [2020] EWHC 1107 (Admin)), the High Court (Mr Sam Grodzinski QC sitting as a Deputy High Court Judge), dismissed a claim for judicial review brought by an impoverished family of overstayers, who sought to challenge a refusal by the London Borough of Bexley to increase subsistence support to them.

The Claimants were a family of three. The 1st Claimant was the mother of the 2nd Claimant, who was her 16-year-old son. The 3rd Claimant was her 19-year-old son – the 2nd Claimant’s older brother. The Claimants were Nigerian nationals. None of them had immigration leave in the UK. They were, therefore, excluded from mainstream benefits by virtue of Schedule 3 of the Nationality, Immigration and Asylum Act 2002 – i.e. they had no recourse to public funds (“NRPF”).

During 2019, the Claimants became homeless and destitute. Recognising this, Bexley assessed the 2nd Claimant as a child in need. It provided accommodation and support to the 2nd Claimant and, as his mother and care giver, the 1st Claimant, including accommodation in a two-bedroom property, and financial support to purchase food and other essential items. However, whilst Bexley allowed the 3rd Claimant to live with his mother and younger brother, it took the view that it could not provide additional support, to take account of the 3rd Claimant presence, under s. 17 of the Children Act 1989. This led to Bexley providing financial support limited to £307.56 per month, based on standard rates, which was intended to provide for the essential needs of a lone parent and one child. Bexley accepted that this amount was never intended to take account of the food-related needs of the 3rd Claimant. This situation led to the 1st Claimant, as a mother of two sons, splitting the family’s food allowance, which would be sufficient to feed only two people, between the three of them, with the result that all of the Claimants were going hungry.

The Claimants asked Bexley to increase subsistence support. They argued that Bexley was able to do so under s. 17(3) Children Act 1989. Bexley’s position was that it had no power under s. 17(3) to provide additional subsistence support, because to do so would circumvent the restrictions imposed on persons such as the 3rd Claimant (adults with no immigration status) by Schedule 3 NIAA. The Defendant argued that on a proper construction of s. 17(3) it could only be applied to a parent and/or a carer of a child, and not to any another family member of a child in need.

The Deputy Judge rejected Bexley’s arguments as to the interpretation of s. 17(3). He held that the power could be exercised in respect of any family member, including the 3rd Claimant, and was not limited to a parent or a carer. However, the Deputy Judge decided that all of the 2nd Claimant’s needs could be met, and were being met, by the 1st Claimant. In these circumstances, Bexley was bound to conclude that it had no power under s. 17 of the Act to provide financial support for the 3rd Claimant, in order to meet the welfare needs of the 2nd Claimant. The claim for judicial review was therefore dismissed.

Azeem Suterwalla acted for the Claimants, instructed by Olivia Halse of Matthew Gold & Company

Viasat UK Ltd & Viasat Inc v The Office of Communications & Inmarsat Ventures Limited [2020] EWCA Civ 624, judgment 11th May 2020

The Court of Appeal today dismissed an appeal by Viasat against the Competition Appeal Tribunal’s ruling upholding Ofcom’s decision to grant an authorisation for the use of 2GHz spectrum to Inmarsat. Monckton counsel acted for each of Viasat, Ofcom and Inmarsat.

US satellite operator Viasat had challenged Ofcom’s decision to authorise a service by Inmarsat for provision of broadband-like coverage to passengers in aircraft, called the “European Aviation Network” (“EAN”). The service consists of a satellite element and ground-stations known as a “complementary ground components” (“CGC”). The Ofcom decision had followed on from the European Commission’s decision to select Inmarsat for use of the 2GHz spectrum.

The CAT had found that the service was a “mobile satellite system” within the definition in Decision 626/2008 and Ofcom had thus lawfully exercised its power to authorise the use of the 2 GHz spectrum by ground stations.

Viasat argued that (a) Ofcom had failed to observe the principles of equal treatment and transparency; (b) Inmarsat’s non-compliance with the initial Commission conditions disqualified it; (c) Ofcom ought to have imposed a specific condition requiring a satellite terminal on each plane; (d) the alleged CGCs were not “complementary” and thus not ground component as defined; and (e) Inmarsat had failed to ensure the requisite radio-communication path from CGC to satellite.

The judgment of Green LJ, with whom Leggatt LJ and Lewison LJ agreed, rejected all of these grounds, finding that (a) there is no inexorable connection between breach of any conditions by Inmarsat and authorisation, as the conditions precedent to the grant of authorisation had been met and – therefore – there had also not been a breach of the principles of transparency and equal treatment; (b) Ofcom’s decision not to place an additional condition on Inmarsat, and instead to consider enforcement action if necessary, was rational; (c) there was no basis to suggest that CGCs must be subservient (as opposed to dominant) in order to be “complementary”; and (d) looking at the system as a whole, the service had the required capability to be defined as a mobile satellite system.

A copy of the judgment is here.

Viasat was represented by Philip Moser QC, Fiona Banks and Khatija Hafesji. Ofcom was represented by Josh Holmes QC and Julianne Kerr Morrison. Inmarsat was represented by Tim Ward QC.

The Competition Tribunal has handed down the first judgment imposing financial penalties for infringement of the Hong Kong competition regime. At the invitation of the Competition Commission who brought the case under Hong Kong’s prosecutorial model, the Tribunal took the opportunity to set out the principles to be applied in setting penalties. It has adopted an approach broadly in line with EU and UK practice. It also held that civil rules on costs should apply meaning that people found to have infringed can be required to pay the Commission’s costs of bringing cases before the Tribunal.

Daniel Beard QC acted for the Commission (assisted by counsel from Temple Chambers in Hong Kong).

ViaSat v Commission (Case T-734/17)

ViaSat, a US communication services provider, has launched proceedings before the General Court to challenge the European Commission’s refusal to intervene to prevent national regulatory authorities from authorising its competitor, Inmarsat, from launching its in-flight satellite broadband service. Its appeal (Case T-245/17) challenges the Commission’s alleged failure to act on competition law, regulatory and public procurement grounds.

In support of that case, Viasat has made a separate application (Case T-734/17) under the public access regime in Regulation 1049 for access to all the information submitted by Inmarsat as part of its participation in the EU tender process. Inmarsat took part in the selection process which led to the adoption of Commission Decision 2009/449/EC of 13 May 2009, where it was selected as one of two operators granted spectrum frequencies to operate pan-European mobile satellite services (MSS).

ViaSat sought access to Inmarsat’s tender bid even though it decided not to participate in the tender process itself.

The General Court has declared that there is no need to rule on the lawfulness of the European Commission’s rejection of Viasat’s application. The General Court refused the application on the basis that the documents represented confidential and strategic information that could affect competition in the market. It also dismissed Viasat’s argument that the information was over five years old since the content of Inmarsat’s documents were still of strategic importance to its commercial policy. ViaSat also failed to establish a public interest case – mere general assertions regarding the importance of transparency requirements were not sufficient.

Inmarsat was awarded all of its costs in full which is extremely rare for an intervener.

This case has ongoing relevance to ongoing proceedings before the EU Courts, the UK Court of Appeal, Belgium, France and Germany where ViaSat is challenging the national authorisation decisions that have been given to Inmarsat to operate its in-flight satellite broadcasting services for European airlines.

Read full judgment here.

Anneli Howard acted for the intervener Inmarsat Ventures.

The Competition Appeal Tribunal has upheld the CMA’s decision to block the merger between Ecolab Inc. and The Holchem Group Ltd, rejecting in its entirety a judicial review challenge to that decision brought by Ecolab: Ecolab Inc. v Competition and Markets Authority [2020] CAT 12.

Ecolab and Holchem both supply formulated cleaning chemicals and ancillary services to professional food and beverage customers in the UK. These goods and services are used by such customers to clean manufacturing and processing equipment and premises. In November 2018, Ecolab (a large US corporation) acquired Holchem (a UK company), thus combining two of the four largest suppliers in the market and triggering an investigation by the CMA under the Enterprise Act 2002.

In a final report issued in October 2019, the CMA found that the merger had resulted or may be expected to result in a substantial lessening of competition (SLC) in the relevant market. In particular, it found that the parties exerted a strong competitive constraint on each other, and that the elimination of such competition as a result of the merger would have an adverse impact both on their existing customers and new customers. The CMA decided that the appropriate remedy was for Ecolab to sell Holchem Laboratories (a subsidiary of Holchem) to a suitable purchaser. In reaching that decision, it rejected an alternative divestiture proposal (ADP) submitted by the parties, whereby a portfolio of one of the parties’ customers would be divested to another existing supplier, concluding that the ADP had “serious shortcomings” and would not effectively remedy the merger’s adverse impact on competition.

Ecolab challenged the CMA’s decision by way of judicial review before the Competition Appeal Tribunal. It advanced four grounds, arguing that the SLC decision was irrational and unsupported by evidence (Ground 1), and that the decision to reject the ADP was irrational, procedurally flawed, and based on an error of law (Grounds 2 to 4).

In a judgment issued on 21 April 2020, the Tribunal unanimously dismissed all four of Ecolab’s grounds. It held in summary that:

• Ground 1: the evidence cited in the report was clearly sufficient to support the CMA’s finding that there was an SLC across the market as defined. Ecolab argued that any SLC should have been limited to large UK only customers. However, the Tribunal found that the CMA was entitled to rely on a lessening of competition for small UK only customers as part of its SLC finding, even though the effect on large UK only customers was more marked.
• Ground 2: the decision to reject the ADP was neither irrational nor based on an error of law. In particular, the Tribunal held that, since the CMA’s intervention in merger cases was a one-off, as a matter of policy it was entitled to seek a remedy in which it had a “high degree of confidence” that it would achieve its intended effect. In the present case, the CMA was fully entitled on the evidence to reject the ADP on this basis.
• Ground 3: the CMA had been well within its “wide margin of appreciation” to decide that further consultation on the ADP was unnecessary, especially when there was no reason to suppose that this would overcome the ADP’s shortcomings, and when it would have required the CMA to extend the statutory deadline for delivery of its report. Whilst the CMA was empowered to extend the deadline for “special reasons”, parties could not expect it to invoke this power where they proposed a remedy only shortly before the deadline, or prevented the CMA from consulting on crucial aspects of the remedy for commercial reasons.
• Ground 4: the fall-back ADP put forward by the parties did not address or mitigate any of the CMA’s principal objections to the ADP. As such, it did not merit any further consideration by the CMA of affect the rationality of its assessment.

The CMA was represented by Rob Williams QC and Ben Lask, both of whom are standing counsel to the CMA. A copy of the judgment is here.

On 5 March 2020, and with much publicity, Flybe Limited formally entered into administration. On the same day, the Civil Aviation Authority’s Consumer & Markets Group issued a proposal to revoke Flybe’s Operating Licence and two associated Route Licences. It did so on the basis that, following an in-depth financial assessment, there was no reasonable prospect that Flybe could meet its actual and potential obligations for the following 12 month period for the purposes of Article 9(1) of EC Regulation No 1008/2008 (“the EU Regulation”). A hearing before the CAA Panel took place at which evidence was considered and submissions made as to the prospects of Flybe being acquired as a going concern within a reasonable period of time in order that the test under Regulation 9(1) of the EU Regulation might be met. The CAA’s Panel have concluded that there is no such prospect and further concluded that Flybe’s request for a Temporary Operating License must also be rejected for the same reasons. The decision takes effect 14 days from the date of the decision. Flybe have a right to appeal the decision to the Secretary of State for Transport and it remains to be seen whether that right will be exercised.

Brendan McGurk acted for the Consumer & Markets Group of the CAA.

On 15 April 2020, the Upper Tribunal released its decision on appeals by HMRC in the cases of Done Bros and Rank. A copy is available here.

HMRC appealed against two decisions of the First-tier Tribunal (Tax Chamber) (“FTT”) relating to VAT in respect of supplies to retail customers of the ability to play various games of chance on gaming machines. The appeals concerned a common issue relating to the EU test of fiscal neutrality.

The Rank dispute concerned the VAT liability of gambling made using certain slot machines dating back to the period from 1 October 2002 to 5 December 2005. As the Upper Tribunal observed, the procedural history of the Rank claims has been long and tortuous, involving decisions of the VAT and Duties Tribunal, the FTT, Upper Tribunal, Supreme Court and Court of Justice of the EU.

The Done Bros dispute related to supplies of gambling by means of fixed odds betting terminals (“FOBTs”) during the period from 6 December 2005 to 31 January 2013.

In both cases, the taxpayer argued that UK legalisation breached the principle of fiscal neutrality because taxed supplies were sufficiently similar to exempt supplies. The FTT allowed the taxpayers’ appeals.

On appeal to the Upper Tribunal, HMRC’s position was that the FTT had erred in its approach to the evidence on the similarity of supplies, in particular in relation to the average consumer’s needs and characteristics.

The Upper rejected HMRC’s appeal, holding that the CJEU case law does not prescribe any particular methodology which must be adopted or evidence which must be available in making the determination of the needs and point of view of the average consumer.

Valentina Sloane QC acted for Done Bros and Rank. George Peretz QC and Eric Metcalfe acted for HMRC.

Virgin Media Ltd v HM Revenue and Customs [2020] UKUT 0100 (TCC), 8 April 2020

The Upper Tribunal has dismissed VML’s appeal against the decision of the First-tier Tribunal [2018] UKFTT 556 (TC). VML’s appeal concerns the correct operation of the Prompt Payment Discount (PPD) provisions of paragraph 4(1) of Schedule 6 to the Value Added Tax Act 1994, which provided (prior to its amendment with effect from 1 May 2014) that “[w]here goods or services are supplied for a consideration in money and on terms allowing a discount for prompt payment, the consideration shall be taken for the purposes of section 19 as reduced by the discount, whether or not payment is made in accordance with those terms.” VML provides telecommunications services to customers through fixed lines. Those services include fixed line rental (FLR) with related broadband and telephone services. In the relevant period, VML provided FLR services in return for either (i) monthly payments (e.g. £13.90) or (ii) a single payment for 12 months’ service (e.g.£120). VML contended that the 12 month “saver” option was a “discount for prompt payment” and that paragraph 4(1) applied to deem the monthly customers to have given consideration for the FLR supply to them by reference to a notional monthly figure of £10 (i.e. £120/12), not the actual monthly payment of £13.90. The FTT dismissed VML’s appeal, holding that VML’s services to monthly customers were not “supplied on terms allowing a discount for prompt payment”, because the supply to monthly customers and the supply to saver customers were different supplies on different terms. The Upper Tribunal dismissed VML’s appeal, for the reasons given by the FTT. Having decided the case on that basis, the Upper Tribunal did not find it necessary or appropriate to deal with various further or different arguments for dismissing the appeal relied on by HMRC, which had been rejected by the FTT.

Andrew Macnab, led by Kieron Beal QC (Blackstone Chambers), represented HMRC in the First-tier Tribunal and the Upper Tribunal. Read the full decision here.

The European Commission is investigating whether Broadcom restricted competition in various markets for chipsets for TV set-top boxes and modems. As part of its investigation, the Commission has taken the novel step of imposing “interim measures” for the first time under Regulation 1/2003. The interim measures decision concludes that Broadcom is, prima facie, infringing competition rules by abusing a dominant position and that interim measures are urgently warranted to prevent serious and irreparable damage to competition.

Josh Holmes QC and James Bourke are acting for Broadcom in its annulment action against the Commission’s decision. Broadcom’s case is that the Commission made a series of errors of law and fact in its prima facie assessment of a restriction of competition and in its assessment of urgency.

This will be the first time that the General Court adjudicates on an interim measures decision since the IMS case of 2001.