Competition Consumer Rights Class Action Challenges BT’s £1.3billion Overcharging of Landlines

In a first-of-its-kind consumer rights claim being heard before the Competition Appeals Tribunal, BT’s unfair landline pricing from 2015-2018 is being collectively challenged as an abuse of a dominant position under Competition Act 1998 by around 4 million affected consumers.

Former Ofcom official, Justin Le Patourel, is acting as collective proceedings representative for disgruntled consumers arguing that Ofcom effectively failed to fully redress the balance for consumers when it only accepted forward-looking commitments from BT to reduce landline prices in a 2017 fixed landline market review and did not compensate “split purchase” customers — those who separately purchased landline and broadband services.

Not only will this case have potentially have wide-ranging implications for similar consumer class actions based on anti-competitive behaviour of dominant providers, but it also brings into question regulatory scrutiny of BT and Ofcom’s acceptance of forward-looking voluntary commitments as a way of redressing consumer harms.

Introduction

On 29th January 2024, the case of Case 1381/7/7/21 Justin Le Patourel v BT Group PLC (“BT Case) became the first collective proceedings case to come to full trial before the Competition Appeal Tribunal (“CAT”). The case is expected to last until 15th March 2024. The hearing of this case represents a pivotal moment in the enforcement of the consumer rights litigation and competition law enforcement under the Collective Proceedings Order (“CPO”) regime introduced by the Consumer Rights Act 2015 (“CRA”).

This article analyses the potential implications both for business and for the future of UK collective proceedings litigation.

BT Case

In the BT case the defendant, BT Group PLC, finds itself on the receiving end of the first collective proceedings action to come before the Courts for full trial. The case, spearheaded by the Collective Proceedings Representative, Mr Justin Le Patourel, was certified successfully as a class in 2021. The claim alleges that BT overcharged nearly 4 million customers in connection with landline telephone services, potentially amounting to £1.3 billion in damages.

The core issue revolves around BT’s purported overpricing of certain residential landline services, impacting customers who purchased standalone fixed voice services (BT SFV Service) during the claim period (see below). The claim asserts that BT abused their dominant position contrary to Chapter II Competition Act 1998 and is brought under Section 47A of the Competition Act 1998.

Where the case originates

The origins of this legal battle can be traced back to a comprehensive review conducted by Ofcom in 2017, addressing the market for standalone landline telephone services. Ofcom’s findings revealed that prices for standalone residential landline services exceeded competitive levels, resulting in consumer detriment. Following the review, Ofcom provisionally concluded that retail price controls were necessary to mitigate the overpricing issue. Consequently, BT committed to voluntary measures, including forward-looking price reductions for specific customer segments.

The proposed collective proceedings seek to amalgamate standalone claims for damages stemming from BT’s alleged unfair pricing practices. The Class Representative Order states that the Representative represents all affected individuals domiciled in the United Kingdom, excluding the Hull Area, who purchased BT SFV Service during the claim period (1st October 2015-1St April 2018), except for excluded services like BT Basic and BT Home Phone Saver. In the CPO application it also stated that many of the class come from groups that are vulnerable. Ofcom noted that BT SFV Service Customers tended to be elderly, in lower socio-economic groups and those that are disengaged.

Implications for Business

In the event of a positive outcome for the claimant the implications of the BT case for business are profound. BT Group PLC may face substantial financial liabilities, including compensation payments to affected customers. More generally a positive outcome for the claimants would undoubtedly encourage more litigation of this nature. In addition, BT faces negative publicity surrounding the overcharging allegations could tarnish BT’s reputation and erode consumer trust.

In addition, the outcome of the trial may prompt heightened regulatory scrutiny from Ofcom and other regulatory bodies, necessitating stricter compliance measures and oversight in pricing practices. Many have been critical of Ofcom’s approach in accepting forward looking commitments from BT rather than pursuing sanctions or compensation for past conduct.

Implications for Competition Litigation

The BT case will have a big effect on the future development of the CPO regime. The resolution of this case is likely to establish precedents for future collective proceedings actions in the realm of competition litigation, shaping the legal landscape for similar disputes. A stellar win for the claimants is also likely to serve as a deterrent on BT as well other market players engaging in similar or any anti-competitive behaviour, fostering a more competitive and consumer-friendly marketplace.

Conclusion

The judgment in the BT Case will be a pivotal moment in the enforcement of the consumer rights litigation and competition law enforcement under the CPO regime under the Consumer rights Act 2015 whatever the result.

In the event of a positive outcome for the Claimant class it will have profound business and legal implications in safeguarding fair market practices and promoting economic welfare for consumers.

Fundamentally, an award of significant damages will send a clear message that large corporates which are found guilty of anticompetitive conduct cannot avoid the past damage caused to their customers by offering regulators’ commitments as to their future conduct. The judgment is awaited.