Judgment

Judgment of the Tribunal in relation to a claim for damages by the Claimants (collectively GLOBAL-365) for loss allegedly caused by the Defendants (collectively PayPoint) through their conduct which, it is claimed, excluded GLOBAL-365 from the market for the supply of over-the-counter (OTC) prepayment services to energy suppliers in Great Britain (OTC energy prepayment market or the OTC market). In addition, it was also alleged that GLOBAL-365 was excluded from or otherwise suffered loss in the related market for the supply of non-OTC prepayment services to energy suppliers (the non-OTC energy prepayment market or the non-OTC market) either by PayPoint leveraging its dominant position in the OTC market or as a consequence of it.

GLOBAL-365 was seeking to enter both the OTC and non-OTC smart prepay markets though its product SMARTprepay. To deliver its OTC service, GLOBAL-365 entered into a partnership with epay Limited, a provider of other OTC payment services with an existing retailer network. GLOBAL-365 sought to enter the OTC and non-OTC markets from early 2018 until late 2021, which coincided with a phase of the roll out of smart meters in the UK.

GLOBAL-365 contended that PayPoint’s strong market position during period 2009-2018 was founded upon its provision of OTC prepayment services for legacy meters into which it had sunk a great deal of investment in physical infrastructure. GLOBAL-365 considered that the technological shift to smart meters offered the possibility of a fresh start which would level the playing field between established providers of energy prepayment services and new entrants. 

GLOBAL-365’s position was, in summary, as follows:

• Dominance: GLOBAL-365 was dominant from 2009 until 2018 in the OTC market, prior to the merger of the Post Office and Payzone (PO/PZ). Both parties agreed that PayPoint’s share of the OTC energy prepayment market fell in 2020 but there was a dispute between the parties as to how rapidly PayPoint’s market share fell following the PO/PZ merger.
• Abuse: GLOBAL-365 was prevented from entering the market at scale by exclusivity clauses and related provisions in PayPoint’s contracts.  PayPoint conceived and successfully implemented an exclusionary strategy that foreclosed new entry onto the OTC and non-OTC energy prepayment markets. The parties agreed that the OTC market was a two-sided market which required consideration of the impact of the exclusivity provisions on both the energy supplier and agent retailer sides of the market. That exclusionary strategy relied in particular on:
  • exclusive purchase obligations (including convenience exclusivity) in PayPoint’s contracts for OTC prepayment services;
  • exclusivity-based pricing in PayPoint’s contracts for OTC prepayment services;
  • exclusivity provisions in PayPoint’s contracts with agent retailers; and
  • exclusive purchase obligations in PayPoint’s non-OTC contracts with energy suppliers.
• Causation: In the counterfactual, absent the exclusionary provisions, GLOBAL-365 would have had: (a) a 30% chance of winning any given volume of tier 3 business; (b) a 50% chance of winning any given volume of tier 2 business; and (c) a 30% chance of winning any given volume of tier 1 (Big Six) business. GLOBAL-365 pursued its claim solely on a loss of chance basis.
• Quantum: GLOBAL-365’s loss was comprised of (i) estimated loss of profits in GLOBAL-365’s first ten years of trading of £39.6 million, relative to the counterfactual absent PayPoint’s alleged abuse; and (ii) an estimated “Terminal Value” for GLOBAL-365 at the end of the 10 year period of £73.6 million, based on future discounted cash flows.

The Tribunal concluded:

• Relevant Market: the relevant market was the market for the supply of OTC prepayment services to energy suppliers in Great Britain, with the OTC market being a two-sided market.
• Dominance: PayPoint was dominant in the relevant market during the period 2009–2018, prior to the PO/PZ merger. However, PayPoint was not dominant in the relevant market following the PO/PZ merger.
• Abuse: as a result of the two-sided nature of the OTC market and the associated network effects, the Tribunal concluded that PayPoint’s exclusive contracts with energy suppliers and retailers did impede the growth of competition at the margins of the market. The effect of PayPoint’s conduct was to hinder the growth by a competitor or a potential competitor of either a sufficient network of retailers or a large enough portfolio of energy supply business to generate adequate flows of energy prepayments. This created a “step-function” in the market impeding the development of normal competition. PayPoint’s conduct did foreclose its competitors from the relevant market.
• Causation: GLOBAL-365 was only in a position to roll out SMARTprepay to energy suppliers on any material commercial basis at the beginning of 2019 (not 2018 as contended by GLOBAL-365). GLOBAL-365 had not established that SMARTprepay was a sufficiently attractive product to energy suppliers and there was no evidence that it was either reliable or robust, which would have been a requirement of the larger energy suppliers. However, absent PayPoint’s conduct, GLOBAL-365 would have had a 20% chance of winning additional business from the smaller, tier 3, energy suppliers.
• Quantum: the Tribunal assessed GLOBAL-365’s losses for the period to be £169,334 and awarded simple interest at the rate of 2% above the Bank of England’s base rate for the period 1 January 2020 up to the date of Judgment.