The Legal 500

Section 192 of the Communications Act 2003 provides for a right of appeal to the Competition Appeal Tribunal (the Tribunal) in relation to a broad range of decisions taken by Ofcom under its Communications Act 2003 powers. Under this provision, affected parties have a right of appeal ‘on the merits’ before the Tribunal against, for instance, regulatory infringement decisions, the determination of disputes and other regulatory statements or interventions. Appeals against decisions taken by Ofcom under its concurrent Competition Act powers can similarly be appealed to the Tribunal ‘on the merits’ pursuant to s46 of the Competition Act 1998.


The rather peculiar phrase ‘on the merits’ poses the question as to what is the standard of review to be applied by the Tribunal when determining appeals. The short answer is that ‘on the merits’ appeals are to be distinguished from appeals brought on judicial review grounds. Broadly speaking, the latter focus on the reasonableness (or otherwise) of the regulator’s decisions whereas, in the former, the Tribunal has a much more wide-ranging jurisdiction to investigate the facts and to assess the decision afresh.


Three recent decisions of the Tribunal involving the mobile phone industry have shed more light on the exact standard of review to be exercised in these cases. 


STANDARD OF REVIEW


The first two cases, T-Mobile (UK) Ltd & ors v Ofcom [2008] and Hutchison 3G UK Ltd v Ofcom [2008], were handed down by the Tribunal on the same day (20 May 2008) and stemmed from a combined hearing held in January and February of this year. In T-Mobile, known as ‘the termination rate dispute appeals’, the Tribunal considered appeals against Ofcom’s determination of disputes between each of the five mobile network operators and BT in relation to the charges levied by the mobile network operators for call termination.


In that appeal, which was ultimately remitted back to Ofcom, the Tribunal recognised that in relation to any particular dispute there may be a number of different approaches that Ofcom could reasonably adopt and that, therefore, there may be no single right answer. On that basis, the Tribunal found that even while conducting a merits review it may: 


‘… be slow to overturn a decision which is arrived at by the appropriate methodology even if the dissatisfied party can suggest other ways of approaching the case which would also have been reasonable and which might have result in a resolution more favourable to its case’.


In Hutchison, which related to the appropriateness of Ofcom’s imposition of a price control on the call termination charges of the appellant as remedy for its finding of significant market power, the test applied by the Tribunal was whether Ofcom’s analysis could stand up to ‘profound and rigorous’ scrutiny. The Tribunal found that in an appeal on the merits, the issue is not solely whether the regulator’s decision is adequately reasoned but whether those reasons are correct. On that basis the question to be asked by the Tribunal was not whether Ofcom’s decision to impose a price control ‘was within a range of reasonable responses but whether the decision was the right one’. In that case, Ofcom’s decision was upheld. Note, however, that the exact level of the price control imposed on each of the mobile network operators is currently the subject of an ongoing inquiry before the Competition Commission.


The Tribunal’s most recent consideration of this issue arose in Vodafone Ltd v Ofcom [2008]. Vodafone had appealed Ofcom’s decision to modify the general conditions of entitlement regarding number portability. Number portability is the system that enables mobile or fixed network subscribers to change operators while keeping their existing number. Ofcom’s decision mandated the creation of a special database to enable the implementation of a system of ‘direct routing’ for ported numbers. Ofcom’s decision also required that, from September 2009, the length of time taken to port mobile numbers should come down from two days to two hours.


Vodafone’s argument was, in essence, that Ofcom had failed to equip itself with a sufficiently rigorous analysis of the costs and benefits of the decision to enable it to reach a lawful decision in accordance with its statutory duties. Vodafone argued before the Tribunal that that the ‘profound and rigorous’ scrutiny test applied. Vodafone argued, moreover, that the basis of Ofcom’s costs/benefits analysis was not sufficiently ‘robust’; the standard set by the Tribunal in Genzyme Ltd v OFT [2004] exercising its appellate powers under the Competition Act. 


It its defence, Ofcom argued that a measure of ‘robustness’ was meaningless as a legal standard. Rather, what the Tribunal ought to consider is whether the decision is wrong by virtue of a significant error of fact or material error of law. Indeed, Ofcom went so far as to say that even a finding that there was a substantial or serious risk that the decision could be wrong would not be adequate to overturn the decision on appeal.


Citing the T-Mobile and Hutchison judgments, the Tribunal, with Lord Carlile QC sitting as chairman, noted that the cases showed that the Tribunal may, depending on the circumstances of the case, be slower to overturn decisions of Ofcom where there may be a number of different approaches that the regulator could reasonably adopt. Nonetheless, in rejecting Ofcom’s approach, the Tribunal found that:


‘… it is incumbent on Ofcom… to conduct their assessment with appropriate care, attention and accuracy so that their results are soundly based and can withstand the profound and rigorous scrutiny that the Tribunal will apply on appeal’. 


On that basis, the Tribunal found that the essential question, which was answered in the negative in this case, was whether Ofcom had equipped itself with a ‘sufficiently cogent and accurate set of inputs’ to enable it to perform a ‘reliable and soundly based’ costs/benefits analysis. 


COMMENT


Practitioners could be forgiven for being confused by the multitude of terminology employed by the Tribunal. For instance, do Ofcom’s decisions need to be ‘robust’ or able to withstand ‘profound and rigorous scrutiny’? Should they be ‘reliable and soundly based’ or be conducted with ‘appropriate care, attention and accuracy’? The answer is likely to be ‘all of the above’ or, rather, they are different ways of expressing the same thing. Indeed, the Tribunal in Vodafone held that there was no meaningful distinction to be found in practice between ‘robust’ and ‘profound and rigorous’.


The answer seems to be that Ofcom’s decisions must be able to withstand ‘profound and rigorous scrutiny’. What this means in particular cases will be determined by the circumstances under consideration. Where there are a number of different approaches that Ofcom could legitimately have adopted (such as in T-Mobile), the Tribunal is unlikely to overturn a decision reasonably taken by Ofcom. In other cases where the outcome is more black and white (such as in Hutchison), profound and rigorous scrutiny will equate to whether Ofcom’s decision was the right one. In both sets of cases, in order to meet the profound and rigorous scrutiny test the methodology underpinning Ofcom’s decision (such as the costs/benefits analysis in Vodafone) will need to be undertaken with appropriate care, attention and accuracy so that it is reliable and soundly based. 


Whatever the linguistic label applied to the legal standard, Ofcom is unlikely to please everyone in the pursuit of its regulatory activities and there will be, no doubt, plenty more appeals to come.

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