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You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Telefonica O2 Europe Plc & Ors, R (on the application of) v Secretary of State for Business, Enterprise and Regulatory Reform [2007] EWHC 3018 (Admin) (07 December 2007) URL: https://www.bailii.org/ew/cases/EWHC/Admin/2007/3018.html Cite as: [2007] EWHC 3018 (Admin) |
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QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
Strand London WC2A 2LL |
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B e f o r e :
____________________
THE QUEEN ON THE APPLICATION OF | ||
(1) TELEFONICA O2 EUROPE PLC | ||
(2) T-MOBILE INTERNATIONAL AG | ||
(3)ORANGE PERSONAL COMMUNICATIONS LIMITED | ||
(4) VODAFONE LIMITED | Claimants | |
v | ||
SECRETARY OF STATE FOR BUSINESS, ENTERPRISE AND REGULATORY REFORM | Defendant | |
OFCOM | Interested Party | |
(1) HUTCHISON 3G UK LIMITED | ||
(2) GSM ASSOCIATION | Applicants to Intervene |
____________________
WordWave International Limited
A Merrill Communications Company
190 Fleet Street London EC4A 2AG
Tel No: 020 7404 1400 Fax No: 020 7831 8838
(Official Shorthand Writers to the Court)
Mr Peter Roth QC and Mr Ronit Kreisberger (instructed by Messrs Herbert Smith) appeared on behalf of the 4th Claimant
Mr Jon Turner QC and Mr Tim Ward (instructed by the Treasury Solicitor) appeared on behalf of the Defendant
Mr Michael Fordham QC and Mr Brian Kennelly (instructed by Messrs Baker & McKenzie) appeared on behalf of the 1st Applicant to Intervene
Mr Martin Chamberlain (instructed by Messrs Jones Day) appeared on behalf of the 2nd Applicant to Intervene
____________________
Crown Copyright ©
"This Regulation introduces a common approach to ensuring that users of public mobile telephone networks when travelling within the Community do not pay excessive prices for Community-wide roaming services when making calls and receiving calls, thereby contributing to the smooth functioning of the internal market while achieving a high level of consumer protection, safeguarding competition between mobile operators and preserving both incentives for innovation and consumer choice."
Article 9 requires Member States to lay down rules on penalties for infringements of the Regulation and to take all measures necessary to ensure they are implemented, hence the UK regulations, which provide by regulation 5(1) for a penalty of up to 10 per cent of the turnover of an MNO's relevant business in the year preceding notification of a breach of the Roaming Regulation. Article 7.5 of the Roaming Regulation contains a provision of particular interest to H3G which requires national regulatory authorities to ensure adequate access to wholesale services by MNOs. There is and could not be any challenge to the lawfulness or proportionality of that article.
"...the following provisions shall apply for the achievement of the objectives set out in Article 14. The Council shall ... adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market."
Article 14.2 defines the internal market as:
"... an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured..."
"The high level of the prices payable by users of public mobile telephone networks, such as students, business travellers and tourists, when using their mobile telephones when travelling abroad within the Community is a matter of concern for national regulatory authorities, as well as for consumers and the Community institutions. The excessive retail charges are resulting from high wholesale charges levied by the foreign host network operator and also, in many cases, from high retail mark-ups charged by the customer's own network operator. Reductions in wholesale charges are often not passed on to the retail customer. Although some operators have recently introduced tariff schemes that offer customers more favourable conditions and lower prices, there is still evidence that the relationship between costs and prices is not such as would prevail in fully competitive markets."
(3) The travaux preparatoires suggests that consumer protection was at the heart of the Commission proposal and the Roaming Regulation adopted. (4) The Roaming Regulation is inconsistent with the CRF. Preamble (4), which states the opposite, is a legal cloak which fails to conceal the true object. It reads:
"This Regulation is not an isolated measure, but complements and supports, insofar as Community-wide roaming is concerned, the rules provided for by the 2002 regulatory framework for electronic communications. That framework has not provided national regulatory authorities with sufficient tools to take effective and decisive action with regard to the pricing of roaming services within the Community and thus fails to ensure the smooth functioning of the internal market for roaming services. This Regulation is an appropriate means of correcting this situation."
(5) European Court caselaw establishes that a measure which purports to fulfil an objective of Article 95 but does not in fact do so may be declared invalid. He relies in particular on Germany v European Parliament and Council [2000] ECR 1-8419, known as Tobacco Advertising 1.
"The Commission, in its proposals envisaged in paragraph 1 concerning ... consumer protection, will take as a base a high level of protection, taking account in particular of any new development based on scientific facts. Within their respective powers, the European Parliament and the Council will also seek to achieve this objective."
"Consumer protection requirements shall be taken into account in defining and implementing other Community policies and activities."
(5) European Court caselaw establishes that the fact that existing Community law guarantees the removal of obstacles to trade in the area it harmonises does not inhibit the community legislature from amending or adapting that law in the light of, but not limited to, new developments based on scientific facts; see case C-491/0112 British American Tobacco Investments v Secretary of State for Health [2002] ECR1-1453 and case C-374/05 GINTEC, in which judgment was given on 8th November 2007.
"97. As to review of proportionality, it should be recalled that the principle of proportionality, which is one of the general principles of Community law, requires that acts adopted by Community institutions do not exceed the limits of what is appropriate and necessary in order to attain the legitimate objectives pursued by the legislation in question; where there is a choice between several appropriate measures, recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued (Jippes, paragraph 81 and the case-law cited.
98. As regards judicial review of the implementation of that principle, bearing in mind the wide discretion enjoyed by the Community legislature where the common agricultural policy is concerned, the lawfulness of a measure adopted in that sphere can be affected only if the measure is manifestly inappropriate in terms of the objective which the competent institution is seeking to pursue (Jippes, paragraph 82 and the case-law cited).
99. What must be ascertained is therefore not whether the measure adopted by the legislature was the only one or the best one possible but whether it was manifestly inappropriate (see, to that effect, Jippes, paragraph 83)."
It is not contended that there is any material difference between cases concerning the Common Agricultural Policy and this case. To like effect are observations of the Court at paragraph 44 in case C-120/99 Italy v the Council [2001] ECR 1-7992. Those are formidable hurdles to surmount. Mr Roth submits that the CRF provided an adequate mechanism for the regulation of the market or markets for roaming services. I conflate the first and second of his grounds in his skeleton argument to achieve that proposition. Secondly, the imposition of price limits on retail as well as wholesale services was unnecessary and inappropriate. Thirdly, the imposition of a "one size fits all" cap set at the level stated in Articles 3 and 4 is inappropriate and unfair. Fourthly, there were significant errors of appraisal during the legislative process. Mr Chamberlain for GSMA has advanced the fourth ground relying on a claimed mistake in the assessment of the size of the market at EUR 8.5 billion, whereas in truth it should have been assessed at EUR 5 billion.
"The principles underlying the Framework lay down that retail regulation should be imposed only to the extent that wholesale remedies are ineffective. ERG believes that this principle should be respected in framing the proposed Regulation. Given well-designed wholesale regulation, market forces should be able to play a strong role in bringing down retail tariffs. Nevertheless, it recognises that this cannot be left to chance. This has informed the proposals set out in this paper."
This conclusion, formed by those charged with the regulation of the market, is entitled to serious consideration. It is true, as Mr Turner points out, that it also stated in paragraph 1.10 that:
"Consequently, while a safeguard level of retail price reduction might be implemented on a Europe-wide basis, in order to remove the risk of exorbitant prices for particular types of call, a measured and proportionate regulatory regime will need to respect national market differences."
This was a summary of its proposal set out in greater detail in a subsequent submission to the Commission on 11th May 2006 at paragraph 1.8(e) and (g), which recognised that, after a period put by it at six months, the impact of capping wholesale prices should be examined at retail level with a view to seeing if retail caps were also required.
"The extent to which further remedies at the retail level are considered necessary is dependent on the extent to which MNOs are prepared to respond positively to the measures advocated above, by voluntarily reducing (or committing to reduce) retail roaming prices alongside the wholesale reductions arising from the measures recommended above. For that reason, ERG believes that it would be preferable to delay implementation of any form of retail price control to allow the combination of the above measures and market forces to work. This should not need a long period."
It noted the differences in the effectiveness of competition at national and retail level and observed that a degree of flexibility in retail regulation between Member States was likely to be appropriate "to ensure that any retail regulation is both effective and proportionate", see paragraph 4.1, "Policy issues", (iii). The ERG's observations about the regulation of retail services is capable of being supported by consideration of the difference in arrangements for the supply to customers between markets. Some, for example, provide free or subsidised handsets, others do not. Some provide free or low cost calls of a particular type, for example text, some do not. Retail competition in particular markets may not all focus on the price of particular services, including roaming services, as indeed the ERG noted in paragraph 3.10 of its proposal of 22nd March 2006. The adjustment of retail offerings to reflect lower wholesale prices might take forms other than a pro rata reduction in retail roaming charges if national retail markets were to remain subject to the Framework Directive and the four specific directives. Accordingly, in my judgment it is possible for a viable challenge to be mounted to Article 4.2 of the Roaming Regulation on a combination of proportionality and subsidiarity grounds on the assumption that the regulation is otherwise lawful. Ground 3 adds nothing to this challenge to Article 4.2.