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Burgess (CAT)

M. E. Burgess, J. J. Burgess & S. J. Burgess (t/a J. J. Burgess & Sons) v. Office of Fair Trading
[2005] CAT 25
Judgment of 6 July 2005 available online (PDF, 106 pages)

This is a case of exclusionary denial of access by a crematorium operator (Harwood Park, who appeared as interveners in the case) to Burgess, a firm of funeral directors.

The OFT had made a decision that Harwood Park's conduct was not an abuse of a dominant position, mainly because it considered that the crematorium did not hold a relevant dominant position, but also because it considered that the conduct was in any event not an abuse.

The CAT quashed that decision and replaced it with a decision that Harwood Park's conduct had been an abuse under the Competition Act 1998.

UK competition law enforcement

The case is notable because of its implications for competition law enforcement in the UK, as the Tribunal found that the OFT's approach to the case had been inappropriate in several ways.

The CAT rebuked the OFT for thinking that "it cannot be right" that each crematorium is dominant in its own local area and therefore refusing to accept the evidence that Harwood Park had a dominant position. Even small firms can have a dominant position if they are not subject to effective competitive constraints.

"However, the proposition that, for the purposes of the Chapter II prohibition a crematorium may be found, on the evidence, to be dominant in a particular local area is not one that the Tribunal finds particularly exceptionable or surprising." (CAT judgment, paragraph 250)

The CAT dismissed the OFT's reliance on a claim that it should "protect competition, not competitors" to justify its view that conduct which eliminated one firm but left a degree of effective competition would not be abusive.

"In such circumstances the enforcement of the Chapter II prohibition may in a sense 'protect' a competitor, by shielding the competitor from the otherwise abusive conduct of the dominant firm." (CAT judgment, paragraph 332)

The CAT emphasised that the role of competition law was to protect the competitive process, which was considered ultimately in the interests of consumers whether or not any effect on consumers was directly apparent. This is consistent with the statement of the ECJ in the Hoffmann-La Roche judgment that:

Article 82 "therefore covers not only abuse which may directly prejudice consumers but also abuse which indirectly prejudices them by impairing the effective competitive structure as envisaged by Article 3(f) of the Treaty." (Hoffmann-La Roche judgment, paragraph 125).

The CAT criticised the amount of time taken by the OFT to bring the case to a conclusion:

"We regard a delay of over two years in producing a decision in such circumstances as incompatible with the effective enforcement of the Act." (CAT judgment, paragraph 139)

Application of "eliminate all competition" test

The CAT judgment states that the OFT argued for a test of whether all competition in the downstream market was eliminated by the refusal to supply:

"According to the OFT's analysis, in United Brands the key consideration was that the refusal to supply was "designed to have a serious adverse effect on competition" on the relevant market, while in Télémarketing the conduct complained of had the effect of eliminating all competition on the market. Similarly in Commercial Solvents, the dominant undertaking's refusal to supply was a general policy adopted in order to facilitate its own access to the downstream market. The complainant was one of the dominant undertaking's "principal" competitors on the downstream market. This case was, according to the OFT, interpreted in [Magill] as a case where all competition on the relevant market was eliminated. Similarly in Bronner, the Court of Justice noted (at paragraph 38) that both Commercial Solvents and Télémarketing were cases where the conduct in question was likely to eliminate all competition in the relevant market." (CAT judgment, paragraph 269)

The reference to Bronner in this reported argument is wrong: paragraph 38 of Bronner specifically mentioned that something was an abuse "to the extent that the conduct in question was likely to eliminate all competition on the part of that undertaking" (italics supplied).

But the OFT in fact pursued a subtler line, as set out at paragraphs 77-79 of the decision (PDF)), and explained in the day two hearing (PDF):

John Swift QC (for the OFT): ... "Does a refusal by a dominant firm to supply goods or services to an existing customer give rise to an abuse unless there is an objective justification? To which, in my submission, the answer is No. Second question: if the customer is an existing competitor of the dominant firm does a refusal give rise to an abuse unless there is an objective justification? Again the answer is No. The OFT's case is that a refusal to supply will be an abuse where, in the absence of objective justification, (a) it risks eliminating all competition in a relevant market, or (b) it would lead to substantial harm to competition in a relevant market; and on (b), the question of whether there is substantial harm to competition is a matter of fact and degree, and in resolving the matter of fact and degree one takes into account intention of the dominant firm, effect, both direct and indirect, of the conduct on the undertaking's competitors and customers, and the extent to which the conduct is plainly restrictive of competition, and, for the record, I am simply repeating what is set out at para. 12 of the skeleton. That is the OFT's case and that is the OFT's policy." (pages 2-3)
"Sir, back to the formulation which I have to make, and that is the Commercial Solvents test involving elimination of a competitor" (page 11)
The President: "The elimination of competition?"
Mr Swift: "No, no, no. The Commercial Solvents case, as it is clarified in the Oscar Bronner judgment, is still talking about elimination of a competitor person, and then saying that there has to be elimination and the facility in question has to be indispensable. My submission is that the Commercial Solvents principle applies most obviously in those cases where there is elimination of competition, as it was in Commercial Solvents. The way I want to develop the argument is as follows: the test of elimination of the competitor, which is the way the Appellants put their case, an indispensability, are necessary aspects of the facts and matters to be looked at in considering whether there is substantial harm to competition, because plainly one starts off with the position of competition as it is on the ground — what is going to happen to the particular competitor in question. Those are matters that have been taken into account by the Office of Fair Trading. Whether or not the Tribunal is satisfied that the OFT arrived at the right decision, the OFT concluded that there was no risk of the elimination of that competitor because of access to other facilities, and that the indispensability test also did not apply. But the OFT is also saying as part of its policy that in looking at markets generally the process of competition can continue to work if, in certain circumstances, a individual competitor leaves that market."

In this subtler form, this appears to be a statement of policy towards enforcement priorities rather than a test of abuse. The Tribunal rejected the OFT's application of these ideas on the particular facts of the Burgess case (see for example paragraph 333 of the judgment). However, the Tribunal did not need to take a view on the OFT's approach to enforcement priorities, since the issue at hand was whether the OFT's non-infringement decision was correct.

There is no reference to IMS Health in the Burgess judgment (there could have been: the ECJ's preliminary ruling in IMS Health was issued more than nine months before the main hearing in Burgess).

Follow-on claim for damages

In August 2007 Burgess claimed damages against Harwood Park. The case was settled out of court.

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Last changed by Franck at 9:35 AM on Wednesday 2 July 2008.

Reference for this page:
Reckon Open "Burgess" 2008-07-02T09:35:24
Link within Reckon Open: [[Burgess]]