Interim injunction granted in relation to an alleged abuse of dominance

Lucy Davies

In Packet Media Ltd v Telefónica UK Ltd, the High Court has granted an interim injunction in relation to a claim which alleged abuse of a dominant position by the defendant, contrary to the UK’s competition rules.

The claim relates to the provision of telecommunications services via a GSM gateway.  A GSM gateway is a cost-saving piece of computer equipment which diverts landline-to-mobile calls through a gateway installed with SIM cards, such that the call is registered as a mobile-to-mobile call, which is generally less expensive than a landline-to-mobile call.  The claimant, Packet Media Ltd, had supplied a number of its customers with airtime on the mobile network of the defendant, Telefónica UK Ltd, by providing SIM cards to those clients for use in GSM gateways.

The defendant informed the claimant that use of gateways was contrary to its policy, and gave notice of its intention to discontinue service to the SIM cards in question.  The claimant started proceedings on grounds that discontinuing a lawful connection would be (i) contrary to the right to connect under the Radio Equipment and Telecommunications Terminal Equipment Regulations 2000 (the “Regulations”); and (ii) an abuse of a dominant position contrary to the Competition Act 1998.  The claimant also sought an interim injunction to prevent the disconnection of the SIM cards, and following the first day of the instant hearing with respect to the application for an interim injunction, the claimant submitted draft amended particulars of claim in relation to the alleged abuse of dominance by the defendant.

In its defence, the defendant argued that the Regulations did not apply to the case before the court and that it did not have a dominant position on the alleged market, and that in any event it was objectively justified in disconnecting the SIM cards in question in order to protect its network capacity and integrity.

The court ruled that there was no serious issue to be tried in relation to the alleged breach of the Regulations and that there was no arguable case in relation to the abuse of dominance as set out in the original particulars.  However, the amended particulars did put forward an arguable case.  On deciding whether or not to take account of the amended particulars, the court noted that it was extremely wary of allowing an applicant for interim relief to set up an entirely different case than that set out in its original claim, particularly when the defendant had successfully resisted the claim as originally stated.  However, taking into account the overriding objective of active case management, the court noted that it would be undesirable to refuse the injunctive relief just because the amended particulars were raised at a late stage.

The court granted the interim injunction, pending trial, on the basis that it was the course of action least likely to cause prejudice.  This took account of the fact that the claimant claimed that if the SIM cards were to be disconnected it would suffer loss which could not be easily compensated in damages.  The claimant estimated that it would lose between an eighth and a quarter of its business if the defendant was to disconnect service to the SIM cards, and disconnection would have an immediate effect on the business which would result in employees losing their jobs.  Conversely, the court considered that if the defendant was to continue service to the SIM cards it would not suffer any substantial loss given the scale of its business.  It was noted that any ongoing prejudice to defendant could be addressed by a costs order and by allowing it to apply to discharge any injunction granted on evidence relevant to the alleged dominant position.  The court also ruled that the issue of abuse of dominance and objective justification could not be determined in an interim application.

Packet Media Ltd v Telefónica UK Ltd (unreported, Chancery Division (Judge Hodge QC), 20 July 2015).

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