Simmons & Simmons has successfully defended a £1.3bn class action lawsuit for its client BT brought in the Competition Appeal Tribunal (CAT) by class representative Justin Le Patourel. 

The CAT dismissed the claim in a 1428-paragraph ruling, prompting predictions that the decision would dampen enthusiasm among litigation funders to support similar collective actions.

Competition lawyers had eagerly anticipated the ruling, not just for the tribunal’s assessment of excessive and unfair pricing – the subject of much expert evidence – but also as a significant milestone as the first collective proceeding to go to trial.

Le Patourel, who instructed Mishcon de Reya, had argued BT had abused its dominant position over three million consumers by charging unfair prices to two groups of customers. 

First, residential consumers who bought voice-only landline phone services without broadband internet. Second, customers who purchased landline and broadband services but not as a single bundle – the so-called ‘split purchase’ customers. 

Harbour Litigation Funding supported the claim, calculated to have been worth between £300-£400 to individuals on an opt-out basis if it had been successful. 

The CAT, led by chair Mr Justice Waksman, ruled: “Overall, we considered that, whether taken by itself or in comparison with other prices, BT’s prices were not unfair, and therefore there was no abuse of dominant position.”

While the CAT agreed with Le Patourel that BT dominated the landline market by charging “persistently excessive” prices for its services, it said the prices were not unfair, although it rejected BT’s arguments on market dynamics. 

It stressed, both in summary and the full judgment, that just because the price was excessive did not mean it was also unfair, owing to the “distinctive value” BT provided to the claimants, which was reasonably related to their value and significant customer loyalty.

In response, BT commented: “We take our responsibilities to all of our customers very seriously and welcome today’s ruling.” 

The Simmons team was led by Patrick Boylan, head of UK dispute resolution, who said: “We are delighted by today’s judgment. The evidence we presented demonstrated to the tribunal that BT’s products provided real and meaningful value to BT’s customers, and BT charged a fair price for those products.”

Le Patourel said: “I am disappointed that the tribunal did not ultimately find in our favour whether BT’s prices were unfair. We will now carefully consider the tribunal’s reasoning and the prospects for an appeal.” 

Ashurst disputes partner Tim West predicted the ruling would have a “dampening effect, at least in the short term, on the availability of capital to fund the more novel or unusual claims in the CAT moving forward”.

He explained that, contrary to expectations, most cases before the CAT, like the BT action, had arisen from regulatory findings which were inconclusive as to liability 

“The CAT found that it should not give material weight to Ofcom’s findings [in relation to BT’s charges],” he said. “They reasoned that this was because they were presented with their own set of primary materials, which included a substantial body of expert evidence based on far more data than had been available to Ofcom.”

One partner, speaking confidentially, agreed that the “Le Patourel judgment will influence funders’ and insurers’ willingness to continue supporting collective proceedings”. 

Mohsin Patel, director and co-founder at litigation finance broker Factor Risk Management, said the result was “a bitter pill to swallow” for claimants, lawyers and funders alike, given the CAT’s finding that prices exceeded the benchmark significantly and persistently. Although he added that the prospect of an appeal left “some light at the end of the tunnel”.

He also noted that there had been several recent CAT settlements.

Earlier this month the CAT approved a £37.75m settlement between class representative Mark McLaren, represented by Scott + Scott, with two defendants in the Car Delivery Charges legal action.

This month also saw a settlement reached in the landmark UK collective action against Mastercard over the alleged overcharging of credit card fees that was at one point valued at £17bn.

However, Innsworth Advisors, the litigation funder which backed the claim, said it would challenge the settlement when it came before the CAT for approval early next year, claiming it was “both too low and premature”.