The Court of Appeal overturns excessive pricing decision

26 March 2007

Louise Banér

The Court of Appeal (CA) has overturned the High Court decision that the British Horseracing Board (BHB) had abused its dominant position in the supply of pre-race data in relation to horseracing. The High Court had held in December 2005 that BHB had unreasonably refused to supply Attheraces Ltd (ATR) and charged ATR excessive, unfair and discriminatory prices for pre-race data. The CA held that the High Court had not taken enough consideration of the relevant economic value of the product in determining whether the price was excessive and in effect a refusal to supply.

BHB is the administrator and governing body of British Racing. BHB was engaged in a programme of commercialisation of its assets, including its electronic database of information related to horse racing, and in particular pre-race data, as a means of funding British horseracing. ATR licensed such data from BHB for use in its websites, television channels and other audio-visual media related to British horse racing.

Problems arose for BHB out of the decision of the ECJ in British Horse Racing Board v William Hill (Case C-203/02), dated 9 November 2004, in which the ECJ held that BHB’s investment in this database was not the subject of protection under the Databases Directive. This undermined the protracted negotiations between BHB and ATR in relation to the terms of supply of pre-race data for two services in particular: the SIS FACTS audio-visual bookmaker service and the ATR branded international satellite TV bookmaker service. ATR brought proceedings against BHB and the High Court found in ATR’s favour, concluding that BHB had breached Article 82 of the Treaty by unreasonably refusing to supply pre-race data to ATR, excessive and unfair pricing of pre-race data and discriminatory pricing of pre-race data. BHB appealed this decision and the CA gave its judgment on 2 February 2007.

The CA considered the issue of excessive pricing first since it was central to the case and affected the other two findings of abuse. The test is whether the price is excessive because it has no reasonable relation to the economic value of the product supplied. The CA held that in calculating the economic value of the product, exceeding a cost + criterion is a necessary but not sufficient test of abuse of a dominant position. It is necessary to consider all the relevant circumstances. In this case the CA considered that the benefit derived by overseas bookmakers from BHBs data had a bearing on whether the price was excessive. The CA also found that there was little evidence that competition in the downstream market was being distorted by the demands made by BHB on ATR. Equally there was no evidence that ATR’s competitiveness was at a risk of being materially compromised by the terms specified by BHB nor was this a case of an upstream provider seeking to reserve a downstream market to itself so as to exclude its downstream customers from competing on it. Therefore the CA found that the High Court had applied too narrow a view by holding that the economic value of the pre-race data was limited to the cost of compilation plus a reasonable return. The High Court had been wrong to reject the relevance of the value of the pre-race data to ATR in determining the economic value and whether the charges specified by BHB were excessive and unfair.

The issue of excessive pricing and discriminatory pricing were related but not the same. The CA accepted that BHB had negotiated different deals with ATR and other broadcasters which could be considered equivalent transactions. However, differential pricing by a monopoly supplier cannot by itself amount to abuse of a dominant position unless material adverse effects on competition are shown, and ATR had not established that the price differential actually or potentially distorts competition. In this market not all customers were similarly placed and differential pricing could legitimately reflect the different value of the product to each customer.

The CA also found that BHB had not abused its dominant position by refusing to continue the supply of pre-race data to ATR except on unreasonable and anti-competitive terms. Again this partly related to points in relation to excessive and discriminatory pricing. The CA held that the High Court had been wrong to find that it was an abuse for BHB to insist on an IP licence. ATR had claimed this was not justified as a result of the ECJ decision which made it clear that BHB had no relevant IP rights. However, the CA held that the issue depended on the terms proposed in the data licence which in the event never progressed beyond draft form.

The case casts new light on the concept of economic value in relation to excessive pricing and the particular circumstances which can be taken into account to determine such economic value. The CA judgment also emphasises the need to assess whether the competitiveness of purchasers is affected by the pricing behaviour as this will affect the position for the ultimate consumer.

Source: Court of Appeal judgment of 2 February 2006, Attheraces v the British Horseracing Board at http://www.bailii.org/ew/cases/EWCA/Civ/2007/38.html