Interim injunction requires T-Mobile to activate Truphone numbers

30 October 2007

Louise Banér

On 17 July 2007, the High Court granted an interim injunction requiring T-Mobile to activate Truphone’s mobile telephony numbers, pursuant to the rules on abuse of dominance under the Competition Act 1998. This amounted to a requirement on T-Mobile to purchase call termination services for calls made using its network. Truphone applied for the interim injunction arguing that T-Mobile’s refusal to activate the numbers was an abuse of its dominant position. The interim injunction was granted as the court found Truphone had a serious arguable case and the requirements for granting an injunction were satisfied.

Software Cellular Network Limited (trading as Truphone) applied for the interim injunction against T-Mobile. Truphone wished to launch a new mobile phone service using new Voice over the Internet Protocol (VoIP) technology which enables customers to route phone calls via the internet for cheaper call charges. Truphone alleged that T-Mobile’s actions had prevented the launch of this new mobile phone service.

Truphone has been allocated phone numbers by the Office of Communications (Ofcom). These numbers must be recognised by the other mobile network operators so that customers can receive calls on their Truphone numbers from callers using one of the other networks. Therefore, before Truphone could launch its product, the company applied to all existing mobile phone service providers to activate the new Truphone numbers. T-Mobile was the only provider to refuse to activate the Truphone numbers, despite having activated the numbers of other providers for this purpose. The two parties had continued negotiations on this point and had been unsuccessful in concluding the terms for the contract, specifically with regard to charges. As a result of activating the numbers, T-Mobile would be obliged to purchase termination services from Truphone and it maintained that Truphone’s proposed termination charges were excessive. However, the interim injunction was applied for by Truphone on the basis that it would accept the rates put forward by T-Mobile, pending a dispute resolution decision by Ofcom on their reasonableness. Truphone asserted T-Mobile was therefore abusing its dominant position by persisting in its refusal to activate the telephone numbers and therefore refusing to interconnect T-Mobile’s and Truphone’s systems.

Time was of the essence for Truphone, as there was strong competition to be first to market using the new VoIP technology. An interim order was sought by Truphone as the launch of its new product was being severely delayed by T-Mobile’s failure to activate the numbers. The order would require the numbers to be activated, in advance of a full trial on the matter.

The issue to be decided by the trial judge would be whether T-Mobile’s actions amounted to an abuse of a dominant position in a market, which may affect trade within the UK, under s18(1) of the Competition Act 1988. This involved a debate whether T-Mobile was dominant in the relevant market in this situation. The judge considered that, while Truphone was interpreting the definition of ‘relevant market’ too narrowly by limiting it to the provision of services on T-Mobile’s network, T-Mobile had interpreted it too widely by referring to all retail sales of mobile voice communication (call origination) services. If the wider definition were to be used, T-Mobile had a market share of between 22 and 30%. Significantly, while this has been deemed insufficient in previous cases to demonstrate market dominance, the judge stated that it was an open question as to whether in the circumstances of the mobile communication industry, T-Mobile could not be dominant, on the wider market, even below the 40% threshold. As a result of this decision, the judge was satisfied that Truphone had a seriously arguable case on this matter.

Whether T-mobile was abusing its dominant position would turn on whether it was reasonable in refusing to activate the numbers. T-Mobile argued that it required a satisfactory contractual framework to be in place before it would activate the numbers. However, obliging T-Mobile to activate the numbers would not require the contract to be based on certain terms, rather it would solve the issue in question – that of timing of the activation. As Truphone had a seriously arguable case against T-Mobile for the abuse of a dominant position, the judge then had to decide whether, on the balance of convenience, an interim injunction would be the best remedy.

The judge had to consider the effect of this order if the final judgment reversed the injunction. It was necessary to find a high degree of assurance that Truphone would be able to establish its right at trial. Despite the finding that Truphone had a seriously arguable case, the judge refrained from going so far as to say that there was a high degree of assurance that Truphone would be successful. However, when the suitability of awarding damages rather than an injunction was assessed, the judge decided that damages would not be an adequate remedy. It would be extremely difficult to calculate Truphone’s loss as a result of not launching the new VoIP service. In contrast, a cross undertaking in damages by Truphone would allow T-Mobile to be compensated for losses incurred by activating Truphone’s numbers, if Truphone was unsuccessful at a later trial. Therefore, the judge considered that, on the balance of convenience, there was sufficient urgency to grant the interim injunction.

The judge therefore granted Truphone an interim injunction on this occasion. Ordering the activation of the numbers at this stage would allow Truphone to launch its new service and T-Mobile could be compensated in damages if it was successful when the case went to full trial. T-Mobile was ordered to activate Truphone’s numbers on or before 23 July 2007 and the charges for activation and termination services would be on T-Mobile’s terms until Ofcom made a decision otherwise.

The interim order obliged T-Mobile to purchase the termination services as well as provide a service (activation). There was no precedent for such an order to buy such a service. The judge decided that, given the nature of the telephone services industry, it should be possible to order a remedy which might involve reciprocal call termination services and charges. The court decided an interim order could be granted which would require positive action by T-Mobile rather than an injunction to refrain from a specified activity. Significantly, the requirement on T-Mobile to activate the numbers involved a decision requiring T-Mobile to purchase termination services on Truphone’s network. In this respect, the court also considered that there would be serious inconvenience and detriment to Truphone if it could not market its services on the basis that its customers could receive calls from, and enable calls to, subscribers to all the main mobile networks.

Source: Software Cellular Network Limited v T-Mobile (UK) Limited, judgment of Knowles DHJ, 17 July 2007