The Court of Appeal has allowed an appeal by the British Horseracing Board (BHB) against the High Court's judgement finding BHB to be in breach of Chapter II of the Competition Act 1998 and Article 82 EC Treaty. The dispute concerned the supply of pre-race data to Attheraces (ATR).
Background to the Dispute
BHB is the governing authority for the British horseracing industry. It is concerned with the creation of the fixtures list for horseracing in Great Britain. It maintains an electronic database containing details of horses, trainers and jockeys. In addition, part of this database includes pre-race data, including the place, date and time of races and riders.
ATR provides coverage on British horseracing at numerous racecourses throughout the country. It had negotiated certain rights with BHB for the supply of pre-race data to its subsidiaries.
Late in 2004, the ECJ found that BHB did not have rights in the pre-race data collected by it. This hampered negotiations between BHB and ATR and BHB threatened to stop supplying ATR with pre-race data if ATR did not fulfil certain conditions imposed by BHB.
As a result of this protracted dispute, ATR initiated legal action against BHB, in which it claimed that BHB had abused a dominant position in violation of Chapter II of the Competition Act 1998 and Article 82 EC Treaty.
On 21 December 2005 the High Court ruled that BHB had indeed abused its dominant position by:
- Refusing to provide ATR with pre-race data;
- Excessively and discriminatorily pricing the data supplied to ATR.
BHB appealed the High Court's findings of abuse but not those relating to the relevant market or dominant position.
In allowing the appeal the Court of Appeal made the following points:
- While the cost plus criteria is a reasonably good indicator of what may be a competitive price, it is in no way a sufficient means of establishing an abuse of a dominant position. Instead, such a determination should be assessed by taking into account the individual circumstances of the case.
- The High Court applied a test that was too formalistic by finding that the only costs that were legitimately attributable to BHB were those that were directly incurred in compiling the database and expenditure relating to the sale of the data. The commercial advantages gained by ATR in selling the data to foreign parties indicates a certain standard of integrity in relation to the data compiled by BHB and such characteristics have formed the positive commercial values upon which ATR was making a market profit.
- The central question in the case was really whether or not BHB should be able to charge a percentage of ATR's revenues in relation to the sale of data collected by BHB and sold to ATR for further sale to foreign bookmakers. The Court of Appeal made it clear that the commercial advantages attributable to bookmakers from the use of BHB's data had a significant bearing on the question of whether BHB's pricing was excessive. Although ATR manipulates the data compiled by BHB, BHB's pricing does not automatically entail an abuse of a dominant position in the market. The Court of Appeal held that the purpose of Article 82 is meant to protect. In this regard, the court was of the opinion that Article 82 was to protect consumers, not competitors and that there was no evidence whatsoever that ATR's competitiveness was being compromised by BHB's pricing charges.
Main Points of Interest
This case is of particular significance in relation to two points of law:
- The law relating to discriminatory pricing; and
- The Court of Appeal's opinion on what constitutes an unreasonable refusal to supply.
In rejecting the claim that BHB had abused its dominant position by way of discriminatory pricing, the Court of Appeal decided that the relevant question to consider was whether the charges imposed upon ATR were out of proportion and excessive as compared to prices which were charged to other broadcasters. In other words, was there an element of discrimination against ATR in relation to the price of the charges?
In answering these questions, the Court of Appeal was of the opinion that there is no legal principle establishing that a monopoly supplier cannot engage in a differential pricing scheme as a result of such a scheme being an abuse of a dominant position. The only way that differential pricing would constitute an abuse of a dominant position would be if the price difference was a result of discrimination and had the actual effect of distorting competition between competing companies. The court found this not to be the case and, in doing so, decided that BHB had not abused the dominant position by way of discriminatory pricing.
Unreasonable Refusal to Supply
ATR claimed that BHB's refusal to supply was an abuse of a dominant position which arose from the fact that BHB insisted on ATR taking on IP licence in relation to the data. ATR submitted that, BHB had no IP rights in a database. As a result of these submissions, the High Court decided that BHB's actions in this regard did constitute an abusive and dominant position. However, on appeal, the court was of the opinion that the High Court judge did not give an adequate explanation as to why BHB's actions in this respect constituted anti-competitive practices. While agreeing that, as a result of ECJ jurisprudence, BHB did not have any IP rights in the database, ATR's claim that BHB acted in an anti-competitive manner would only hold ground if ATR had raised the issues in relation to the ECJ's judgement during negotiations with BHB and BHB had refused to alter the terms of the agreement accordingly. In the absence of such circumstances, as was the case here, there was no evidence to suggest that BHB had acted in an anti-competitive manner by requiring ATR to enter into a data licence agreement.
The Court of Appeal, in allowing BHB's appeal, found that ATR had not sufficiently established a breach of either of the Competition Act 1998 or Article 82 of the EC Treaty.