Judgment (revised non-confidential version)

Neutral citation:

[2008] CAT 25

Published:

29 Sep 2008

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Summary:

Judgment of the Tribunal on applications by British Sky Broadcasting Group plc (“Sky”) and Virgin Media, Inc. (“Virgin”) for a review under section 120 of the Enterprise Act 2002 of the decisions of the Competition Commission (“Commission”) and the Secretary of State for Business, Enterprise and Regulatory Reform (“Secretary of State”) in relation to the acquisition by Sky of 17.9% of the shares in ITV plc (“ITV”).

The Tribunal considered its approach to applications under section 120 and made a number of preliminary observations before dealing with the individual pleas of the parties.

The Tribunal rejected Sky’s arguments relating to the findings of the existence of a ‘relevant merger situation’ and ‘substantial lessening of competition’, holding that Sky had identified no defect in the Commission’s approach to the material before it or in the adequacy of that material which was such to render any of the relevant findings of the Commission perverse or irrational or unsupported by the evidence.

In respect of Virgin’s application, the Tribunal upheld Virgin’s submissions relating to the ‘public interest’ provisions of the Enterprise Act 2002 (sections 58 and 58A). The Tribunal held that the Commission misdirected itself as to the meaning and effect of the legislation in question, and in particular section 58A(5) of the Act and, as a result, took irrelevant considerations into account in reaching its decision. Having identified errors with the Commission’s decision in this respect, the Tribunal found that the corresponding decision of the Secretary of State could not be sustained and must be set aside.

Each of Sky and Virgin also challenged the remedial action proposed by the Commission, and accepted by the Secretary of State, that Sky must divest its shareholding in ITV down to a level of below 7.5%.

The Tribunal rejected Sky’s submissions that the Commission had misdirected itself as to the correct approach to remedial action; acted irrationally in selecting the divestiture level of 7.5%; wrongly rejected the alternative remedies proposed by Sky; and that the remedy was disproportionate.

Virgin submitted that the Commission should have required complete divestiture of Sky’s shareholding in ITV. The Tribunal rejected Virgin’s first two arguments that the Commission had misinterpreted the applicable legal provisions and had failed to apply its own guidelines. Virgin’s third line of argument on remedies was that the Commission had failed to have regard to the adverse effect on the public interest arising from the specified media public interest consideration. Having already concluded that the Commission and the Secretary of State had misdirected themselves as to the meaning and effect of the statutory provisions in relation to that issue, the Tribunal invited the parties to submit further observations on the question of what, if any, relief was appropriate.

This is an unofficial summary prepared by the Registry of the Competition Appeal Tribunal.