Readers of the e-bulletin may recall our previous coverage of the landmark ruling of the European Court of Justice in the CIF case.  The Court held in that case that national competition authorities have a duty to overturn national laws which are at odds with European competition law.

On 31 August, the Competition Appeal Tribunal handed down its judgment in a case brought by Floe Telecom concerning alleged infringement of Article 82 of the EC Treaty by Vodafone by disconnecting certain services provided to Floe.  The case contains an important discussion of how UK competition agencies will approach their CIF duties.

Background

The Floe case concerned so-called GSM gateways, devices operated by mobile network operators (MNOs) that can be used to offer cheaper rates for making calls to mobile phones.  The allegation against Vodafone (an MNO) was that it had abused its dominant position by disconnecting Floe Telecom's GSM gateway services.

However, Ofcom (the competition authority investigating the allegation) found that Vodafone was not, in fact, permitted by UK law to provide GSM gateway services to Floe.  This was because, in Ofcom's view, the use of GSM gateways fell within the terms of Regulation 4(2) of the Wireless Telegraphy (Exemption) Regulations 2003 (the GSM Licence Requirement).  The effect of the GSM Licence Requirement was to prohibit the use of GSM gateways by anyone who did not hold a relevant telecoms licence.  Floe did not hold such a licence.

Ofcom concluded that the use by Floe of GSM gateways was unlawful and that it would have been a criminal offence for Vodafone to supply services to Floe to enable it to provide a GSM gateway service.  Ofcom noted that, under paragraph 5(2) of Schedule 3 of the Competition Act (the Legal Requirements Exemption), the Chapter II prohibition did not apply to conduct to the extent to which it is engaged in to comply with a legal requirement. Therefore, the Chapter II prohibition could not be used to compel Vodafone to engage in an illegal activity.

The CAT ruling

Ofcom's ruling was appealed to the CAT.  In the appeal, the CAT was called upon to consider whether Ofcom ought to have overridden the Legal Requirements Exemption in this case on the basis of the CIF ruling.

The CAT's starting point in its critique of Ofcom's decision was whether the GSM Licence Requirement was consistent with Community law.  In particular, the CAT discussed whether it was compatible with two key telecoms directives (Directive 1995/5 on radio equipment and telecommunications terminal equipment and Directive 2002/20 on the authorisation of electronic communications networks).

It did not reach a concluded view on this point, but proceeded to give an opinion of what the legal consequences would have been had it found that the GSM Licence Requirement was indeed inconsistent with these directives.  In such circumstances, according to the CAT, Ofcom would have been obliged – on the authority of CIF – to disapply the GSM Licence Requirement and apply the Chapter II Prohibition to Vodafone's refusal on that basis.

In reaching this conclusion, the CAT dismissed arguments from Ofcom and others to the effect that, if a national competition authority has a power or duty to disapply national legislation that power or duty should be limited solely to “matters of competition law”.  In rejecting those arguments, the CAT stated that the CIF duty derived from Article 10 of the EC Treaty.  This Article, according to the CAT, is of general application and applies to the entire subject matter of the Treaty and not just the competition rules in the Treaty.

Comment

It is interesting to see the CIF duty being applied – or at least discussed – in live proceedings in the UK for the first time.  However, it is suggested that the CAT's analysis may not have quite grasped the proper significance of the CIF ruling.

Yes, it is quite true that national law which is inconsistent with Community law must yield in the interests of primacy.  That lays the path open, as the CAT quite rightly states, to applying national competition law (such as Chapter II) in situations where it would otherwise not apply as a consequence of a national legal requirement.  However, CIF advances a wider proposition, namely that the concept of "inconsistency" applies not only in situations (such as in Floe) where a national legal rule may conflict, on its face, with Community law, but also in situations where such a rule impedes the effective application of EU competition law.

We will have to await a future case in which this wider aspect of CIF is brought to bear.  In the meantime, Floe is a useful reminder of the role of primacy arguments in UK competition cases.

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