CAT dismisses student gowns claim

The Competition Appeal Tribunal has dismissed a stand-alone abuse of dominance claim against Ede and Ravenscroft, which has been appointed by a large number of UK universities as the ‘official supplier’ of academic dress and other services in relation to those universities’ graduation ceremonies. The claim was brought by Churchill Gowns, a ‘start-up’ company that has sought to establish itself as a ‘business-to-consumer’ supplier of academic dress to students attending graduation ceremonies. Churchill sought to challenge the Ede and Ravenscroft’s official supplier arrangements on the grounds that they constituted unlawful exclusive supply agreements, contrary to sections 2 and 18 of the Competition Act 1998. The CAT dismissed the claims in their entirety, holding (in summary) that Churchill’s failure to establish itself in the market was not caused by any abuse of dominance or anti-competitive agreements involving Ede and Ravenscroft, but rather by universities’ own preferences as to how best to organise their own graduation ceremonies.

Michael Armitage (led by Conall Patton QC of One Essex Court Chambers) acted for the successful defendant, Ede and Ravenscroft, throughout the proceedings before the CAT (instructed by Bree Taylor of Alius Law).

A copy of the judgment be found here.

Azeem Suterwalla and Antonia Fitzpatrick succeed for the Secretary of State for Health and Social Care against Kellogg’s challenge to cornerstone of anti-obesity strategy

Azeem Suterwalla and Antonia Fitzpatrick, led by Sir James Eadie QC of Blackstone Chambers, have succeeded for the Secretary of State for Health and Social Care in defending a claim for judicial review of the Food (Promotion and Placement) Regulations 2021 brought by Kellogg. The Regulations are the cornerstone of the Government’s strategy to tackle childhood obesity. The Government’s National Child Measurement Programme shows that in 2020/2021, 25.5% of 10-11 year olds were obese.

The Regulations will come into effect (in part) on 1 October 2022. They will restrict where foods which are high in fat, sugar, and salt (“HFSS”) can be positioned in supermarkets and their online equivalents, so that placement (e.g. on an aisle-end or by a checkout) can no longer be used as a strategy to drive sales.

54.7% of Kellogg’s cereal sales are of HFSS products (e.g. Frosties, Crunchy Nut Cornflakes, and Krave), and it claimed that Regulations were unlawful on vires, irrationality, and human rights grounds (A1P1 and Article 10 ECHR).

In a judgment handed down this morning, Linden J dismissed Kellogg’s claim, holding: (1) that the Regulations’ enforcement regime, which provides that food authorities can issue “improvement notices” where there are reasonable grounds for believing that a business is failing to comply with the Regulations, was not ultra vires; (2) that the Regulations’ incorporation by reference of the Nutrient Profiling Technical Guidance (“NPTG”), which contains the Nutrient Profiling Model (“NPM”) by which products are scored as HFSS or non-HFSS, was not ultra vires; (3) that the Secretary of State had not acted irrationally in not considering whether the nutrient profile of breakfast cereals should be assessed without taking into account that they are typically consumed with milk, including in not considering a prior debate between manufacturers and experts in that regard that had happened in 2004-2009 during the development of the NPM/NPTG for television advertising purposes; and (4) that the assessment of the nutrient profile of breakfast cereals without adding milk did not disproportionately infringe Kellogg’s A1P1 or Article 10 rights and that there was no irrationality of outcome.

There has been wide media coverage of Kellogg’s position that the nutrient profile of its cereals should be assessed on an “as consumed” basis, specifically with semi-skimmed milk: BBC News, the Independent, the Telegraph, the Guardian. As to that argument, Linden J held [223] that “[t]he notion that the approach advocated by Kellogg measures the “actual health impact” of a breakfast cereal is… problematic. In fact, it does not confine the measurement to the health impact of the breakfast cereal itself; it measures the impact of the cereal combined with other products and seeks to take advantage of the fact that the other products are lower in fat, sugar and/or salt or contain other compensating nutrients”.

As to Kellogg’s evidence regarding its anticipated loss of profit, Linden J observed [233] that “the irony [of that evidence] was… that the adverse impact on Kellogg… directly correlates with what the Government is trying to achieve”, adding that Kellogg had not explained why it was “unable or unwilling” to reformulate its products to remove them from the new restrictions.

The judgment is available here.

Azeem Suterwalla and Antonia Fitzpatrick (instructed by the Government Legal Department) for the Defendants.

The result has been reported in the media: BBC News.


High Court grants permission for judicial review of the EU Settlement Scheme

The Independent Monitoring Authority for the Citizens’ Rights Agreements (“IMA”) has been granted permission to apply for judicial review of the domestic implementation of the UK’s commitments to EU and EEA citizens in the UK-EU Withdrawal Agreement and UK-EEA EFTA Separation Agreement.

The IMA contends that the EU Settlement Scheme breaches the commitments entered into by the UK by requiring EU and EEA citizens who have been granted Pre-Settled Status to apply for Settled Status or for further Pre-Settled Status before their current Pre-Settled Status expires, failing which they will automatically be considered unlawfully present in the UK with attendant consequences for their right to live and work in the UK.

Granting permission for the challenge to proceed to a full hearing in the Autumn, Mr Justice Saini described the challenge as “plainly arguable”, and noted that there was also a real issue as to the potential application of EU law in the interpretation of the Withdrawal Agreement. He noted that resolution of the issues is matter of public interest given the potentially large numbers of those with Pre-Settled Status (2.4 million people).

The IMA is the independent body set up pursuant to the Agreements to receive complaints, conduct inquiries and bring legal action on behalf of EU/EEA citizens and their family members under the Agreements.

The IMA’s statement and link to the permission decision is here.

Robert Palmer QC and Clíodhna Kelleher are instructed by the IMA in this case.

The case is being reported in the media: Independent.

CAT rejects Application by Apple to strike out Dr Kent’s excessive pricing claim for App Store overcharges of up to £1.5 billion

Having already announced that it would certify collective proceedings brought by Dr Rachael Kent against Apple in relation to alleged abuses of dominance in the distribution of iPhone and iPad apps through the ‘App Store’ (see news 6 May), the Competition Appeal Tribunal has now handed down its judgment in relation to Dr Kent’s application for a collective proceedings order (CPO) setting out its detailed reasons for concluding that Dr Kent’s application was well-founded.

The judgment also dismisses Apple’s application to strike out Dr Kent’s claim that App Store Commissions paid by consumers who buy apps and digital content on iPhones and iPads are excessive and unfair. The CAT found that Dr Kent has reasonable grounds for making the claim and she had properly addressed the various elements of the legal test for excessive pricing.

The effect of the judgment is that all of the abuse of dominance claims advanced by Dr Kent have been permitted to proceed to trial on a collective basis.

Ronit Kreisberger QC and Michael Armitage act for the authorised class representative, Dr Rachael Kent, instructed by Hausfeld LLP.

Suspension lifted in National Lottery Litigation

In its ruling in Camelot UK Lotteries Ltd and ors v The Gambling Commission [2022] EWHC 1664 (TCC), the High Court has lifted the automatic suspension which prevented the Gambling Commission from awarding the Fourth National Lottery Licence.

The suspension arose from challenges to the competition to operate the Fourth Licence, which was won earlier this year by Allwyn Entertainment Ltd. Claims have been brought by Camelot, the incumbent licensee, and various companies of the IGT group, some of which were listed as key sub-contractors in Camelot’s application. The High Court (O’Farrell J) allowed the Gambling Commission’s application to lift the suspension, meaning that the handover from Camelot to Allwyn can now begin. The Camelot and IGT claims will continue, but will be for damages only. The Fourth Licence will begin in 2024 and last for a decade.

The High Court has not yet considered the question of permission to appeal.

Ligia Osepciu acts for Camelot.

Philip Moser QC and Ewan West act for the IGT claimants.

Anneli Howard QC and Will Perry act for the Gambling Commission.

The judgment has been covered by City AM, The Financial Times, The Guardian, The Telegraph and The Times.

Daniel Beard QC and Jack Williams instructed by Intel in €600m interest claim

Daniel Beard Q.C. and Jack Williams are instructed by Intel in T-236/22 Intel v Commission before the General Court of the European Union. The action seeks the payment of default interest arising from the General Court’s annulment, in Case T-286/09 RENV, of the entire €1.06 billion fine wrongly imposed on Intel (which it provisionally paid in 2009). Daniel and Jack also represented Intel in those ground-breaking remittal proceedings: see here. Whilst the Commission has since repaid the principal sum owed as a result of the annulment, it has failed to provide default interest, which Intel now seeks.

Monckton team instructed in proposed £786m opt-out collective proceedings against Apple

Anneli Howard QC, Stefan Kuppen and Will Perry are acting for Justin Guttman in proposed opt-out proceedings against Apple on behalf of at least 25 million iPhone customers.

They are instructed by Charles Lyndon, whose press release is available here.

For news coverage, see BBC News, The Times, The Guardian, Evening Standard, Sky News, Mail Online, the Independent and Bloomberg.

High Court to hear new immigration exemption challenge

The Administrative Court has granted permission to apply for judicial review in a fresh challenge to the ‘Immigration Exemption’ under the Data Protection Act 2018 (“DPA 2018”).

The Court of Appeal found in R (Open Rights Group & The3Million) v SSHD & SSDCMS [2021] EWCA Civ 800 that an earlier version of the Immigration Exemption under the Data Protection Act 2018 was incompatible with retained EU law. The Government subsequently enacted the Data Protection Act 2018 (Amendment of Schedule 2 Exemptions) Regulations 2022 (SI 2022/76), amended the DPA 2018 in light of the Court of Appeal’s decision.

The Claimants argue that the amended Immigration Exemption remains unlawful in that it does not meet the requirement of being a ‘legislative measure’ necessary for compliance with Article 23 of the UK GDPR; and/or does not comply with the mandatory requirements listed in Article 23 of the UK GDPR and, as a consequence, omits necessary substantive and procedural safeguards.

Nikolaus Grubeck is acting for the Claimants, instructed by Leigh Day.

Meta v CMA: CAT upholds the substance of the CMA’s merger assessment; and provides guidance on ‘dynamic competition’, remedies in s.120 cases, and delegation by CMA merger groups

The Competition Appeal Tribunal yesterday handed down judgment on Meta’s wide-ranging challenge to the decision of the Competition and Markets Authority (“CMA”) that its completed acquisition of GIPHY resulted in a substantial lessening of competition (“SLC”) in the UK and that Meta must therefore divest itself of GIPHY.

The Tribunal rejected all of the substantive grounds of Meta’s application for judicial review; and all but one of Meta’s procedural challenges (relating to redactions for confidentiality). The parties have been invited to make submissions on whether the Decision needs to be remitted in case Meta wishes to make any further representations on the redacted material.

The judgment provides important guidance on the application of the CMA’s new merger assessment guidelines, but also contains at least four points of relevance beyond the merger context.

First, the Tribunal held that the CMA had properly directed itself as to the relevant test when assessing the impact of the merger on dynamic competition. In the course of upholding the CMA’s assessment, the Tribunal enumerated, on a non-exhaustive basis, various factors that the CMA should consider whether considering whether there has been a substantive lessening of dynamic competition. On examination, the Tribunal considered that the evidence and thinking set out in the Decision easily passed this framework.

The Tribunal’s framework constitutes important guidance, given that dynamic competition is a relatively new concept introduced in the CMA’s updated (2021) merger assessment guidelines, and will be central to the assessment of many digital mergers. However, the Tribunal’s comments could also be of potential relevance outside of the merger context, to the extent that the concept of dynamic competition is relied on in Competition Act cases or market studies. Relevant factors included the time frame, in respect of which the Tribunal commented that it doubted there could be an impairment of dynamic competition that would not have manifested itself within five years. The Tribunal also commented that, in future merger cases involving dynamic competition, as well as assessing the potential harm of permitting an acquisition, the CMA should carry out a cross-check to assess the potential adverse effects of prohibiting the merger, for example due to a potential chilling effect on innovation (given that the prospect of exit through acquisition can incentivise, as well as disincentivise, innovation by entrepreneurs). It also held that, while it considered the CMA to have jurisdiction, in mergers with an international dimension the CMA should consider whether intervention was consistent with the demands of comity.

Second, the Tribunal held that CMA groups on merger references are entitled to delegate tasks, including the drafting of text for decisions and provisional findings, to CMA staff, so long as the group remains the ultimate decision-maker, on so-called ‘Carltona’ principles which govern the extent to which ministers of state can delegate tasks to their civil servants.

Third, the Tribunal held that the CMA had erred in redacting material that was commercially sensitive to a third party from the Decision and its Provisional Findings, thereby depriving Meta of the ability to make submissions based on that material. In this connection, the Tribunal stated that “the addressees of a decision and any other persons affected by a decision are entitled to understand exactly the basis on which the decision is made, and the decision-maker must stand by and defend the decision it has made, and not some variant that leaves bits out”.

Fourth, under the common law, where a reviewable error of law has been found, the Simplex test provides that the court should refuse a remedy only if the decision would inevitably have been the same if the public law wrong had not occurred. In 2015, the Government, concerned at the number of decisions that were having to be retaken as a result of procedural irregularities, amended s.31(2A) of the Senior Courts Act 1981 to provide that the “High Court must refuse to grant relief on an application for judicial review … if it appears to the court to be highly likely that the outcome for the applicant would not have been substantially different if the conduct complained of had not occurred” (emphasis added).

Where it finds a reviewable error of law in an application for review under s.120(4) of the Enterprise Act 2002, when determining whether to refuse a remedy should the Tribunal apply the common law Simplex test, or the less demanding test under s.31(2A)? The Tribunal held that it should apply the Simplex test, in part on the basis that the s.31(2A) test only applied to the High Court in England and Wales, whereas the Tribunal was a tribunal of the whole of the UK.

The judgment is available here.

Josh Holmes QC represented the CMA, Julian Gregory represented the Application Developers Alliance (one of the interveners) and Alison Berridge represented Snap Inc.

Supreme Court endorses “costs follow the event” in competition cases

CMA v Flynn Pharma Ltd and Pfizer Inc

Pfizer and Flynn were found by the CMA to have excessively priced a pharmaceutical drug contrary to section 18 Competition Act 1998. The CAT allowed the companies’ appeal in part, confirming the CMA’s finding of dominance but allowing the appeal on abuse. The CAT remitted the issue of excessive pricing to the CMA for reconsideration (this direction being upheld by the Court of Appeal on appeal by the CMA).

The CAT also awarded the successful companies’ approximately two thirds of their costs on an issues basis. The CAT considered that “costs follow the event” was an appropriate starting point but that some discount should be given for the CMA having succeeded on the issue of dominance.

The Court of Appeal set aside the CAT’s costs ruling. This was because the Court of Appeal considered that the CAT had disregarded a general legal principle based on a line of cases beginning with Bradford MDC v Booth [2000] 164 JP 485 and ending with BT v Ofcom [2018] EWCA Civ 2542 that, where there is no default position expressed in the wording of the power to award costs, the starting point should be that no costs order should be made against a public body such as the CMA provided that it had acted reasonably.

The Supreme Court allowed the companies’ appeal and reinstated the CAT’s costs Order. Lady Rose gave the unanimous judgment The reasons were as follows.

First, there is no generally applicable principle that all public bodies should enjoy a protected costs position when they are unsuccessful. The Booth line of cases supports a principle that examines whether there is a “chilling effect” on the authority acting in the public interest if an adverse costs order were made [97]. This chilling effect cannot be presumed but depends on the nature of the public body, the nature of the decision and the frequency with which such decisions are made [98]. In the present case the way the CMA is funded dispelled any notion of a chilling effect. This is because the CMA can set-off any adverse costs orders against the income it receives from penalties imposed on companies for breaching the competition rules [123]. Further, there were good policy reasons for applying a cost follows the event principle as it was apt to discipline public authorities, here the CMA, from adopting unfounded decisions [131].

Second, the CAT’s existing case law on costs was consistent with the Booth line of cases [136]. The principle of costs following event which was supported by Rule 104 of the Tribunal Rules did not mean that costs follow the event was the end point. The CAT had adopted a sophisticated, flexible and multifaceted approach to costs awards which struck a balance between fairness to the parties and ensuring the effectiveness of the competition regime [152].

The judgment is available here.

Mark Brealey QC acted for the Appellants (Pfizer Inc and Pfizer Ltd) Instructed by Clifford Chance LLP
Rob Williams QC acted for the Respondent (Competition and Markets Authority) Instructed by Competition and Markets Authority
Josh Holmes QC acted for the 2nd Intervener (Office of Communications (Ofcom) Instructed by OFCOM

Case History

Substantive issue on excessive pricing
CMA Decision “Phenytoin” 7 December 2016
CAT [2018] CAT 11 and CAT 12 (remittal)
Court of Appeal [2020] EWCA Civ 339

Costs principle
CAT [2019] CAT 9
Court of Appeal [2020] EWCA Civ 617
Supreme Court [2022] UKSC 14