Justin Le Patourel v BT Group Plc: Failure for the UK’s first opt-out class action

In its 19 December 2024 judgment, the Competition Appeal Tribunal (CAT) unanimously rejected Mr Le Patourel’s excessive pricing claim against BT. This was the UK’s first opt-out collective action to proceed to trial, and will come as a blow to the class representative, lawyers and funders behind the claim.

Mr Le Patourel – as class representative – sought £1.1 billion in damages on behalf of over 3.7 million BT customers, alleging that BT had a dominant position in the market for unbundled residential telephone landline services and abused that position by charging “unfair” prices. The damages claimed were calculated as the delta between the prices charged by BT and a notional “competitive benchmark” for the services.

Mr Le Patourel overcame the first hurdle of establishing that BT was dominant in the relevant market, making it necessary to consider whether its pricing was an abuse of that dominance. To determine whether BT’s prices were abusive, the CAT assessed the notional competitive benchmark. The CAT did not, however, use the competitive benchmarks arrived at by the parties’ two experts, which diverged greatly. Instead, the CAT adopted features of the methodology of both experts in a blended approach to reach “the appropriate outcome” and establish its own competitive benchmark. In doing so, the CAT showed its willingness and ability to depart from a binary approach of choosing one expert methodology over another.

Having established the competitive benchmark, the CAT proceeded to consider whether BT’s pricing was abusive. The CAT considered a price of 20% above its competitive benchmark would be excessive, and found that BT’s prices “significantly and persistently” exceeded that benchmark by 25% to 49.9% (“radically less” than the excess alleged by the class representative). But excessive prices are not by definition unfair. Applying the test in United Brands, the CAT found that BT’s prices were not so excessive as to constitute an abuse of its dominant position. Among other things, BT provided distinctive value to its residential landline customers and its prices bore a reasonable relation to the economic value of the service. The CAT also considered evidence of class members switching to other providers or bundled services (which undermined the contention that BT’s customers were captive or inert) and whether BT harbored any anti-competitive or exploitative intent (it did not). 

Having found that BT’s prices were excessive but, crucially, not unfair, the claim was dismissed.

Key takeaways

In excessive pricing claims, the CAT’s judgment underscores the case-specific considerations to determine whether excessive prices are unfair, and the relatively high bar to establishing abuse. The focus on the economic value of services when assessing unfairness will be welcomed by defendants who will take comfort that the CAT will give careful consideration to the justifications for their pricing structures.

More generally, Le Patourel serves as a reminder that success at the certification stage for class representatives is no guarantee of success at trial where the merits of the claim will be subject to rigorous scrutiny by the CAT. At the certification stage, Mr Le Patourel’s application relied heavily on the provisional conclusions made by Ofcom in 2017 in a review of the relevant market, and BT’s commitment to reduce prices in light of those conclusions. The CAT attributed considerable weight to Ofcom’s provisional conclusions at that stage. By contrast, at trial, the Tribunal attached limited weight to Ofcom’s conclusions and relied on the primary materials it had been provided with, as well as extensive economic expert evidence, which was based on far more data than had been available to Ofcom. The CAT noted in particular that when conducting its investigation, Ofcom had not had the same objectives as the civil litigation, highlighting the “pitfalls” of “attempting a rigid ‘read-across’ from the findings of a regulatory body, especially where there is no final conclusion.”

Impacts on litigation funding? 

The relative ease of obtaining certification since the Supreme Court’s decision in Merricks has encouraged major investment by litigation funders in the UK’s opt-out class action regime, with a raft of cases proceeding through the certification stage. Le Patourel, however, will come as a setback. While it is too early to tell whether funders will have a significantly reduced appetite to invest in collective actions, Le Patourel coupled with the recent public spat in Merricks between the class representative and his funder over the quantum of the agreed proposed settlement (for a tiny fraction of the billions claimed) should come as a reality check encouraging greater scrutiny of prospective claims. Le Patourel also serves a reminder that complex litigation is unpredictable and should encourage class representatives and their funders to bank realistic settlement offers pre-trial, rather than risking it all.

Imogen Laycock (White & Case, Trainee Solicitor, London) and Sally Staunton (White & Case, Trainee Solicitor, London) contributed to the development of this publication.
 

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