BT: Pricing excessive but not unfair
The first opt-out collective action decided by the Competition Appeal Tribunal (CAT) yesterday went against the claimant acting on behalf of 3.8m customers of communications giant BT.
Though the CAT found that BT’s charges for landline customers were excessive, it did not consider them unfair, saying BT provided “distinctive value” to its customers “such that its price bore a reasonable relation to value”.
Justin Le Patourel, a one-time head of market intelligence at telecoms watchdog Ofcom who founded CALL (Collective Action on Land Lines), brought the action after Ofcom found in 2017 that BT had been overcharging customers who only bought a landline and not other services in a bundle by up to £84 a year.
BT agreed to reduce future bills but did not compensate customers for past overcharging.
As well as this group, the action also encompassed ‘split purchase’ customers – people who took a BT landline and also a broadband service from either BT or another provider, but under separate contracts.
These customers paid substantially more than those who bought the same services as a single discounted bundle.
The claim was valued at £1.3bn plus interest – or around £3-400 per customer – and was backed by Harbour Litigation Funding.
In a 301-page ruling following an eight-week trial, the CAT agreed that BT was dominant in the market for landlines, and had used this dominance to charge “significantly and persistently” excessive prices for its services.
But they were “radically less” excessive than Mr Le Patourel had claimed and BT provided “distinctive value” to its customers – not just in terms of particular features provided to customers, but also in BT’s brand value as a whole.
The CAT’s summary of the ruling explained: “We found significant loyalty to BT which could not be dismissed as customers simply paying these prices because they had to. Indeed, they did not have to, because they were not captive or generally inert. In fact, over the claim period, there was a very substantial amount of switching by [voice-only customers]…
“This suggested an ascription of positive brand value to BT for the period before they switched (as most class members did, at some point).”
Comparisons with other providers also showed that BT’s pricing was not unfair, the CAT added, rejecting too the submissions that BT was exploiting its price insensitive customers, and that it was guilty of a lack of transparency towards those customers, the press and Ofcom.
Mr Le Patourel said: “While I am pleased that the tribunal has recognised BT’s dominant position in the market, and the significant and persistent nature of its excessive pricing, I am disappointed that it did not agree that these prices were unfair.
“This means we cannot now compensate many of BT’s most loyal but mistreated landline customers for the overcharging that took place.
“However, we are carefully considering the tribunal’s decision and whether the next step will be an appeal to the Court of Appeal to challenge this verdict.”
His solicitor Sarah Houghton, a partner at Mishcon de Reya, added: “As the first collective proceedings tried since the Consumer Rights Act 2015 introduced the regime in the UK, this is a watershed moment in the development of the collective proceeding regime in that it is the first judgment of its kind.
“We are grateful to the Tribunal for the time spent hearing and considering the evidence. However, we are disappointed that the tribunal did not agree that the excessive prices charged by BT were unfair in terms of amounting to a breach of competition law.
“Mr Le Patourel is a passionate advocate for BT’s loyal customers and is carefully considering with his team of advisers what the next steps should be.”
In a statement, BT said: “We take our responsibilities to all of our customers very seriously and welcome today’s ruling.”
Mohsin Patel, director and co-founder at litigation finance broker Factor Risk Management, commented: “For many, it will be deeply regrettable that the first full opt-out trial to be heard in the CAT has failed.
“However, this should not detract from the fact that there has been a number of recent high-profile settlements in favour of consumers, which indicates that the CAT regime is creating a positive impact overall and affording redress where previously there was none.”
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