High Court finds for telecoms companies in Phones4U litigation

Hogan Lovells, Covington, Clifford Chance, Mishcon and Linklaters secure wins in blockbuster competition case
LEEDS, UK - 7 SEPTEMBER 2015. Phones 4U Store. The former phones 4u mobile telephone retailer shop in Leeds. The once successful retail chain was eventually placed into administration.

Shutterstock; James Copeland

A UK High Court judge has dismissed claims telecom companies including Vodafone, O2 and EE were behind the 2014 collapse of mobile phone retailer Phones 4U.

The administrators of Phones 4U had accused the telecom giants of conspiring to eliminate the retailer from the market, thus enabling them to boost their profitability. They alleged losses exceeding £1bn.

The trial in the Competition List lasted more than nine weeks and featured 41 factual witnesses and four expert witnesses. The 770+ paragraph judgment by Mr Justice Roth established that none of the defendants, including the parent companies of EE – Deutsche Telekom and Orange – had violated UK or EU competition law as alleged by Phones 4U.

The claim centred on the decisions by O2, Vodafone UK and EE to withdraw their business from Phones 4U, which the retailer’s administrators, represented by Quinn Emanuel and counsel from One Essex Court led by Kenneth MacLean KC, argued was a result of collusion. 

However, the telecom companies strongly denied these allegations, maintaining that their decisions were based on independent and robust commercial analysis. Roth said one of Vodafone’s documents, which reflected uncertainty as to what steps EE might take, was “the very antithesis of the alleged collusion with EE”.

The court’s findings highlighted the significant impact of the merger between Carphone Warehouse and retail chain Dixons in 2014 on market dynamics, leading to Phones 4U’s management to “significantly underestimate the impact which the news of the merger had” on the perceptions that other telecoms companies had in later deciding their commercial retailing strategies.

However, the telecoms giants did not escape without criticism in the ruling. Roth noted that many senior executives in the various defendant companies had not adhered to their own corporate guidelines during meetings with competitors.

He pointed out that a lack of pre-set discussion topics and post-meeting notes was a lapse in corporate governance, saying “if instead a more prudent approach had been followed, at least some of the accusations levelled in this case might have been avoided”. However, he concluded: “[While] the defendants had a common interest to reduce their reliance on indirect distribution… that does not remotely suggest that they engaged in collusive conduct to achieve that objective.”

Separate allegations of breach of contract against EE were dismissed for want of any breach of duty of good faith in EE’s actions. This in turn lead to the subsequent dismissal of related claims against Deutsche Telekom and Orange.

A team led by Meredith Pickford KC of Monckton Chambers and Laura John KC of Fountain Court, together with Clifford Chance, acted for EE, while, impressively, Brick Court supplied four silks and multiple junior barristers for various defendants. 

Robert O’Donoghue KC and Hugo Leith acted for Deutsche Telekom, instructed by Covington & Burling, while the same set supplied Marie Demetriou KC and Dr David Scannell KC for Norton Rose Fulbright for Orange. Mark Hoskins KC, Sarah Abram KC and juniors were also instructed by Mishcon de Reya and Linklaters for various Telefonica entities.

Ewan McQuater KC and Adam Kramer KC, of 3VB, and Rob Williams KC, of Monckton Chambers were instructed by Hogan Lovells for Vodafone, for whom partners Angus Coulter and John Tillman acted. 

All of the law firms concerned declined comment, bar Coulter, who said: “The case is one of the largest standalone competition damages cases ever brought before an English court, and involved complex and challenging issues of both fact and law.” 

He concluded: “The judgment demonstrates the careful approach which the English Court will take when scrutinising such allegations, and contains many points of relevance to companies seeking to navigate the complexities of what are often necessary dealings with competitors in their industry.”

Phones 4U is reportedly considering an appeal.

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