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Meridian Communications Ltd. v. Eircell Ltd.  IEHC 195 (5 April 2001)
THE HIGH COURT
1999 No 5306p
MERIDIAN COMMUNICATIONS LIMITED
AND CELLULAR THREE LIMITED
JUDGMENT of Mr. Justice O'Higgins delivered the 5th day of April 2001.1. The first named plaintiff Meridian was incorporated in October 1990, began trading in March 1992 and changed its name to Meridian in 1993. The second named plaintiff Cellular 3 Communications is a wholly owned subsidiary of the first named plaintiff and was incorporated on the 4th of March, 1999. The defendant/Eircell is a wholly owned subsidiary of the Eircom group. It began trading in 1985 as a division of Telecom Eireann and it was the first mobile phone operator within the State. It had a monopoly on the mobile telephony market from that time until the arrival of Esat Digifone who commenced operations in March of 1997. At the time of the hearing Eircell was one of two network operators providing mobile telephony services on the market, the other being Esat Digifone. Although a third licence has been granted to Meteor, its arrival in the market place was delayed following legal challenges. Meteor commenced operations in the market place between the end of the hearing and the date of judgment.
Background to the dispute.2. In 1985 when Telecom Eireann introduced mobile telephony to Ireland the service provided was through an analogue system and the cost of a handset was very expensive. There were moreover, technical difficulties with covering certain areas of the country. Furthermore, the system could not be used outside the country. 3. In July 1993 Telecom Eireann launched a global system for mobile communications (GSM). That system had a number of advantages over the analogue system. They included technical advantages in the quality of the service, the ability to use phones internationally, the ability to separate the given line from the given handset by the provision of a Sim Card. There are also certain security advantages in the new system because of encryption in GSM services which ensures privacy in the carriage of calls. The number of users increased and the price of handsets was dramatically reduced. For example, in 1986 a Motorola handset 8000x cost £4230 inclusive of VAT where as in 1996 the GSM Erikson 198 handset was £49.99. In certain circumstances handsets were free of charge for the customer. The price of GSM handsets in recent years has been heavily subsidised. In October 1997, Eircell launched its Ready to Go service, which enabled a purchaser to buy a telephone and card giving a certain amount of airtime without having to subscribe for a fixed period. This was the start of prepaid mobile telephony in Ireland which now accounts for almost half of Eircells' new business. 4. When Mr. Brendan Dowling acquired Meridian in 1996 the company had approximately 40 lines. In early 1997 it entered into an agency agreement with Eircell. It enlisted customers for Eircell in return for which it received a commission. The company was also involved in a small way in the sale of handsets. Initially the Meridian's business was as a subscriber to Eircell for a number of mobile phone lines at a fixed cost. Meridian would then rent out these lines to its customer for a price in excess of that which it paid to Eircell, enabling it to make a profit. When he acquired the company Mr. Dowling realised that there was little future for this premium rental market partly, because of the decrease in cost of handsets and also because he anticipated changes in the market whereby people could buy handsets and airtime on a prepaid basis without having to subscribe for a fixed period. For these reasons he realised that he would have to look elsewhere for opportunities to expand the company. As an agent of Eircell, Meridian undertook a number of initiatives with a view to showing Eircell that it was an innovative and dynamic company with whom Eircell could do business. The response to these initiatives by Eircell was only lukewarm. In July 1998 Eircell terminated its agency agreement with Meridian and instead Meridian became a sub agent. This sub agency arrangement is still in existence. A Volume Discount Agreement (VDA) is an agreement between Eircell and certain customers whereby Eircell provides discount to such customers based on the volume of Eirtime used. Such a discount could be up to 40% off the standard price. Such agreements are common in the mobile telephony industry and indeed in many other industries. The introduction of the VDA was against the background of the arrival in the market of Digiphone, and was seen as a pre-emptive strike by Eircell against any attack Digiphone might make on Eircell's share of corporate market for mobile telephony services. In 1997 following negotiations between Mr. D'Arcy on behalf of the plaintiffs and Mr. Hennessy on behalf of the defendant during which Meridian specifically outlined to Eircell that it wished to expand its rental fleet, Eircell agreed to provide Meridian with a VDA. In the standard form of the agreement however clauses 4.1 and 4.2 read as follows:
4(i) The subscriber Dialled Calls must be made by the subscriber or employees of the subscriber from Nominated Eircell Numbers.
(ii) The user(s) of Nominated Eircell Numbers must be the subscriber or employees of the subscriber.5. The restriction imposed by these provisions as to who could use the numbers the subject of discount rendered it unsuitable for the use to which the plaintiffs intended to use the discount. Meridian wanted the clauses deleted. This was clearly set out in the letter from Mr. D'Arcy to Mr. Hennessy dated 25th July, 1997 in which he specifically drew Eircell's attention to the fact that Meridian provide a mobile phone rental service and had done so for many years. He pointed out that the condition which required that all phones operating under the scheme be used only by employees of the company was not appropriate, and in the letter requestion an agreement without the restricted clauses he stated,
"...it is important that this point is clarified as we intend to continue expanding our rental fleet and our pricing is dependant on this discount to remain competitive."6. Mr. Hennessy had to obtain approval for the deletion of such clause. However, on the 1st September, 1997, a letter was received from Eircell acknowledging that the Meridian mobile fleet was predominantly used for rental and used by people not employed in the company. The letter confirmed that the discount might proceed as normal and that clause 4.1 and 4.2 which restricted on the use that could be made of the discount did not apply. It was only after, that Mr. D'Arcy was shown this letter that Meridian signed the VDA. 7. The initial VDA ran from August 1997 to August 1998. Thereafter, between August 1998 and November 1998 the parties continued with the agreement as it had operated without the agreement being formally renewed. Following the renewal of the VDA contract with Eircell in November 1998, Meridian began to expand its operations significantly. Over the next number of months a considerable injection of money and expertise was provided by Mr. Sean Bolger and his associates. Mr. Bolger is a person of considerable business acumen and specialised knowledge of the national and international mobile telephony market. 8. When Eircell realised that it was the intention of Meridian to expand in the market place, and when they saw that the business was beginning to expand, it became apparent that it was unhappy with the use to which Meridian/Cellular 3 were putting the VDA. In January, 1999 Mr. Kinsella ordered that transfers to Meridian/Cellular 3 be stopped. Initially the defendant thought that the plaintiffs were in breach of the VDA, until it was pointed out to them that Eircell had agreed to the deletion of clause 4.1 and 4.2 of the agreement. Nonetheless the defendant maintained that the plaintiffs were in breach of the spirit of the VDA and indicated that it would not renew the agreement when it expired. I have already indicated in my judgment dated 4th April 2000 that Eircell were entitled to adopt such a course. 9. The defendant considered that Meridian/Cellular 3 were using the VDA to undercut their prices, this was bad for their business. Accordingly, in April 1999 what has been referred to as 'the process letter' was sent out to customers of Meridian who wish to transfer from Eircell to Meridian/Cellular 3 and avail of the cheaper prices they were able to offer consumers by virtue of having the discount agreement in unrestricted form. It has never being explained to the Court why the term "process letter" was used. However, as will become apparent it was a cause of serious dispute between the parties. 10. It appears that the process letter was the event which triggered off the litigation in this case. Meridian/Cellular 3 applied for an interlocutory injunction to require Eircell to continue to supply airtime at a discount on the expiry of the VDA. Following a hearing of several days, the injunction was refused, inter alia on the grounds that the plaintiff was required to have a licence to offer mobile telephony service to the public. Miss Justice Carroll took the view that, in default of such license, Eircell would be in breach of its license by supplying airtime to the plaintiffs, whom she considered to be unlicensed service providers. This decision was appealed to the Supreme Court. The Supreme Court declined to adjudicate on the appeal but instead directed that the case should have an early trial. The case commenced on the 18th of January and the hearing lasted for a period of 94 days. It has to be said that the running of the case would have been far more satisfactory had there being an opportunity to engage in active constructive case management at an early stage prior to the hearing. Unfortunately, because of the short time between the Supreme Court hearing and the commencement of the trial this exercise did not take place. In the event, it was deemed necessary to deliver an amended Statement of Claim on February 21st 2000 during the hearing of the case. Furthermore, in the course of the case there was a motion for further discovery heard on day 53. In retrospect, it is likely that had there been a period of reflection, and had constructive case management been employed, some of that the issues of the case could have been narrowed. 11. I have already given two judgments in the course of this case dealing with various aspects of it. Firstly, following many days of oral hearing and legal argument I was asked to decide on three specific issues. They were:
1. Whether the plaintiffs needed a licence to engage in the business which they carry on. - I held that they did not need a licence.
2. Whether they were entitled to renew the VDA under the terms of the contract itself. I held that the plaintiffs had no such entitlement.
3. Whether the defendants were estopped by their conduct from renewing the VDA. I held that they were not.
12. These matters were dealt with in a judgment dated the 4th day of April 2000. 13. At the close of the plaintiffs case, the defendant applied for a direction on a number of aspects of the case relating to the Competition Act 191 as amended. That matter was dealt with by a judgment of the court delivered on the 4th October 2000. The judgment dealt with the alleged breach of Article 81 of the Treaty of Amsterdam and Section 4 of the Competition Act 1991 as amended and the issue of joint dominance in the market. I held, inter alia, that there was no case for the defendant to answer in respect of the allegations of joint dominance, but that, there was prima facie evidence that Eircell was dominant in the relevant market. 14. The present judgment is concerned with whether the defendant is dominant in the relevant market, and if so, whether it was guilty of abuse of its dominant position. It is further concerned with the question as to whether the defendant committed a number of breaches of contract and/or various torts arising out of its dealings with the plaintiffs.
Defining the market15. In order to decide whether or not an undertaking is dominant in the market it is necessary to define the relevant market. As has been pointed out by Whish in 'Competition Law' Third Edition 1993 page 248 a dominant position:-
"..... does not exist in the abstract but in relation to a market: for this purpose the relevant market must be analysed from three perspectives: the product market, the geographical market and the tempora market."16. In this case the plaintiffs at paragraph 14 of the amended Statement of Claim pleaded that:-
....... "The defendant is in a dominant position in the market for a mobile telephony services in the State and/or in the market in the provision of air time for resale within the State (full particulars of the product markets will be furnished in due course)".17. However, in the course of the hearing they did not attempt to argue that the relevant market was that for the provision of airtime for resale within the State, and this definition was abandoned by them. 18. Dr Walker for the plaintiffs, having come to the conclusion that a market definition to include fixed and mobile telephony was too wide and that the market for the resale of airtime was too narrow stated in his report.
"This leaves us with two possible market definition; the market for mobile telephony or the market for digital mobile telephony"19. His arguments and conclusions are not different whether one takes the market definition as being that of all mobile telephony, or whether one regards the digital mobile telephony and analogue mobile telephony as being different markets. Professor Cave the plaintiffs' expert witness, having pointed out that there was scope for disagreement as to whether analogue and digital (GSM) mobile telephony fell within the same market, proceeded on the basis that the relevant market was the market for GSM services within the State. However, his evidence was to the effect that the inclusion of analogue services would make little difference to his analysis, and would not alter his conclusions. 20. In these circumstances there is agreement between the parties that for the purposes of this case the court may proceed on the basis that the market is that of mobile telephony services within the State. It is thus not necessary to encounter that fanciful entrepreneur the hypothetical monopolist, or to have regard to other methods used to arrive at a market definition. 21. The classic definition of dominance contained in the United Brands -v- Commission (Case 27/76)  ECR 207 at p. 277 states that it: "..... relates to a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers". 22. That definition has being followed in Hoffman LaRoche -v- Commission (Case 85/76)  ECR 461 and indeed in Ireland in Mars -v- HB  I.L.R.M. 145, Cooney -v- Murphy Brewery Sales Limited Unreported this Court, Costello J., 30th July 1997 and Blemings -v- Patten Limited Unreported, High Court, Shanley J., 15th January 1997. 23. In the Hoffman LaRoche case the Court observed at page 532 paragraph 70:
"the Court has already held inter alia in its judgment of 14th of February, 1978 in United Brands Company and United Brands Continental BV -v- Commission of the European Commissioners  ECR 207 that even the existence of lively competition on a particular market does not rule out the possibility that is a dominant position on this market since the predominant feature of such a position is the ability of the undertaking concerned to act without having to take account of this competition in its market strategy and without for that reason suffering any detrimental effects from such behaviour".24. The following passage occurs at page 532 paragraph 71 in the same judgment:
".... the fact that an undertaking is compelled by the pressure of its competitors' price reductions to lower its own prices is in general incompatible with that independent conduct which is the hallmark of a dominant position".25. As was pointed out in the judgement of this court on the 4th of October 2000 on the defendants' application for a direction, Dr Walker criticised the United Brands definition of dominance as follows in his evidence:
"From an economist's point of view that definition is not entirely meaningful because it ends up saying 'Dominance is the power to behave to an appreciable extent independently of consumers'. And as an economist I do not believe that any firm ever anywhere has priced independently of its consumers. Any firm that makes a pricing decision, sets its price in order to maximise profits and sets its price on the basis of what consumers will demand of the product at a given price.
So as an economist, firms, even an monopolist, does not set its price independently of consumers, it sets its price on the basis of consumer demand. And if consumer demand for some reason varies then the price that the company sets will vary. So even in monopolist is dependent on consumers for its pricing."26. Paragraph 9 of his report contains the following sentence:
"Hence all firms are dependant on demand of final consumers (what economists refer to as the demand curve) and none can 'behave to an appreciable extent independently of its....consumers choice'".
27. However this criticism, appears to me not to take sufficient account of the important qualification on independent action contained in the United Brands definition itself, namely the qualification to act independently, "to an appreciable extent." Dr Walker contended for a definition of dominance based on the exercise of market power. He defined dominance as being the possession of a substantial market power the exercise of which requires a firm to restrict output and this increases price. The resultant increase in price must lead to profitability. Furthermore the market power is exercised relative to the bench mark of the competitive price. 28. I was referred also to a passage in EC Competition Law edited by Faull and Nikpay, chapter 3 page 122 where the following passage occurs:
"Market power defined - what is dominance? Dominance is the position of considerable economic power held for a period of time by firms over customers and/or suppliers in a market. More specifically, it is the ability of firms to restrict output and thus raise prices above the level that would prevail in a competitive market, without existing rivals or new entrants in due time taking away its customers."29. Professor Cave was happy to abide by the United Brand's definition and regarded the definition proposed by Dr Walker, as less comprehensive than the United Brands definition.. From the perspective of the Court, the United Brands definition is satisfactory: it has been repeatedly followed both in the European Court of Justice and in this jurisdiction, and is clear and comprehensible, at least in legal terms. The essence of dominance is the ability to profitably act independently to an appreciable extent of rivals and ultimately of consumers. Thus it was pointed out in the Hoffman LaRoche case that independent conduct is the "hallmark" of a dominant position. In the Faull and Nikpay definition that characteristic of independence is expressed through the "ability of firms to restrict output and thus raise prices above the level that would prevail in the competitive market without existing rivals and new entrants in due time taking away its customers". 30. An assessment of whether an undertaking is dominant in the market place or not involves an analysis of both structural and behavioural aspects of the market and a consideration of whether such analysis supports the contention of dominance or not. In that context it is necessary to consider the market share of a given undertaking. In general the existence of a very high market share is indicative of a dominance. In the AKZO case - AKZO Chemie BV -v- Commission (C - 62/86)  ECR I - 3359 at paragraph 5 of the head note the following statement occurs:-
"Save in exceptional circumstances, very large market shares are in themselves evidence of the existence of a dominant position. That is the case where there is a market share of 50%".31. The weight to be attached to such evidence however varies greatly from case to case and market to market . The Court of Justice stated in the case of Hoffman LaRoche at paragraph 39, 40 and 41:-
"The existence of a dominant position may derive from several factors which, taken separately, are not necessarily determinative but among these factors a highly important one is the existence of very large market shares. A substantial market share as evidence of the existence of a dominant position is not a constant factor and its importance varies from market to market according to the structure of these markets, especially as far as production, supply and demand are concerned......
Furthermore although the importance of the market shares may vary from one market to another the view may legitimately be taken that very large shares are in themselves, save in exceptional circumstances, evidence of the existence of a dominant position."32. It is note worthy that the Court emphasised the structure of the market "especially as far as production, supply and demand are concerned" as being important in assessing the weight to be attached to a large market share. In that context the low barriers to expansion, to which I will refer later is of great importance.
MARKET SHARE33. Market share is an important direct indication of dominance and one to which in all cases the court must attach weight. In order to better assess the weight to be attached to the market share of the defendant in the present case it is helpful to give a brief outline of the background to that market share. The reason for this is that a given market share will have different significance depending on how it came about. For example, a market share of 60% in the context of a steady increase in share over a period of years is much more likely to indicate dominance than the same share in the context of a decline over a period. The fall in market share by Eircell in this case was agreed by Dr. Walker for the plaintiffs to be 'quite dramatic'. In December 1985 Eircell launched Ireland's first mobile telephony service (analogue) and in 1993 Digital (GSM 900) services were provided by Eircell. It was the holder of the only licence until 1996 when Esat Digifone were granted a GSM 900 licence also. Digifone launched in March 1997 and has grown very rapidly in the market place. By October 1999 it had secured 364,000 digital subscribers being 41.8% of all digital subscribers and 39.1% of all mobile subscribers. A third operator, Meteor had planned to enter the market in 1999. However its entrance was delayed by a challenge to the decision of the Regulator to grant Meteor the licence. In May 2000 the Supreme Court upheld the decision to award the third licence to Meteor. At the time of writing Meteor has commenced its operations in the market. 34. The Office of the Director of Telecommunications Regulation (ODTR) is planning the grant of third generation mobile licences in the near future. The rate of growth in the use of mobile telephones in Ireland can only be described as dramatic. The evidence is that mobile penetration in Ireland is now over 50% as opposed to 43.61% on the 1st of March 2000. In common with mobile operators within Europe, Eircell and Digifone compete for subscribers at the retail level by offering bundles of services. Such services include the ability to make domestic peak calls, off peak calls, international calls and international roaming calls. The operators also offer access to value added services such as voice-mail or text messaging. Subscribers are presented with a range of different tariff packages and can choose whichever they consider most suitable for their individual requirements. Various pricing strategies are employed to encourage and reward high users. The market also is characterised by many special offers of various types. The operators offer different type of tariff packages to appeal to particular customer groups. One of the most successful forms of tariff innovation has been the introduction of prepaid packages. These appeal to users who do not want to run an account with the operators. The first of these was Eircell's Ready to Go which was launched in October 1997. Such has been the rapid growth of the use of mobile telephony within the State that it could be contended that the mobile phone vies with the industrial crane as a symbol of Ireland 2001. 35. The importance to be attached to the market share enjoyed by Eircell as an indicator of dominance, is in my view considerably reduced in light of the fact that within the relatively short period in which Esat Digifone has been on the market that is since March 1997, Eircell has lost approximately 40% of the market share. The plaintiffs argue that the market has now stabilised at approximately 60% to 40% in favour of Eircell, and assert that this percentage is indicative of dominance. They rely on a sentence in the evidence of Mr. Fahy Eircell's Director of Strategy and business planning to the effect that Eircell expect to gain 60% of new callers to support that contention. I do not think that that observation of Mr. Fahy is sufficient to carry the case that the market has now stabilised at approximately 60/40 in favour of Eircell. That is so especially in view of his other observation in referring to the advent of Meteor when he said - "It is inevitable that both Digiphone's and Eircell's market share will decline as a result." I consider that view, which is shared by Professor Cave, to be much more likely to be correct. I cannot accept the plaintiffs' contention that because the case is concerned with Eircell's alleged dominance prior to Meteor's entry to the market, that the court should not have regard to its arrival. Indeed it is almost inconceivable that the arrival of Meteor had no strategic or costs implications for the defendants, despite the fact that it was not yet competing in the market at the conclusion of the hearing. This view is strengthened when one considers that it is clear that Eircell's first price reduction was in anticipation of Digifone's arrival on the market, and occurred before it was actually competing. The imminent award of third generation licenses which, at least in theory, could mean the advent of four more entrants to the market, is also part of the background against which Eircell's alleged dominance must be assessed. In deciding whether Eircell was dominant in the market at a given time, it is relevant to examine its state of knowledge at that time as to future developments in the market. It is in the light of such knowledge that its ability to act independently to an appreciable extent must be assessed.
Number of Competitors36. The number of competitors is a factor to be taken into account in assessing whether a particular undertakings is dominant in the market. Its significance, however, can vary widely from case to case. If for example, there had been a large number of competitors in the market, and over time that number had shrunk leaving only a few players that fact would be strongly indicative of dominance. In the instant case however the market is regulated and the position is different. In the circumstances where the market has only been recently deregulated and the number of licences has been fixed by the regulator the number of competitors is in my view not of any great assistance in assessing whether the candidate in this case is dominant.
Significant Market Power37. The director of Telecommunications Regulation designated Eircell as having significant market power (SMP) in 1998, and in December 1999 designated both Eircell and Digifone as having such. In determining whether or not the defendant is dominant in the market place I do not consider that the designation of SMP to be of any significance. Such a designation exists in the regulatory context only and it is irrelevant to the determination in competition law cases. The expert witness on behalf of the plaintiff has agreed with this proposition.
The Market Share of the Competitors38. The market share of the competitor is a factor which can be of assistance in assessing the importance of the market share of the defendant as an indicator of dominance. Even a competitor with a very limited market share could exercise powerful constraints on a competitor with a much larger market share where barriers to expansion are very low. The ability of a competitor with a large market share and low barriers to expansion (such as Digifone in this case) to impose such restrictions is great. In Whish, Competition Law, 3rd Ed., at page 263 the following passage occurs:-
"One particular issue will be the market shares of the alleged dominant firm's nearest rivals. The smaller their shares, the likelier the Commission will be to hold that the largest firm is dominant"39. In the present case the market share of the nearest rival is approximately 40%.
Barriers to Entry/Barriers to Expansion40. Although the phrase 'barriers to entry' concerns the difficulties of new arrivals in the market place in gaining access to the market, and barriers to expansion concern the difficulty for an existing competitor to expand its operation, these topics are best taken together because they concern the same issue. As Dr Walker put it (day 62 p. 1000 Q. 277):-
"The issue is the ability of other suppliers to replace output that by assumption has been lost in the market".
Both barriers to entry and barriers to expansion impinge on the ability of a competitor to take advantage of an anti-competitive price increase or restriction on output by another undertaking. They are therefore relevant in assessing the ability of a firm to act to an appreciable extent independently of competitors.41. In my view the ability of the competitor in the market place to expand easily, and thus take advantage of price raising or restriction of output by a rival, is of central importance in the present case. 42. There is no dispute between the parties that barriers to entry into the market for mobile telephony are high. There are only three licences currently in existence and one of the licensees had, at the end of the hearing, yet to enter into the market, though has since done so. The evidence was that in addition third generation licences would soon be available. The existence of high barriers to entry (being part of the market structure tending to show dominance), would be of very great importance in circumstances, if there were also high barriers to expansion for the existing competitors. The reason is that if there were both high barriers to entry and high barriers to expansion, it would be easier for an undertaking to act to an appreciable extent independently of competitors and consumers, as it would be difficult for a rival enterprise, either to enter the market, or if already in it, to take advantage of anti competitive behaviour on the part of the other undertaking. Where either barriers to entry or barriers to expansion are low the likelihood of such anti-competitive behaviour being exercised with impunity is greatly diminished. Professor Cave attaches considerable importance to the fact that there are low barriers to expansion as impinging on the ability of Eircell to raise its prices or reducing output without suffering in the market. Dr Walker accepts the importance of this factor also. Thus, at day 62, p. 82 Q. 213:
"Q: so your evidence is that if there are no barriers to expansion, that that is an important factor to consider in deciding whether or not a competitor is able to exercise a competitive check on the allegedly dominant firm?
A: Whether it is able to, yes, and of course, it does not tell us anything about whether its incentives are such that it will exercise that competitive restraint constraint".43. Here Dr. Walker is accepting that the lack of barriers to expansion affects another firms ability to impose constraints on an allegedly dominant firm. 44. I will refer later to the question of incentives. 45. Although Dr. Walker did not include the barriers to expansion as one of the factors to be taken into account in considering the question of dominance in the market, it is only fair to state that in his report he stressed that his list of factors was not exhaustive. He added, however, that it did cover those factors that were generally considered by economists to be the most important. It is also fair to state that he did refer to the ability to expand output. However, that was in the context of a discussion on passive collusion. In my view it is surprising that the barriers to expansion were not considered by Dr. Walter in his report in assessing the question of dominance. It is the more surprising in view of the very considerable emphasis placed by him on structural aspects of the market arriving at his conclusions.
The Availability of Competing Products/Ease of Switching46. In his report, Dr Walker stated that one of the characteristics of the market that should be considered in assessing whether a firm was dominant in a market is the availability of substitute products. It emerged in cross-examination that the availability of competing products would have been a more felicitous description, because what was being referred to was the availability of alternatives and the ease of switching. The availability of substitute products is a factor generally associated with the search to define the relevant market, whereas the Commission has defined a relevant product market in as follows:-
"A relevant product market comprises all those products and/or services which are regarded as interchangeable or substitutable by the consumer, by reason of the products' characteristics, their prices and their intended use".47. Dr Walker agrees with that definition. The Regulations based on Article 81 and 82 of the Treaty of Amsterdam (Section 6 of from A/B with respect to Regulation No. 17) and from the Commissioner's merger control regime (see Section 6 of form DO with respect to Regulation (EEC) No 4064/89. 48. Associated with the capacity to expand with ease is the topic of ease of switching from one operator to another in the market with which we are concerned. 49. The GSM services offered by Eircell and Digifone are 'close to homogeneous according' to Professor Cave. However branding by both companies may result in loyalty to one or other of them. It has to be said that there is no convincing evidence of brand loyalty, perhaps because of the fact that the market is growing so quickly and that consequently a high percentage of customers are new. Moreover, each firm charges lower prices for calls to its own network, and there may also be differences in technological characteristics. However, there is no dispute between the parties that, in general terms, in the market for mobile telephony in Ireland switching is relatively easy. 50. At present there is partial number portability. If one changes from one operator to another it is necessary to change one letter of the prefix from 088 (analogue) or 087 to 086 or vice versa in the event of switching from one operator to another the rest of the number stays the same. Moreover, in the event of a change of operation if the previous number has been called the new prefix will be given for a period of six months. In my view this may be a matter of concern for some users particularly in the business sector but is unlikely to be of great significance for prepaid users, who now from the majority of the subscriber base. 51. There is no need to change handsets on changing from one operator to another except in the case of analogue services. Such services are availed of by a diminishing number of users, and are due to be phased out by the year 2004, or even earlier. 52. If a customer is in the first year of contract (and for that purpose, the upgrading of a handset will constitute a new contract) certain costs are accrued on a diminishing scale depending on the time of the contract that remains. Moreover, since calls to the same network are cheaper than calls to an other network, this could be regarded as an incentive to remain with Eircell. Because its market share is large, it is more likely that the people whom a subscribers might wish to call would be on the Eircell network rather than on the Digifone network. A Digifone customer however, would (at least in theory) on average be more likely to wish to make network calls to Eircell customers in the approximate ratio of 6-4. This of course, disregards the fact that one or other operator may have a certain niche market. It may be for example that amongst veteran 16 year olds users one or other brand would be 'cool' and the other unspeakably 'naff'. In those circumstances the numbers called by that sophisticated clique would be very likely to be on the same network. (The word on the street, which is, however, inadmissible in evidence, is that such concerns are more likely to be in terms of particular handsets rather than in respect of service providers.) These factors however, are of relatively minor significance as are the administrative costs of changing. Neither do the restraints imposed by the customer loyalty or different technical characteristics appear to be a significant factors in preventing switching from one operator to another. 53. In my view for a high percentage of customers switching costs are unlikely to be the crucial consideration in a decision to change. Moreover, there has been evidence that some 80% of the subscriber base of Eircell are now prepaid customers. Prepaid customers can easily change from one operator to another at any time, and there are no contractual penalties associated with such change. The cost of switching in the prepaid market is the cost of buying the subsidised phone to replace the subsided phone one already has, or perhaps the cost of changing the SIM card which is approximately £30.00. 54. In any event, the relevance of switching costs is reduced in expanding markets, because in such markets the focus of competition is on new customers, who are free to choose between suppliers. 55. In light of the matters stated above, the costs of switching from one operator to another cannot be regarded as other than a minor factor inhibiting competition. The plaintiff's expert economist agreed that low switching costs indicate that a market is more likely to be competitive than if such costs were high.
Vertical integration/ route to market.56. Eircell is to a large extent a vertically integrated company. It is not merely a network operator providing the infrastructure for mobile telephony but is involved in the marketing and supply of mobile telephony services at the retail level. It is also involved in the provision of handsets through its agents. 57. Eircell also exercises a considerable control over the route to market which it employs through its agents. The evidence before the court is that Eircell has approximately one hundred agents who operate through approximately five hundred outlets. Approximately 40% of Eircell's subscribers come through agents which are wholly or in part owned by Eircell. Moreover, even in the case of agents not directly under its control Eircell has, at least on occasion, supported such agents by way of loans or guarantees. The plaintiffs expert did not make the case that either the fact that Eircell is vertically integrated or the fact that it exercises influence on the route to market is evidence of dominance. The plaintiffs however, argue as follows. It was submitted that the route to market employed by Eircell together with the decision to subsidise handsets.
'Removed from the market any meaningful power in players other than Eircell with the entry of ESAT on the market exactly the same route to market was used. This structural arrangement has meant that there is no meaningful market power in the relevant market save Eircell and ESAT. This is a further factor to consider when looking at the economic power of Eircell. Counsel submitted that the vertical integration of Eircell and Esat gives rise to one market reality which can be placed on the weighing scales when considering the position of Eircell'.58. In my view these are matters of which the court should take account in the overall assessment of the market with which the case is concerned: Neither phenomenon is peculiar to Eircell: Digiphone too, is vertically integrated and has an agency structure in some respects similar to that of Eircell. Moreover, it must be bourne in mind that, not only is vertical integration unobjectionable in itself, but that it can lead to increased efficiencies and as be of benefit to the consumer. It is pertinent to observe too that, at least in general terms commercial enterprises are free to adopt such structures and marketing strategies for marketing their products as they see fit. The agency arrangements made by Eircell concerning the route to market may have been commercially advantageous but do not indicate dominance. Eircell was entitled have the agency structure of its choice. Digiphone have a similar structure and many outlets are common to both. The plaintiffs too are at liberty to adopt a similar structure. In so far as it is claimed that in some way Eircell exercised an illegitimate stranglehold on the route to market, that contention also fails. 59. It has been stressed that a market definition is not an end in itself. Rather, it is "a tool to identify and define the boundaries of competition between firms...... The main purpose of market definition is to define in a systematic way the competitive restraints that the undertakings involve face". (Commission Notice on the definition of the relevant market for the purposes of Community Competition Law OJC 372, 9th December 1997). The same observation could be made concerning the factors to be taken into account in the assessment of dominance. Market share, the number of competitors, the size of competitors, the barriers to entry, the barriers to expansion, the ease of switching, the availability of alternatives are all only tools to enable an assessment as to whether a firm has "the economic strength... which enables it to prevent effective competition being maintained on the relevant market, by affording it the power to behave to an appreciable extent independently of its competitors, its customers, and ultimately of its consumers". The high market share of Eircell, the low number of competitors, the high barriers to entry, are all factors which would tend to indicate its dominance in the market place. However, when examined in the context of this particular case, the position appears to me to be different. The significance of the high market share is greatly diminished having regard to the rapid decline in market share in a relatively short period. The importance to be attached to the small number of competitors is significantly reduced by (a) consideration of the regulatory regime which is the background to the market (b) by the size and strength of the competitor and (c) in light of the knowledge that new licenses are to awarded. The high barriers to entry as a factor pointing towards dominance must be looked at in the context of the low barriers to expansion, which are characteristic of the market with which we are concerned herein. In that context the weight to be attached to high barriers to entry as an indicator of dominance is much reduced.
Behavioural aspects of the market.60. Dr. Walker's view that Eircell were dominant in the market was primarily based on the structure of the market. He said he would be happy to give his opinion on dominance solely based on the market structure in the present case. He also considered the price of mobile telephony in Ireland to be high in comparison with other countries, and he regarded this as being confirmatory of his opinion. 61. Dr. Walker based his view that prices were high relative to other countries, primarily on two prices of information. The first was the report of the European Commission, the fifth report on the implementation of the regulatory package, November 1999. The second was the O.E.C.D. Report of August 1998.
The European Commission Report62. This report contained inter alia two charts 82 and 83 which Dr. Walker reproduced in his report as figures two and figures three. Figure two, chart 82 which appears at page 209 of the Fifth Report on the implementation of the Telecommunications Regulatory package deals with residential users. Figure three, chart 83 appears at page 210 of the said report. The charts which are produced below purport to show that :-
- Irish Residential mobile charges are the highest in the E.U.
- Irish business mobiles are the second highest in the E.U. (behind Italy).
- Irish residential mobile charges are more than double those than the U.K.
- Irish business users charges are about 20% higher than those in the U.K.
Free calls included in the package price are subtracted from the usage charges, where relevant. Values are expressed in Euro/PPP (including VAT and give the position at 1 August 1999. A footnote to the report listed the packages selected for the various countries. In the case of Ireland Eircells Eirtime 250 was selected. The fixed charges are calculated from the annual rental charge plus 1/5 of the installation charge. The national usage charges refer to a basket of 568 mobile calls; the international usage portion is 1%. Values are expressed in Euro/PPP (excluding VAT), and give the position at 1 August 1999.65. The basket of calls was provided by Euro Data, a reputable commercial enterprise which is now called Telegen. The methodology employed in the Euro Data is not made clear. The Court then does not have all the information on the basket of calls that would be desirable in assessing the weight to be attached to the charts compiled by the commission and referred to and produced by Dr. Walter.
- The tariff plan used for Eircell was Eirtime 250, but without access to the basket of calls the Court does not know whether that was the optimal tariff plan .
- One operator was chosen from each country, but the Court does not know the basis on which that operator was chosen.
- The chart is for post paid prices only, notwithstanding the fact that the vast majority (80%) of Irish residential users are on a prepaid package.
- The residential chart is based on 568 calls annually. The Court does not know whether these calls were made at peak time or off peak, or whether they were on a week day or a weekend.
- The Court does not know the percentage of calls that were made to fixed networks, or to mobile networks. It does not know the percentage of international calls, in the basket
- The Court does not know whether the same definition of peak times for the tariff that were used was implemented in all cases used for comparison.
- The Court does not know the duration of the calls.
- No account has been taken of handset subsidies which exist in most countries except Italy or in Finland.
1. That the report indicates a total 568 calls per annum and 1136 calls in the case of business use,
2. The residential user is assumed to have a large proportion of off-peak calls, the peak to off-peak ratio is 1:2,
3. The average length of a call is assumed to be two minutes,
4. The most appropriate Eircell tariff for a residential user is Eirtime 50,
5. Eirtime 50 has a monthly subscription of £20.00, VAT at 21% excluded,
6. Mobile to fixed lines are the only type of calls included in order to keep the calculations simple. This has the effect of making the cost of usage more expensive as mobile to mobile calls are considerably cheaper that mobile to fixed line calls and thus could be considered unfavourable to Eircells case.
7. Off-peak calls are split evenly into weekend and evening calls,
8. Peak rate is 30p per minute, evening rate is 15p per minute, and weekend rate is 10p per minute, VAT of 21% is excluded,
9. Installation charges costs £35.00 VAT of 21% is excluded,
10. No recalculation was done of the international calls.
72. It is fair to say that this exercise would have a striking effect on the basket of calls if the assumptions contained in the report of Martina Moran, were the same as the assumptions used by the compilers of the basket of calls. However, the court cannot place any reliance on her revised chart. This is not because the assumptions made are unreasonable; indeed they appear to be extremely fair and reasonable, but because a valid comparison cannot be made without knowing the assumptions made by the author of charts 82 and 83. It cannot even be said with certainty that Eirtime 250 was inappropriate for the basket contained in charts 82 and 83.
The O.E.C.D. Report73. Dr. Walker referred to a study entitled "Cellular mobile pricing structure and trends" produced by the O.E.C.D. which included a comparison of mobile telephony prices for August 1999, over a large number of countries. From that study he complied a table from material which is contained in tables 8 and 9 of the O.E.C.D. Report. He produced table 5 (shown below) in his report, to demonstrate that what are called "personal" prices for mobile telephony in Ireland, are the highest in the E.U. and to show that business prices in Ireland are the second highest in the E.U. (after Italy).
Table 5: EU mobile telephony charges
|Personal (US$)||Business (US$)|
Source: Cellular Mobile Pricing Structures and Trends, OECD, May 2000 Notes: The figures are in purchasing power parity US dollars. O.D.T.R. Source: Subscriber numbers compiled from documentation in Section D of the Eircell Discovery
74. There are some differences in analysis between the Commission report and the O.E.C.D. Report. Firstly unlike the Commission report the OECD report includes VAT. Secondly it excludes international calls. Thirdly the prices are in purchasing power parity U.S. Dollars rather than in Euros. However, the basket of calls is the same, and the information is supplied from the same source, Euro Data. The Court has no more information in respect of this table than it had for the charts produced for the Commission on the methodology employed and the assumption used in compiling the basket of calls. This information, therefore, is likewise subject to the reservations that apply in respect of the Commission Report. Again although the report has not been discredited, the accuracy of the information for comparative purpose has not been demonstrated to the Court. 75. Dr. Walker also referred to a document "The regulatory frame work for access in the mobile market, consultation paper of May 2000", ODTR00/32 which referred to a report by Philips Tarifica, another by Salomon, Smith, Barney, and a table published by the International Telecommunications Union, I.T.U. An interesting, but ultimately sterile debate occurred as to whether Dr. Walker relied on the O.D.T.R., consultation paper or not. It is fair to say that he had regard to it and relied on it to the extent that had it pointed in a radically different direction to the opinion he had formed, he would have investigated them further. However, it is noteworthy that he did not look for or read, either the Philips Tarifica report or the Salomon, Smith, Barney report.
The Philips Tarifica Report76. This report was referred to in the O.D.T.R. consultation paper as follows:-
"Looking at the Irish situation relative to other countries, most recently a report by Philips Tarifica suggested that peak rates for most mobile phones in Ireland are high compared to others in Europe".77. The footnote says that quotation appeared in the Sunday Times, 2nd April 2000. The report was not produced to the Court. 78. It is important to note that the report quoted concerns only peak rate calls and does not address the overall calls of mobile telephony.
None of its details have been furnished to the Court other than those mentioned in the evidence of Mr. Fahy. The report in question has not been produced or exhibited. Mr. Fahy informed the Court that the newspaper article referred to, indicates that the service provided by the 1-2-1 service of the Virgin network had significantly cheaper prepaid rates, than those prevailing in Ireland. However Mr. Fahy stated that the report failed to point out that in the particular example chosen that the handset was over £100 cheaper in Ireland. He complained that this fact was not taken into account in making the comparison between the peak rates. Mr. Fahy also criticised the report for stating that a certain peak rate call on Eircell's network for a 3 minute call, would have been two or three times more expensive than the peak rate call on a particular 1-2-1 tariff without taking into account that the Eircell tariff chosen for comparison was 50% less in terms of rental commitment, and for failing to point out that calls to other mobiles were 50% cheaper on the Eircell tariff. He contended that the report was therefore misleading. This Court is unable to come to any conclusion as to the accuracy or otherwise of the Philips Tarifica report, and in default of more information cannot rely on it.
The Salomon, Smith, Barney report79. A consultation paper 'The Regulatory Framework for Access in the Mobile Market' published by the office of the Directors of Telecommunications Regulations in May 2000 makes references to a report of Salomon, Smith, Barney dated the 27th of January 2000. The O.D.T.R consultation paper states that "also a recent report by Salomon, Smith, Barney based on an assumed usage of 65 minutes per month placed Irish rates higher than twelve European counterparts". Figures 36 and 37 purport to outline the current tariffs available to mobile subscribers in Ireland, both post paid and pre paid. The attention of the Court however, was drawn in particular to figure 37 produced hereunder:
|Operator||(£) Incl Mins||(p/min)||(p/min)||(p/min)||(p/min)||(p/min)|
|Eirtime 10||99 10||80||20||10.00||75||100|
|Eirtime 50||100 50||80||20||10.00||75||100|
|Eirtime 10 Day||99 10||50||50||10.00||75||80|
|Eirtime 50 Day||100 50||50||50||10.00||75||80|
__________________________________________________________________________________________________Source: Salomon Smith Barney from Operator data. Figure 37 purports to show the Eircell and Digifone prepaid tariffs compared, and purports to compare Eirtime 10, Eirtime 50, Eirtime 10 day, Eirtime 50 day tariffs to Digifone's Nightowl and Earlybird tariffs. This table however is seriously flawed.
- Eirtime 10, and Eirtime 50 are not prepaid tariffs at all, they are post paid tariffs.
- Moreover, Eirtime 10 day and Eirtime 50 day are not Eircell tariffs at all, either prepaid or post paid.
- Furthermore, in the inclusive minutes column, 10 minutes for the non-existent Eirtime 10 day tariff and 50 minutes for the non-existent Eirtime 50 day tariff, are included. (In fact, although Eirtime 10 and Eirtime 50 (both post paid packages) have inclusive minutes, none of Eircell's prepaid tariffs contain inclusive minutes.
- Evidence was also given to the Court that the per minute weekend call rate contained in figure 37 was not the appropriate figure which was charged at the time.
- Figure 37 also uses an up front fee, which is a characteristic of post paid, and not prepaid tariffs in Ireland.
- Because of these defects it would be manifestly unsafe to place any reliance on this chart.
80. Figure 38 purports to compare in graphic form monthly mobile costs across Europe. On the graph it appears that the costs in Ireland are the highest in the thirteen countries compared. The graph assumes 65 minutes per month usage. Unfortunately, there is no information as to whether the 65 minutes used were on post paid or prepaid tariffs. Moreover, there is no indication as to whether the minutes are during peak or off-peak calling times or a mixture of both. No details have been supplied as to the methodology employed or the assumptions used in compiling the graph. It was suggested that figure 38 was entirely unrelated to the flawed graph in figure 37. However, it was the understanding of Mr. Fahy on behalf of Eircell that the 65 minutes per month usage in figure 38 was applied on the basis of the tariffs in figures 36 and 37. He also gave evidence that he sought to replicate the information on the chart using the correct tariffing information for Eircell and Digifone, but was unable to do so. That is suggestive of the interdependence of figures 36, 37 and 38. In any event, in default of being able to resolve that issue in favour of plaintiffs, I cannot rely on that report. Furthermore, in light of the flaws in the previous graph in the same report, the Court would need further evidence to be satisfied as to its accuracy. 81. The consultation paper of the ODTR includes a table showing a ranking of mobile prices, published by the International Telecommunications Union (ITU). In this table the two Irish mobile operators appear to be amongst the most expensive providers of the particular services contained in the table. This table was exhibited by the plaintiffs, and is reproduced hereunder.
The tariff plan chosen for each operator is that which would
provide the lowest price for the chosen basket of calls and mobile
Price of a monthly basket of 100 minutes of national phone calls, including subscription, 50 minutes peak-rate and 50 minutes off-peal, for a selection of major economies, August 1999, by mobile/service operator. Tariff data is valid for August 1999.
|India (Max Touch)||14.30|
|Rep. Korea (SK Telecom)||120.12|
|HongKong Sar (HKT)||21.69|
|Canada (Bell Mobility)||23.59|
|Singapore (Sing Tel)||23.90|
|USA (Bell South)||25.00|
|Chile (Entel PCS)||26.07|
|France (Loft 2H)||34.75|
|Ireland (Esat Digifone-DigiMax.300 min)||43.09|
|Ireland (eircell-eirtime 750)||44.01|
|South Africa (MTN)||48.46|
|Spain (Plan 7500)||50.20|
The 5% per annum reduction83. In May/June of 1999 Eircell applied to the ODTR for additional spectrum in the 1800 megahertz band. In its application Eircell gave a commitment to the regulator to reduce prices by 5% each year for a period of 5 years which would amount to a total 23% reduction over the full period. The plaintiffs submit that this is strong evidence that their prices are currently too high. That commitment was not a requirement of the regulator or a precondition for the granting of the additional spectrum, but was a decision made by Eircell in the context of its application for Eircell felt that this commitment would help its application to succeed. The promise to reduce prices by 5% per annum for a period of 5 years could indeed be indicative that the current prices are high; equally however, it could be explained by Eircell's expectation become more efficient and by economies of scale that are inherent in the growing market.
The 40% reduction provided in the VDA84. It was further submitted by the plaintiffs that the fact that Eircell were able to supply Meridian with a 40% discount in itself demonstrated that their current prices were too high. Counsel's submissions to the effect that the defendant did not contend that the 40% reduction given to Meridian was not economically viable are not well founded. Evidence was given by Mr. Fahy that prior to the launch of the VDA, an analysis was undertaken based on the type, and amount of money spent by different corporate customers. For some corporate customers the discount was as low as a 3% discount. The discount in the VDA was targeted at approximately 10% of the customer base of Eircell, or approximately 40,000 customers. The average discount that Eircell expected them to received was about 15%. It was calculated that Eircell as a business could afford to give an average of a 15% discount to about 10% of its customers. The VDA analysis revealed that across the board the amount of discount was effectively between 1% and 2% of total income. In other words Eircell was cutting its income stream by 1% to 2%, in order to provide the discount to a limited number of corporate customers. The Court is asked to infer that, because Eircell decided that it could provide an average of 15% discount to 10% of its customers, (which, across the customer base, would bring a reduction in its revenues by 1 to 2%) it could reduce its prices to all its customers by 40%. That inference is not justified on the evidence. Nor can I infer from the existence of the VDA that Eircell's prices are anti-competitive.
The Flash report submissions:85. On day 86 of the case, in the course of his closing submissions, Mr. Nesbitt produced to the Court a document, part of which is reproduced below. It contains certain information which was gleaned by him from a Flash report, Exhibit Number 36, which was produced by the plaintiffs in the course of the case. He did an exercise which purported to show the profit or the contribution towards profits made by Eircell on various phone tariffs. For the purpose of his exercise he assumed that the relevant number of minutes bought in a particular Eirtime package, and nothing more, was used by the subscriber. This he argued was to represent the minimum profit for Eircell from a given transaction, because if additional minutes were used there would be additional revenue for Eircell. He chose as an example the use of an Ericson T 28 handset and Eirtime 50 as the package, which are shown in the Flash report chart. He started with the seventh column across under the heading Eirtime 50.
- The first figure is £170.00. This is made up from the dealer commission of £160.00 for selling the handset and an additional £10.00 which the agent obtains for getting a customer to sign up to Eirtime 50.
- The minimum income from Eirtime 50 is £240.00 per annum (12 multiplied by £20.00) on the basis that Eirtime 50 costs £20.00 per month.
- Subtracting the expenditure of £170.00 from the annual income of £240.00, the figure of £70.00 is given as a return.
- The return of £70.00 is achieved over 600 minutes (12 months multiplied by 50 minutes) in the year.
- The revenue is calculated as 40p, per minute, on the basis that the 600 minutes costs IR £240.00.
- IR £70.00 would enable Eircell to recover costs. IR £70 for 600 would amount to 11.67p per minute.
- Subtracting the 11.67p which a call of one minute duration would cost Eircell from the 40p, which is charged to the customer Mr. Nesbitt calculates that in year two Eircell would have 28.33p per minute profit.
- The case was not made by the plaintiff's economist Dr. Mike Walker, nor was it put to the defendant's economist, Professor Cave.
- It was not put to Mr. Fahy or to any witness for the defendant. Moreover, the Flash report is basically a general news letter for agents and was introduced into evidence solely as a illustration of the agency arrangements of Eircell by Mr. Bolger of the plaintiffs.
Q. "Why would there be a price difference between an operator in a country who gave a handset subsidy and an operator in a country who does not give a handset subsidy?"
A. "Part of the pricing activity is to recover the cost of business in terms of operating its network, but also the acquisition of the customer, so if for instance, as is the case of Ireland, an handset subsidy is of the order of £100.00, then that particular subsidy would have to be recovered from the tariffing of the service to the customer over the contract period".
88. The following passage at page 38 in the judgment of the Supreme Court in the Balkan Bank -v- Taher & Ors (Unreported, Supreme Court, 19th January 1995) is apposite
"Fair procedures require that an issue such as arose in this case should have been pleaded and raised in sufficient time in order to enable the defendants/Apellants to have the time and opportunity of dealing with same and, if they wished to avail of different defences open to them.......".
The defendants in this case were in the words of the judgment in the Balkan Bank case at page 39 "deprived at this stage of the opportunity of defending an action brought on this basis which was radically different to the original claim". If I were to permit the plaintiffs to make the argument in the circumstances which I have outlined it could reasonably be said that the "Trial Judge did not act in accordance with fair procedures, which require that a party to an action be given notice of the nature of the claim and an adequate opportunity of defending all aspects of such claim. It is not in accordance with such procedures that the claim should be permitted to be raised for the first time during the closing submissions of Counsel..."89. It is quite clear that the defendant was not on notice of the nature of the claim being based on the Flash report. He had no opportunity of contesting the validity of the assertions that Counsel made on the basis of that report. The defendant could not be expected to anticipate that the Flash report, introduced into the case in the context of Eircells agency arrangements, would be used in closing submissions to construct a new case which had not been made at all during the hearing. In the circumstances it would be inappropriate for the court to consider not only the new submission of the plaintiffs but the defendant's response thereto.
The absence of evidence of costs from Eircell.90. The plaintiffs made a sustained attack on the failure of the defendant to provide information on costs, and in particular on the cost of carrying a call. They argued that such information should be provided by the defendant in order to properly meet the plaintiffs claim. Mr. Fahy stated that such information was not available to Eircell but that they were in the process of compiling it at the behest of the Regulator. I was invited to take an inference adverse to the defendants that because of the failure to provide such information, to conclude that the costs were low in comparison to the cost charged to the consumer. In that context I was referred to a passage in the case of AKZO Chemie B V -v- Commission (C - 62/86)  ECR I - 3359 where the following passage occurs at paragraph 59 of the judgment;
"It should be further observed that according to its own internal documents AKZO had a stable market share of about 50% from 1979 to 1982 (Annex as 2 and 4 to the statement of objection and Table A annexed to that statement). Furthermore AKZO has not adduced any evidence to show that it share decreased during the subsequent years".91. In my view that passage is merely an illustration of the Court taking an obvious inference from the facts proven in the case. The document showed that the market share to be about 50 per cent for a three year period. In default of evidence that the position had altered subsequently the Court concluded that such a percentage still prevailed. There is nothing remarkable in such a conclusion. If it is authority for the proposition that the Court may take such usable inferences from the evidence (or lack of it) on a particular point - the Court readily accepts that proposition. The evidence of Mr. Fahy was that Eircell had not such information but were in the process of attempting to compile it at the behest of the Regulator. 92. Professor Cave was questioned at length concerning the absence of evidence of the cost to Eircell of carrying a call. He said he would be surprised if Eircell or any mobile operator would have compiled such information independently of the requirements of the Regulator, because these are essentially regulatory concepts. His evidence was that in all the member states of the European Union the national regulatory authorities have been trying to get such information, in order to set interconnection prices on the basis of long run average incremental costs. They have been unable to do so because telecommunication companies do not have information of that kind at their disposal. He described it as "a very specialised and esoteric piece of costing which, this knowledge is only required for regulatory purposes". It is not required for pricing decisions and it is not required for investment decisions. His evidence was that he could not think of commercial circumstances in which that information would enter the consciousness of somebody selling mobile telephone calls other than the regulatory context. 93. Eircell has appointed consultants to probe into Eircells cost structures to assist them in their negotiations with the Office of the Director of Telecommunications Regulation (ODTR). 94. In my view the defendant has given sufficient reasons for not being in possession of and not providing the information sought concerning the costs of carrying a call or the average cost of carrying a call. In the circumstances I am not prepared to take any inference, adverse to the defendants, from their failure to do so. Moreover, it must be remembered that this is a case to which the ordinary rules of civil litigation apply. The same position applies to the failure of the defendant to provide comparative data of its own in lieu of the data which it so vigorously challenged . Such data would undoubtedly have been helpful to the Court. There was however, no obligation on the defendant to provide it, and no adverse influence can be taken from its failure to do so. The onus is on the plaintiff to establish his case and it is not for the defendant to supply information to make the plaintiffs case. While no doubt it could be contended that the adversarial system is not best suited for cases such as this, and, that some type of enquiry would be more suitable, at present cases such as the present one are dealt in a similar manner to other civil litigation.
Conclusion on Eircell's Prices95. The analysis of the various reports and data produced or referred to in the evidence is inconclusive and unsatisfactory. In a number of cases because of the lack of information the accuracy of the reports in question cannot be verified. In others errors are manifestly apparent. 96. The granting of the 40% discount in the VDA does not constitute evidence that such discount could be profitably given to all or indeed a large proportion of Eircells customers. The undertaking to reduce prices at 5% per annum made in the context of an application for a 1800 GSM spectrum does not prove that prices are now too high. For the reasons already stated it would not be proper to have regard to the submissions concerning the Flash report to conclude that Eircell makes excess profits or that the prices are high. The totality of the evidence does not prove on the balance of probabilities that mobile telephony prices are comparatively high though it suggests that such may be the case. 97. Even if it were accepted that Irish mobile telephony charges are high, it is difficult to know what significance should be attached to that, because of the many different possible reasons for such price which Professor Cave at p. 50 of his report called "a host of factors that are unrelated to competition". The examples he chooses succinctly make the point.
1. "handset subsidies are one of the key differentials to be assessed when comparing tariffs. For example, Italy, Greece and most Scandinavian markets do not subsidise handsets, and correspondingly have lower usage tariffs;
2. take-up may be different because of significant income differences, differences in fixed line penetration, differences in the use of data and fax services or the Internet etc.
3. cost conditions may be very different because of differences in population distribution, spectrum endowment, interconnection tariffs, topographical conditions, actual coverage, etc.; and
4. Service quality, (e.g. in terms of dropped calls, refused connections etc.) may differ considerably across countries."98. This list is not exhaustive but these factors alone might explain significant differences in prices between countries. 99. Professor Cave went on to point out that the price differences shown in the ODTR document based on the ITU data, appear not to be reflective of any difference in the level of competition. He stated that prices are highest in Germany, notwithstanding the fact that four operators compete intensely with each other in that country, and all operators are obliged to negotiate the supply of wholesale airtime to independent service providers.
Evidence of competition.100. Professor Cave, the economist for Eircell argues that the behaviour in the market place did not support the plaintiff's contention that Eircell were dominant. He analysed the extent of price rivalry, the development of market shares over time, the role of growth and churn in the market and the innovations introduced by Eircell. On the basis of this evidence he concluded that the competition between Eircell and Digifone was vigorous. He considered that Eircell was not in a position of dominance, in that it was unable to an appreciable extent to act independently of its competitors and customers. 101. Having given the view that the structure and variety of mobile tariff packages makes direct price comparisons difficult, Professor Cave produced a table where he showed how the total monthly bill for twelve categories of customers have changed between March 1997 and October 1999. These categories were intended to capture different levels of use (in terms of overall minutes) and usage pattern (peak /off peak). He followed an approach which had been adopted by the Office of Telecommunications in the UK (OFTEL) in order to assess price changes from mobile services over time. The classification of customers was developed by the National Economic Research Associates (NERA). It should be noted that Dr. Walker did not criticise this approach and accepted it as being reasonable. For the purpose of his exercise, Professor Cave assumed that the users were on the optimal Eircell or Digifone tariff structure. The categories were split in two ways:
- By volume of air time used. Subscribers have been split into four representative categories: low volume users (representative of subscribers who use an average of thirty minutes air time per month); medium volume users (100 minutes air time); high volume users (260 minutes); and very high volume users (800 minutes).
- By type of air time used. Each category by volume used is further subdivided to the type of air time used: namely, peak, off-peak and even use of peak and off-peak.
Table 4: Change in the monthly bill for airtime for Eircell and Digifone subscribers by user profile, March 1997 - October 1999
|Minutes used per month
Low - 30
Medium - 100
High - 260
Very high - 800
|Mostly Even usage Mostly off-
-15.93% -23.37% -23.54%
-23.05% -16.21% -17.99%
-17.17% -14.99% -13.14%
-25.75% -17.44% -7.81%
|Mostly Even usage Mostly off-
-13.10% -13.61% -15.11%
-22.42% -19.62% -3.07%
-15.64% -22.27% -13.14%
-10.31% -15.06% -22.11%
|Low user||Medium user||High user||Very high user|
1. Low Volume User 30 minutes airtime per month
(a) Mostly peak time usage October 1996 Eircell lowers prices in anticipation of Digiphone's entry to the market March 1997 Digiphone arrives with lower tariff May 1999 Eircell lowers tariff to beat Digiphones price December 1999 Digiphone lowers tariff to beat Eircell's price
- Digiphone lower
- Prices converging
(b) Even usage
October 1996 Eircell lowers prices in anticipation of Digiphone's entry to the market March 1997 Digiphone arrives with lower tariff May 1999 Eircell lowers tariff to beat Digiphone's price December 1999 Digiphone lowers tariff to beat Eircell's prices
- Digiphone lower
- Prices converging
(c) Mostly off peak usage October 1996 Eircell lowers tariff in anticipation of Digiphone's entry to the market March 1997 Digiphone arrives with lower tariff May 1999 Eircell lowers tariff to match those of Digiphone December 1999 Digiphone lowers tariff to beat Eircell's prices
- Digiphone lower
- Prices converging
2. Medium Volume Users 100 minutes Airtime per month
(d) Mostly peak time usageOctober 1996 Eircell lowers prices in anticipation of Digiphone's entry to the market March 1997 Digiphone arrives but Eircells tariff is lower November 1997 Eircell lowers tariff to be still lower than Digiphone September 1998 Digiphone lowers tariff but doesn't match Eircell's price December 1999 Digiphone again lowers tariff but still doesn't match Eircell's price
- Eircell lower
- Prices converging
- No leapfrogging
(e) Even usageNovember 1996 Eircell lowers tariffs in anticipation of Digiphones entry to the market March 1997 Digiphone arrives with tariff marginally lower than Eircell November 1997 Eircell reduce tariff to beat Digiphone's prices September 1998 Digiphone reduces tariff to beat Eircell's prices December 1999 Digiphone again reduces prices
- Digiphone lower
- No converging
(f) Mostly off peak usageNovember 1996 Eircell lowers tariffs in anticipation of Digiphone's entry to the market March 1997 Digiphone arrives with tariff lower than Eircell's November 1997 Eircell lowers prices but still doesn't match Digiphone's prices May 1999 Eircell reduces tariffs to beat Digiphone prices December 1999 Digiphone lowers tariffs to match Eircell's prices
- Both have equal price
- No leapfrogging
3. High Volume Users 260 minutes Airtime per month
(g) Mostly peak time usageNovember 1996 No reduction in anticipation of Digiphones entry to the market March 1997 Digiphone arrives with lower tariff the Eircell November 1997 Eircell reduces tariffs to beat Digiphone's price September 1998 Digiphone lowers tariff to beat Eircell's prices December 1999 Digiphone again lowers tariff
- Digiphone cheaper
(h) Even usageNovember 1996 Eircell lowers prices in anticipation of Digiphones entry to the market March 1997 Digiphone arrives with lower tariff than Eircell November 1997 Eircell lowers tariff to beat Digiphone prices September 1998 Digiphone lowers tariffs to beat Eircell's prices May 1999 Eircell reduces tariffs but Digiphone remains cheaper December 1999 Digiphone further reduces its tariff
- Digiphone cheaper
- No convergence
(i) Mostly off peak usageOctober 1996 Eircell lowers prices in anticipation of Digiphone's entry to the market March 1997 Digiphone arrives with the same tariff as Eircell November 1997 Eircell reduces tariff to beat Digiphone's prices September 1998 Digiphone reduces tariffs to beat Eircell's prices May 1999 Eircell lowers tariff but Digiphone marginally cheaper December 1999 Digiphone raised tariff marginally to be the same as Eircell's
- Prices equal
4. Very High Usage 800 minutes per month
(j) Mostly peak time usageNovember 1996 Eircell lowers tariffs in anticipation of Digiphone's entry to the market March 1997 Digiphone arrives with lower tariff than Eircell November 1997 Eircell reduces tariff to beat Digiphone's prices May 1999 Eircell marginally lowers prices again December 1999 Digiphone lowers tariff but still doesn't match Eircell's prices
- Eircell cheaper
- No leapfrogging
(k) Even usageNovember 1996 Eircell lowers tariffs in anticipation of Digiphone's entry to the market March 1997 Digiphone arrives with lower tariff than Eircell November 1997 Eircell lowers tariff to beat Digiphone's prices May 1999 Eircell lowers tariff marginally December 1999 Digiphone lowers tariff to marginally beat Eircell's prices
- Digiphone cheaper
(l) Mostly off peak usageNovember 1996 Eircell lowers tariff in anticipation of Digiphone's entry to the market March 1997 Digiphone arrives but Eircell's tariff still lower September 1997 Eircell lowers tariffs September 1998 Digiphone lowers tariff but Eircell still lower May 1999 Eircell lowers tariff December 1999 Digiphone lowers tariff to beat Eircell's prices
- Digiphone cheaper
- No convergence
- No leapfrogging
- From the graphs and the calculations made from them it is clear that both Eircell and Digifone have reduced the total cost of air time for all categories of user, regardless of the volumes of calls they make or whether those calls are made mainly peak, off-peak or weekend.
- In general the decreases are in the range of 15-25%. They are significant in all categories with the exception of Digiphones medium users with mostly off-peak usage and Eircell's very high users with mostly off peak usage. There are likely to be very few subscribers in the latter category.
- The charts show that for some categories of user Eircell is cheaper and for some categories of users Digifone is cheaper. This is a fact which would tend to point against the dominance of Eircell, because one might expect Eircell to be consistently charging more than Digifone if it where in a dominant position, and able to act to significant extent independently of it.
- Moreover, (in general terms) the charts show a tendency for prices to converge. However, this tendency is however by no means universal.
- It is inherently unlikely that a firm was to a large extent or appreciably able to act independently of its competitor would lose up to 40% of its market share in such a short time. If it were able to restrict that loss of market share it is likely to do so. By the last quarter of calendar 1999 Digifone's revenue in GSM had reached 43.1% although its share of all mobiles was less, being at 37.8%. That reflects the fact having being relatively successful in the prepaid market because quite a lot of its analogue customers are still on prepaid.
- It should be noticed that the charts are on the basis of optimisation of tariffs, although only 60% approximately of Eircell's customers are on the optimum tariff. This however, this does not invalidate the exercise performed by Professor Cave.
- Professor Cave rightly stated that "It is clear that Eircell has not commanded and does not command any systematic price premium over Digiphone for any group of representations regular uses.
- Moreover, the charts are concerned with post paid customers only, whereas the majority of residential consumers are now on prepaid phones. This fact does not invalidate the exercise though it somewhat lessens its significance.
- The graphs do not take into account special offers on promotions which are used extensively by both Eircell and Digiphone and are a significant competitive tool. The unchallenged evidence of Mr. Fahy was that "promotional offers are a very significant part of the competitive dynamic of the market". Professor Cave gave evidence to the same effect.
- The graphs do not show the full extent to which GSM services have fallen of the period to which they relate because the introduction of per second as opposed to per minute billing for all national calls resulted in a reduction of prices to mobile telephone users.
Significance of Market Growth and of Churn113. The defendant's expert Professor Cave argues that the growth in the market is significant in assessing the question of dominance for two reasons.
Firstly, in a growing market there will particularly strong incentives on the part of firms to acquire more market share in the expectation that they will subsequently be able to benefit from that market share. The figures for Ireland show a very sharp growth in subscribers to mobile telephony. It is almost inevitable that the growth will level out as saturation level approaches. The network operators are aware that the present growth pattern cannot last indefinitely. They are likely to be aware of the advantages of gaining new customers at this time of considerable growth. The incentive to acquire new customers is very great indeed. Secondly, and more importantly in relation to the question of dominance is the fact that with the very large number of new subscribers, exercise totally independent judgement in deciding whether to go to Eircell or Meridian. Because of the freedom of choice of these people it is unlikely that any network operator can act to any appreciable extent independently of this category of consumers. Professor Cave produced table 5 which shows the number of subscribers who have chosen their network in the previous year .
Table 5: Subscribers having chosen their network in the previous year
|A||Subscribers at the end of Q3 98/99||631,960|
|B||Subscribers at the end of Q3 99/00||1,361,714|
|C=0.5*(A+B)||Average number of subscribers during year||996,837|
|D=B-A||Net additions during previous year||729,754|
|F=E*60%||Of which voluntary disconnections||149,526|
|G=F*70%||Of which re-connect||89,715|
|I=H/B||As proportion of subscriber base at end of year||60%|
Table 7: Eircell's innovations
Eircell introduced the Fax mail Service, which allows customers to receive fax documents on their mobile and print them out to the nearest fax machine
|Oct 1997||Eircell introduced the Ready to Go Prepaid mobile phone product. Eircell was the first to introduce the product in Ireland and among the first in Europe. When the service was launched on its GSM network in March 1998, Eircell was the second operator in Europe to offer a prepaid service on both Analogue and Digital networks.|
|Oct 1998||Eircell launched the Networked suite of business solution packages which integrate fax, E-mail, text messaging and Internet access facilities on the mobile phone|
|Nov 1998||Eircell launched Auto watch, a complete vehicle security system combining GSM technology and Global Positioning System (GPs) technology to provide customers with the most advanced vehicle security product available in Ireland.|
|Jan 1999||Eircell is first in Irish market to introduce a facility whereby prepaid users could top up their prepaid mobile account via Bank of Ireland TAM machines.|
|March 1999||Mobile phone technology is being used to enable customers to check their bank account balances and transactions details on the screens of their mobile phones. This trial service is the first of its kind in Ireland.|
|May 1999||Eircell offers customer the ability to send multiple MSS messages from the Internet to mobile phone (Web Text).|
|Sept 1999||Eircell launched Ireland's first online mobile phone shop where customers can purchase prepaid mobile phones and accessories and top-up their call credit online.|
|Oct 1999||Eircell launches Advanced Information Services which enable post paid customers to avail of news, weather, sports, travel, share prices and other information over their mobile phones.‹|
|Nov 1999||Eircell introduced Enhanced Full Rate audio quality, which significantly improved the quality of calls, received on the network.|
|Dec 1999||Eircell is one of the first European mobile operators to introduce WAP technology, which enables customers to browse through a variety of information services and access certain internet sites.
Eircell launched a variety of information services (news, travel, weather, sports, entertainment, traffic, restaurants, share prices etc.) for users of WAP phones.
|Jan 2000||1Eircell launches its roaming service to prepaid customers. Eircell is the first mobile operator in the world to offer this kind of service.|
|March 2000||Eircell commenced Ireland's first financial end-to-end secure mobile transaction trials using WAP technology. This technology enables holders of credit cards to load cash value from their bank accounts onto their cards using WAP enables mobile phones connected to the Eircell Network. These cards can be used to pay for various services (parking metres, vending machines, payphones etc.)|
|May 2000||Eircell launches Pre-paid WAP phones and is the first mobile operator in Europe to do so. Eircell launched High Speed Circuit Switch Data technology which permits data to be sent from laptop computers over the mobile network at a rate of 28,000 bits of data per second (as opposed to 9,600 bits of data in GSM technology).
Eircell launched Ireland's first mobile internet service. This service enables customers to directly link up to the internet and E-mail services via their mobile telephone.
The Eircell e-trieve service allows customers have their E-mails read out to them over their mobile phone by computer generated voice. Customers can then choose to send a spoken reply to the original sender as an attachment to an E-mail.
Source: press reports118. The introduction of these innovations, while not amongst the most important factors, points to a degree of response to customer demand and is an indicator of competition albeit a not very important one.
Other evidence119. The evidence in this case is to the effect that Eircell has being and is forced by the pressure of Digifone's price reductions to lower its own prices and that is incompatible with the independent conduct of the type described in a situation of dominance. This is bourne out both by the evidence of Mr. Bolger also. When being examined by his own counsel the following exchange took place:-
Q. ".....In your experience and from your knowledge of the market what would be
the effect of one or other of those two players deciding to reduce the price to compete?
A. If one of them reduced prices then the other would have to get into a
competitive price situation, so they would have to drop prices as well."120. The evidence of Dr. Walker was that if Digifone were to cut their prices by ten per cent over time I think it is likely that Eircell would respond. Those two pieces of evidence from two of the witnesses for the plaintiff appear to me to be accurate, realistic and significant indications against Eircell being dominant.
Do the action's alleged to constitute abuses, help to establish dominance?121. In his closing submissions counsel for the plaintiff referred me to the following passage of the judgment of the court in the United Brands case.
'In order to find out whether the UBC is an undertaking in a dominant position on the relevant market it is necessary first of all to examine its structure and then the situation of the said market as far as competition is concerned.
In doing so it may be advisable to take account if need be, of the facts put forward as acts amounting to abuses without necessarily having to acknowledge that they are abuses.'122. Having considered the matters dealt with in the remainder of this judgment and the defendant's decision not to renew the VDA in the light of the above passage, the court does not consider that, in this particular case, the facts alleged to be abuses of dominance, are of assistance in determining whether or not Eircell is in fact dominant in the market. It has not been shown that acts complained of are particularly indicative of dominance. Counsel submitted that by refusing to renew the VDA without its restrictive terms Eircell tried to close down the plaintiff's business and asserted that 'but for the undertaking given to the Supreme Court they would have succeeded. I have, in a previous judgment in this case, already upheld the right of Eircell not to renew the VDA in its unrestricted form the granting of which was a concession to the plaintiffs'. 123. Moreover, the VDA was being phased out, independently of the present dispute, for good reasons, which have been satisfactorily explained to the court.
CONCLUSIONS RE: DOMINANCE124. The structural aspects of the market are the primary source for Dr. Walker's view that Eircell is dominant in the market. That view was reinforced by his belief that prices are high in Ireland compared with other countries. The reliance placed on the structural aspects of the market by the plaintiff does not appear justified on an analysis of this particular market. The significance of the large market share of Eircell is greatly diminished in the light of the dramatic decline of such share over such a relatively short period. The significance of the low number of competitors is diminished by the fact that Digifone is a strong company, well placed to exploit any laxity on the part of Eircell. I accept that the size of a competitor is not necessarily a relevant consideration in all cases for determining whether or not the firm can exert competitive restraint on a rival, but in this case, the strengths of Digifone are relevant in the assessment of Eircell's capacity to act to an appreciable extent independently of it. The significance of high barriers to entry in the market is vastly reduced by the fact that barriers to expansion are so low. Because of this, Eircell's capacity to act to an appreciable extent independently of its rivals is greatly reduced. Therefore, the structural aspect of the market which might in the abstract provide very strong evidence of dominance by Eircell, do not justify such a conclusion when applied to the particular market with which we are concerned in this case. The level of vertical integration of Eircell and the considerable influence it exercises over the route to market do not alter my view. 125. The contention that prices were high was relied on by Dr. Walker to support his view of dominance, which was as has been stated based primarily on structural aspects of the market. For the reasons already given, the evidence of high prices is quite unsatisfactory and unreliable. However, even if it were proven that prices were comparatively high, that would not necessarily prove lack of competition. Still less will such evidence prove that Eircell were dominant in the market. I was urged by Counsel for the plaintiffs to hold that prices are too high, and to conclude from that that Eircell is dominant because was no one "is disciplining it". Therefore, the argument runs, that Eircell is acting to an appreciable extent independently of its competitors. I cannot accept that contention. Even if I were to accept that prices were comparatively high that is not proof that they are excessively high because of the difficulties inherent in international price comparisons for mobile telephony which were pointed out by Professor Cave. Furthermore even were I to accept that prices were (a) comparatively high and (b) too high, this might indicate that the true level of competition had yet to be attained, but it would not necessarily show that Eircell was acting to an appreciable extent independently of it's competitor. Even if the structural arguments adduced by the plaintiffs, were coupled with evidence that prices are high, that would not necessarily prove that Eircell were dominant in default of other evidence supporting such a conclusion. Evidence concerning prices must be taken in the context of Professor Cave's observations that "what we are trying to establish, and the issue which I am debating is not whether there is competitive pricing but whether there is dominance. And there is a big area in the middle in which pricing is neither perfectly competitive nor is dominance being exhibited". In this case, however, there is considerable behavioural evidence which strongly suggests that Eircell is not dominant. The fall in prices, the dramatic decline in market share, the evidence of "leapfrogging" in tariff reduction, the general tendency towards price convergence, the incentives to compete, the fact that so many subscribers are new and therefore independent, and the number and scale of innovations are the most important matters relied upon by the plaintiffs as indicating competition. Collectively, they form an impressive store of evidence to support the contention in Professor Cave's report that "the market data suggests that its behaviour in pricing decisions have been and are strongly constrained by competition from Digifone". The evidence of competitive behaviour given by Professor Cave, must however be considered in the light of the following passages from Faull and Nickpay (paragraph 3. 29 at p. 123) where commenting on the classic definition of dominance the authors state as follows "the Court has in successive judgments essentially retained this definition. The Court emphasises the notion of a dominant firm's independence from competitive forces normally constraining a supplier in the market. This does not mean that a firm must, in order to be dominant, be able to ignore competition entirely and simply do as it wishes by, for example, raising prices without any constraint. Indeed a firm can be dominant even in circumstances where it must sometimes take competitive factors into account in determining its commercial behaviour. If, however, a firm can substantially disregard, and keep safely at bay, its competitors over a long period of time, this is a clear indication of dominance". 126. For the sake of completeness I should add that insofar as it was argued by Mr. Nesbitt that some significance should attach to the observation by Mr. Bolger that a 20% price reduction was the type that would be noticeable by consumers I reject that contention. The observation may well be correct, but it does not assist me in deciding whether or not Eircell's dominant in the market, or whether prices are at an anti-competative level. It cannot be taken to mean that prices should fall by 20% in order for there to be true competition. 127. Taking into account all the evidence in the case the Court is not convinced that Eircell can act to an appreciable extent independently of its competitors and ultimately of consumers. The plaintiffs have failed to prove on the balance of probabilities that Eircell are dominant. It follows that any claims based on abuse of dominance and hence breach of Section 5 of the 1991 Competition Act must fail.
128. Apart from claims based on alleged abuse of dominance the plaintiffs made a number of other claims based on alleged breaches of contract and/or tort. The remainder of the judgment is essentially concerned with those claims, which will be considered under the following headings:
(1) The suspension of transfers in January 1999
(2) The alleged delays in the processing of transfer requests
(3) The "process" letter
(4) The restriction on the provision of transfer Books to the plaintiffs
(5) Brio/Electornic information
(6) Miscellaneous129. These matters will be dealt with seriatim. Before dealing with them, however, it is appropriate to deal with the legal principles applicable to the implication of terms into a contract, because the plaintiffs argued that implied terms in the VDA were applicable in all the categories mentioned above.
Implied Terms.130. To a very considerable extent the plaintiff's claims about alleged breaches of the terms of the VDA are concerned with terms which they contend are implied in the contract rather than express terms. The defendant denies the existence of such terms. It is not surprising therefore that comprehensive submissions were made to the Court on the implication of terms into a contract. It is appropriate therefore to consider the legal position prior to embarking on a discussion of the individual complaints. 131. The Court was referred to a passage in the judgment of the Supreme Court in Ward -v- Sprivack Limited  IR 40 where Maguire C.J. stated which is to be found at pages 47/48 of the report:-
"It is settled law that a term may be implied in a contract to repair what Cheshire and Fifoot, (3rd Ed., 1952 at p. 127) calls "an intrinsic failure of expression". Where there has been such a failure the judge may supply the further terms which will implement their (the parties) presumed intention and in a hallowed phrase give "business efficacy" to the contract. "In doing this he purports at least to do merely what the parties would have done themselves had they thought of the matter. The existence of this judicial power was asserted and justified in The Moorcock. (1)" In that case Bowen L.J. explained the nature of the implication in all the cases; he says where they were implied, "the law is raising an implication from the presumed intention of the parties, with the object of giving to the transaction such efficacy as both parties must have intended that at all events it should have". The test to be applied by the Court has been stated by several judges in much the same language: see Scrutton L.J., in Reigate -v- Union Manufacturing Co. (Ramsbottom) (1); and McKinnon L.J. in Shirlaw -v- Southern Foundries (1926) (Ltd.) (2).
It will be seen from the language used in so stating the tests that something more is required than the probability of which the President speaks that the parties must have agreed to the term to be implied had the matter been mentioned. There must be something approaching certainty or as put by Jenkins L.J. in Sethia (1944) Ltd. -v- Partabmull Rameshaar (3) it must be "clear beyond a peradventure that both parties intended a given term to operate, although they did not include it in so many words.132. Both sides referred to Sweeney -v- Duggan  2 ILRM 211 where the Supreme Court outlined the tests for the importation of implied terms into a contract. At page 216 Murphy J. delivering the judgment of the Court stated as follows:-
"There are at least two situations where courts will, independently of statutory requirement, imply a term which has not been expressly agreed by the parties to a contract. The first of these situations was identified in the well-known Mooorcock case (1889) 14PD 64 where a term not expressly agreed upon by the parties was inferred on the basis of the presumed intention of the parties. The basis for such a presumption was explained by McKinnon L.J. in Shirlaw -v- Southern Foundries (1926) Ltd,  2 KB 206 at p. 227 in an expression, equally memorable, in the following terms:
Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common, 'Oh, of course.'
In addition there are a variety of cases in which a contractual term has been implied on the basis, not of the intention of the parties to the contract but deriving from the nature of the contract itself. Indeed in analysing the different types of case in which a term will be implied Lord Wilberforce in Liverpool City Council -v- Irwin  AC 239 preferred to describe the different categories which he identified as no more than shades on continuos spectrum."133. At page 217 in the same judgment Murphy J. emphasised the requirement of necessity before a Court would imply a term in a contract. He stated:-
"Whether a term is implied pursuant to the presumed intention of the parties or as a legal incident of a definable category of contract it must be not merely reasonable but also necessary. Clearly it cannot be implied if it is inconsistent with the express wording of the contract and furthermore it may be difficult to infer a term where it cannot be formulated with reasonable precision."134. The attention of the Court was drawn to a passage in the case of Carna Foods Limited and Another -v- Eagle Star Insurance Co. (Ireland) Limited (1997) 2 ILRM 499 where Lynch J. giving the judgment of the Supreme Court stated at pages 504/505 as follows:-
"It is also helpful to quote what Lord Pearson said in 1973 in the case of Trollope and Colb Ltd. -v- North West Metropolitan Regional Hospital Board  2 All ER 260 at p. 268:
"An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract: it is not enough for the court to find that such term would have been adopted by the parties as reasonable men if it had been suggested to them: it must have been a term that went without saying, a term necessary to give business efficacy to the contract, a term which although tacit, formed part of the contract which the parties made for themselves."135. Mr. Gordon submitted that the Court should take an objective view in deciding whether a term was implied in a contract. He referred me to a passage in the judgment of Griffin J. in the case of Rohan Construction -v- I.C.I.  ILRM 373 at p. 380:
"In the construction of this policy also the intention of the parties must prevail. In this regard, the statement of Lord Wilberforce in Reardon Smith Line Ltd -v- Yngvar Hansen-Tangen  3 All ER 570 at p. 574/575 seems apposite. There he said:
When one speaks of the intention of the parties to the contract, one is speaking objectively - the parties cannot themselves give direct evidence of what their intention was - and what must be ascertained is what is to be taken as the intention which reasonable people would have had if placed in the situation of the parties. Similarly, when one is speaking of the aim, or object, or commercial purpose, one is speaking objectively of what reasonable persons would have had in mind in the situation of the parties .....what the court must do must be to place itself in thought in the same factual matrix as that in which the parties were."136. This statement of Lord Wilberforce was also cited by Keane J. (as he then was) in LAC Minerals Limited -v- Chevron Mineral Corporation of Ireland and Ivernia West PLC (unreported Judgment dated 6th August, 1993) where he noted that it had been expressly approved by Griffin J. in the Rohan case. 137. I was also referred to the decision of Laffoy J. in Tobin and Twomey Services Limited -v- Kerry Foods Limited  3 IR 483 in support of an objective construction in implying a term in a contract. 138. Mr. Brady for the defendant however, submitted that those cases were not of assistance to the Court. He pointed out that the Rohan case was concerned with the construction of an express term in a contract and not with the implication of terms. Likewise the LAC Minerals case was concerned with the construction which appeared to conflict with each other. He submitted that the Tobin and Twomey Services case, was not decided on the basis that the principles in Rohan Construction were applied in the implication of a term in a contract. Although the Rohan case was cited in argument, the case does not appear to be authority for the proposition that an objective construction issued in implying terms into a contract. An objective construction was given to an appointment from which the learned Judge made inferences which impinged on the decision as to whether a term was implied in the contract. In any event I am not convinced that the area of dispute is relevant to the issues I have to decide. In relation to the terms which he argues are implied in the contract Mr. Gordon submits that they are to be implied on the basis that they were agreed between the parties and are necessary to give business efficacy to the agreement. If and insofar as he suggests that a term is to be implied in a contract on the basis that it would be objectively reasonable or justified to include it, such suggestion does not accord with the law as stated by Lynch J. in the passage in Carna Foods case referred to above. 139. The extent to which a Court should take into account the surrounding circumstances in construing a contract was again the subject of some observations by Lord Wilberforce in Prenn -v- Simmonds  WLR 1381. He said at p. 1383/1384:-
"The time has long passed when agreements, even those under seal, were isolated from the matrix of facts in which they were set and interpreted purely on internal linguistic considerations. There is no need to appeal here to any modern, anti-literal, tendencies, for Lord Blackburn's well-known judgment in River Wear Commissioners -v- Adamson (1877) 2 App Cas. 743, 763 provides ample warrant for a liberal approach. We must, as he said, inquire beyond the language and see what the circumstances were with reference to which the words were used, and the object, appearing from those circumstances, which the person using them had in view."140. I was also referred to the following cases; Mayfield Holdings Limited -v- Moana Reef Limited  1 NZLR 309; Tradex (Ireland) Ltd. -v- Irish Grain Board  1 IR 1; Liverpool City Council -v- Irwin  AC 239; The Moorcock (1889) 14 PD 64 Shirlaw -v- Southern Foundries 1926, Limited  2 KB 206 and to passages from Lewison on The Interpretation of Contracts 2nd Ed., Chitty on Contracts 28th Ed., Clark, Contracts Law in Ireland ??? and Friel, The Law of Contract 2nd Ed.. The following principles emerge:-
- Before a term will be implied in a contract it must be necessary to do so, and not merely reasonable.
- The term must be necessary to give business efficacy to the agreement.
- It must be a term which both parties must have intended, that is, a term based on the presumed common intention of the parties.
- The Court will approach the implication of terms into a contract with caution.
- There is a presumption against importing terms into a contract in writing and the more detailed the terms agreed in writing the stronger is the presumption against the implication of terms.
- If the term sought to be implied cannot be stated with reasonable precision, it will not be implied.
1. The suspension of Transfers in January 1999142. The plaintiffs complain that in January, 1999 the defendant suspended transfers from Eircell to Meridian/Cellular 3. The defendant gave a false excuse to justify such action, namely that the computer system was running slow. It was subsequently admitted that, while the computer system was indeed running slow, this was not the reason for the failure to effect transfers. It was a convenient pretext for doing so. The sequence of events is as follows:-
- On the 25th January, 1999 Mary Murtagh from the Eircell Optima help desk informed Meridian that she had been told that mobile phone transfers from Meridian/Cellular 3 were suspended by Eircell until further notice. Meridian were so concerned about this issue that they wrote a letter on the same day complaining to Eircell about this and drawing Eircell's attention to the fact that this action was detrimental to Meridian's business.
- On the 26th January, 1999 Brian D'Arcy again wrote to Claude Kinsella complaining about this matter. On that date he informed Claude Kinsella that he had been told by Mary Murtagh that Claude Kinsella had requested all transfers to be stopped. Again he drew attention to the fact that this was detrimental to the plaintiffs' business.
- On the 27th January, 1999 Claude Kinsella replied to Brian D'Arcy. He gave the following reason for the failure to transfer that: "our system is running slow and for practical reasons I requested that Optima should concentrate on other tasks rather than on transfers". That was incorrect and misleading, in that while it was factually correct that the system was going slow, that was not the reason for the delay. The real reason was that Mr. Kinsella had ordered the suspension of transfers.
- On the 28th January, 1999 Meridian wrote directly to Stephen Brewer, Chief Executive of Eircell, drawing attention to the fact that Mr. Kinsella had instructed the Optima help desk and Mary Murtagh not to complete transfers of the Eircell service. On behalf of Meridian this status state that the action was totally unreasonable and was a breach of contract and an abuse of dominant position.
- On the 28th January, 1999 Brian D'Arcy wrote a further letter to Claude Kinsella in respect of the suspension of transfers again complaining about the actions.
- On the 28th January, 1999 Claude Kinsella wrote a considered response to Brian D'Arcy in that he repeated the excuse that the reason Meridians transfers had not been done was that the particular system which processes transfer applications had, for technical reasons, been running slower than usual. In addition Claude Kinsella stated that Meridian were in breach of the Volume Discount Agreement by transferring the lines into the name of Meridian and reserving the right to terminate the agreement.
- On the 29th January, 1999 Meridian replied to this letter of Claude Kinsella stating inter alia that the plaintiffs did not accept the explanation given by Mr. Kinsella and pointing out that Mary Murtagh of Eircell had informed Orlagh Deegan of Meridian that she had been instructed by Mr. Kinsella to stop all transfers until further notice.
- On the 1 February, 1999, Claude Kinsella wrote to Brian D'Arcy saying that if Eircell did not receive a satisfactory written justification of Meridian's actions, that Eircell would terminate the Volume Discount Agreement without further notice.
- On the 1st February, 1999 Meridian replied to this letter pointing out that Meridian were not in breach of the Volume Discount Agreement because Eircell had specifically agreed to the deletion of paragraphs 4(1) and 4(2) of the said agreement.
2. The alleged delays in the processing of transfer requests.145. The plaintiffs claim that the defendant having 'conceded reluctantly' that it was bound by the contract, delayed the transfer of customers to Meridian/Cellular 3 and contend that certain changes in standard operational procedures were implemented for the purpose of causing such a delay. The changes complained of were:
(1) The transfer requests were faxed to Fergus Devereux from the Optima help desk to enable the sending of the process letter.
(2) The transfer requests were sent directly to Fergus Devereux to enable the sending of the process letter.
(3) The actual sending out of the process letter.
(4) Eircell refused to tell Meridian/Cellular 3 whether a transfer had been effected.
(5) The closure of the Optima desk to Meridian/Cellular 3.
(6) The refusal to provide information as to whether or not customers were in contract with Eircell and thus liable to pay termination charges.
(7) The appointment of Fergus Devereux to deal with all Meridian transactions.146. Changes 1, 2 and 3 above can conveniently be taken together because they are all connected with the sending out of the process letter. 147. Likewise changes 4 and 6 above, namely, the refusal of Eircell to inform Meridian/Cellular 3 whether transfers had been effected, and the failure to tell the plaintiffs whether customers were in contract with Eircell and liable for termination charges, can appropriately be considered together, as both involve the refusal to supply information. I will then consider the closure of the Optima help desk to Meridian which is change number 5, and finally the appointment of Fergus Devereux to deal with Meridian/Cellular 3 affairs which is change Number 7. 148. All these changes must be considered in the light of the fact than in general terms a commercial entity is entitled to regulate its own administrative affairs. No other commercial undertaking, least of all a competitor, has any right to dictate what administrative procedures it may employ or exercise a veto over changes in such procedures.
(1) Transfer requests to be faxed to Fergus Devereux.
(2) Transfers to be sent directly to Fergus Devereux.
(3) The process letter.149. Following the suspension of transfers from Eircell to Meridian which occurred in January 1999, it is clear that the relationship between the parties had seriously deteriorated and that litigation was likely, particularly in view of the fact that Eircell had expressed its intention not to renew the VDA (at least in its unrestricted form). This was the vehicle used by Meridian/Cellular 3 to compete with Eircell. 150. When he became involved in the dispute in February 1999, Fergus Devereux asked that a faxed copy of all transfers from Eircell to Meridian/Cellular 3 be sent to him so that he could monitor this activity. This did not involve any delay in processing the transfer requests. On or around the 26th April, 1999 however, with a view to sending out the process letter, he directed that a faxed copy of the transfers be sent to him and gave instructions that transfers be delayed until he reviewed them with a view to sending out a process letter.
- Fergus Devereux or his team in Dublin checked on their computer systems to see which transferring customers had a fax.
- A process letter was sent out to customers who had a fax number and the transfer was put on hold to see whether the recipient of the letter wished to respond. (In addition in at least 14 cases over the period 28/29 September, 1999 the process letter was sent out by post) This, in my view, was an isolated aberration from normal procedure and not part of standard practice). Moreover, in the case of Ronan Higgins (about whom more later) a phone call was made to enquire as to whether or not he had a fax number. This is the only incident of this occurring of which there has been evidence. The Court is however, entitled to infer, and so does, that there were similar enquiries made of other subscribers. It is extremely unlikely that the only such enquiry by telephone was made to Ronan Higgins who happened to be an employee of Meridian/Cellular 3.
- Fergus Devereux reverted to Mary Murtagh, and instructed her to proceed with the transfer in cases where no process letter was sent but to delay the transfer in the cases where the process letter had been sent until such time as he contacted her again. Depending on what instruction was received from the customer, Fergus Devereux instructed Mary Murtagh to proceed with the transfer, not to proceed with it, or to await further instructions. The sole reason for this procedure was to enable the process letter to be sent out.
(4) The refusal to tell Meridian/Cellular 3 whether a transfer had been effected.
(1) The failure to provide information as to whether or not customers were in contract with Eircell.155. The plaintiffs claim that prior to the issue of the process letter it was the practice for Eircell to tell Meridian or enquire whether or not transfers had been effected. However on such an enquiry being made on 19th April, 1999 Fergus Devereux replied stating:
"I apologise for the length of time it has taken to deal with your query. This arose as a result of the nature of you query which was untypical of the requests we receive and additional resources were required to address it. For you future reference the information you sought is available on the initial invoice issued to the customer to whom service is transferred. Service is transferred under the name of Meridian Communications on the date of the commencement of the rental period shown on the first invoice."
156. The delay involved in ascertaining the information from the invoice would be anything from a few days up to five weeks and could cause problems for the plaintiffs in dealing with their customer. This is because they might not be able to answer a simple query from their customer as to whether the transfer had been effected, until the receipt by Meridian/Cellular 3 of the first invoice for that line. Fergus Devereux's evidence was that had other corporate customers of Eircell's requested that information it would probably have been forthcoming. If Meridian/Cellular 3 had made the enquiry, in an isolated case of one particular line, the information may well have been supplied. Fergus Devereux however, was unwilling to undertake the administrative burden involved in providing such information for all lines as he believed it would be an increasing one. 157. The evidence of Mary Murtagh was that if other corporate customers had requested a transfer - they would be told whether it had been effected or not. however, that would not be a regular request. She did not recall ever getting such a request. However, if a third party enquired as to whether a particular subscriber was in contract with Eircell such information would not be supplied. 158. It appears from the facts that if Meridian/Cellular 3 enquired whether a line was now in their name they would have been told, but if they enquired whether the subscribers line was still in contract with Eircell, the information would not have been divulged. While I understand the distinction, it appears to me to be quite odd that the information sought might or might not be forthcoming depending on how the question was phrased. 159. The solicitors for the defendant, in a carefully worded letter dated 8th July 1999 set out the position of the defendant. They said "Our client has never provided Meridian, and provides no other customer, a service by which information is available on a constant basis in relation to the date customers have been connected to the network." 160. That may well have been strictly speaking correct. Such a request was no doubt, not a constant requirement of other customers or indeed of Meridian/Cellular 3. However, I accept the evidence of Orlagh Deegan to the effect that there had been no difficulties experienced in the past. Her queries including those asking whether transfers had been effected would be 'done there and then over the phone'. 161. While agreeing that the information sought by the plaintiffs could have been turned up on a computer screen "at the touch of a button". Fergus Devereux considered that it required a 'diversion of a resource'. In my view there was no justification for the failure to tell Meridian/Cellular 3 on demand or at least shortly after whether or not a transfer had been effected to them. When one takes into account that an administration fee of £16 is paid for transfer, the failure to tell the customer borders on the absurd. The arbitrary assertion that the fee does not include actually telling on demand or shortly thereafter the person who is now the subscriber the time when he became such seems quite unreal. I am fortified in this view by the fact that Fergus Devereux was of the belief that the information could be in any event otherwise obtained within the Eircell organisation. Moreover, the evidence was to the effect that there was no difficulty in obtaining such information about transfers from Digiphone. In those circumstances it showed very considerable 'chutzpah' on the part of the person who suggested in a letter from the defendant's solicitor dated 8th July 1999.
"If your clients wish to have such a service, then our clients are prepared to consider the terms on which such a service would be available and the cost for such a service.162. In closing submissions Counsel argued that the conduct complained of was "part and parcel" of the whole process letter strategy. However, I am not convinced that the refusal to give the information complained of had any bearing on the question of delay in the processing of transfer requests. The passages referred to in the closing submission of Counsel to support that contention are not referable to failure to supply the information sought, but to the closure to Meridian of the facilities of the Optima help desk. That topic will be addressed shortly. 163. The plaintiffs also complain that this conduct of the defendant amounted to a breach of an implied term in the VDA. Although this part of the judgment is primarily concerned with the alleged delays in effecting transfers, it is a convenient juncture to state that. I accept the plaintiffs contention. Under the VDA there is an express term to process transfer requests as soon as possible. A necessary implication of such term in a commercial contract is that the party be told on demand, or at least within a reasonable time thereafter that such a transfer has been effected. It must have been agreed between the parties, and in my view is so obvious as not that it was not necessary to state it. The necessity to wait until the receipt of the first bill which could be weeks later is a clear breach of such an obligation. 164. The refusal of the defendant to inform the plaintiffs whether or not a customer was in contract with Eircell was another complaint made by the plaintiffs. A person could be in contract with Eircell by virtue of either having subscribed within the last 12 months or having had a telephone upgraded within that period. If a person was in contract charges were incurred on the termination of the contract so the information was of some importance to prospective transferors. The dispute arose as follows. 165. On the 15th March, 1999 Orlagh Deegan sent the following fax to Mary Murtagh of Eircell:
RE: Transfers and Reconnections
Regarding all transfers and reconnections that have been and will be faxed into the Eircell Optima help desk by Meridian Communications, please do not reconnect on transfer any line which is bound to a 12 month contract, unless stated in writing by myself or Brian D'arcy.
Please confirm by fax.
Yours sincerely.166. On 8th April, 1999 Fergus Devereux replied by fax as follows:
Dear Ms. Deegan,
RE: Transfers or Reconnections.
I refer to your letter dated 15th March, 1999 to Mary Murtagh in relation to the above.
You letter effectively seeks to transfer to Eircell the administrative burden and responsibility of scrutinising requests for transfers and reconnections made by Meridian and then determining which to process and which to disregard.
I am advised that Eircell is under no obligation, contractual or otherwise to carry out such a task on your behalf and that it is entirely unreasonable to expect Eircell to do so.
Accordingly Eircell will continue to implement all requests for transfers and we suggest that such requests should not be made by you unless intended to be implemented.
Finally, Eircell wishes to remind you that under the terms of the transfer agreement, any transferee is also bound for a minimum period of 12 months.
Yours sincerely.167. As has been pointed out in relation to the defendants refusal to give timely information as to whether connection had been effected the administrative burden referred to by Fergus Devereux was be very light. An administration fee of £16 is paid in respect of each transfer. However, Orlagh Deegan did, in fact, attempt to shift the onus onto Eircell to check out which potential transferees were in contract with Eircell. It is fair to say too that it was correctly anticipated that the volume of such transfers would greatly increase. 168. The evidence from Orlagh Deegan, Brian D'Arcy and Brendan Dowling was that such information had been forthcoming prior to the dispute. Fergus Devereux however, regarded it as a new departure, and Mary Murtagh said that information as to whether a customer was in contract would not be given to a third party, even if that third party had signed an agreement with that customer. I do not believe that Meridian/Cellular 3 had any difficulty obtaining information as to whether a person who proposed to transfer to them was in contract with Eircell prior to the break of this dispute. The number of such requests was small however, and in my view neither of the parties gave the matter any real consideration up to the time that Orlagh Deegan made the request to Fergus Devereux. If a real problem had been encountered because of the fact that Meridian/Cellular 3 was a third party, no doubt the attention of Mary Murtagh would have been drawn to the clause in the Cellular 3 contract with its customers, which specifically authorised Cellular 3 to make such enquiries, and appointed it to be the customer's attorney for the purpose of so doing. However, the issue was not essentially one concerning the refusal of information, but rather one concerning the shifting of the onus of deciding when to effect a transfer on to Eircell, albeit on terms that were perfectly clear and not difficult or time consuming to implement. While one can readily appreciate the contention that this should be covered by the administration charge for the transfer, I think that a clear distinction may be drawn between the failure to tell a person when his contract is actually in place, and the failure to accept the administrative burden, however small, which change was suggested in the letter of Orlagh Deegan. If this represented a change of policy by Eircell as is contended, Meridian/Cellular 3 had no right to veto it, provided that they were not refused information to which they were entitled. In that regard it was for them to invoke the authority of the Eircell customer whom they wished to have transferred to obtain the information. 169. In any event submissions concerning this matter were made in the context of delay. I am not convinced that the refusal of Fergus Devereux to accept the burden of checking first and then not transferring lines that were in contract to Eircell, caused delay in effecting a transfer once instructions were given to do so. The attitude of Fergus Devereux is to be regarded in the context of dealings with a commercial rival.
(5) The closing of the Optima help desk to Meridian.170. A decision that all requests and queries whatever their nature be directed to Fergus Devereux of Eircell was conveyed to Brian D'Arcy of Meridian/Cellular 3 by letter dated 2nd July, 1999. On the 6th July, 1999 an instruction issued to the Optima help desk team in Eircell as follows:
"As and from today, 6th July, 1999 Meridian (Alan, Kate or Orlagh) are to be advised to send their requests, regardless of their nature, in writing to Fergus Devereux.
Under no circumstances are any queries no matter how trivial to be dealt with verbally."
171. The plaintiffs complaint is that because of this direction they were deprived of the services of the Optima help desk and that this affected on the speed with which transfer requests were processed. 172. There is a conflict in evidence as to how long the embargo on using the Optima facilities lasted. 173. Fergus Devereux said that although the direction of 6th July, 1999 was never rescinded either formally or informally, in fact it was only followed for approximately two weeks. Mary Murtagh was on holidays either in early or mid July. On her return she was informed that the instructions that all queries were to be directed to Fergus Devereux had been made in her absence. She said the decision was reversed about a week after she came back from holidays. Her recollection was that she had a conversation with Fergus Devereux in which it was stated that the Optima help desk would receive calls from Meridian/Cellular 3. Furthermore, she stated that there were calls coming from the plaintiffs after that conversation took place. The plaintiffs however point out that a letter was sent complaining about the matter on 28th July, 1999. Accordingly they submit that the embargo was in place at that time. Furthermore, on the 28th August of that year Orlagh Deegan wrote the following to Fergus Devereux:
Yesterday at 9:00 a.m. on 27th August a mobile number was stolen and needed a bar installed immediately. Kate, from Meridian, tried to call but could not get in touch with you. She then called Optima, who stated that they were not allowed to deal with anyone in Meridian Communications.
The embargo on personnel from the Optima help desk dealing with Meridian/Cellular 3 was therefore at least partially in force as of 27th August, 1999. Insofar as a decision was taken to rescind it, it appears that no notice of that was given to Meridian/Cellular 3, and indeed such a decision was manifestly not communicated to all the Optima help desk personnel.174. The decision effectively to close the Optima help desk to Meridian/Cellular 3 was taken in the context of the Ciara Banks incident which may be summarised as follows:- On 30th July, 1999 Orlagh Deegan of the plaintiffs spoke to Ciara Banks of Eircell requesting transfer books. She was advised that the books were no longer being provided by Eircell and that a new procedure had been put in place which would involve Eircell sending transfer books directly to the customer who wished to transfer to Meridian/Cellular 3. Ciara Banks was filling in for another employee of Eircell. She was unaware of the current dispute between the parties. What she told Orlagh Deegan was incorrect and based on her misunderstanding. The misunderstanding between the parties was quickly resolved. However, it is correct to say as was agreed in evidence by Orlagh Deegan that "it generated a lot of heat". It was the subject of correspondence between the parties and discussions between Counsel. In that context Fergus Devereux of Eircell wrote to Brian D'Arcy on 2nd July 1999. The last paragraph of the letter reads as follows:-
"Finally I should like to point out that your confusion as to the process applied by Eircell in supplying you with books has arisen because Meridian contacted a number of Eircell staff, Ciara Banks, who was not aware of the favourable treatment that has been afforded to Meridian to date. To avoid a repeat of this confusion, I would ask that from now on all requests and queries you have, whatever their nature, be directed to me."175. The plaintiffs submit this explanation is "completely disingenuous" and was used as "a lever against Meridian to change the standard operating procedures". I cannot agree with that submission. In my view, it was a completely reasonable and sensible procedure to adopt in view of the break down in relations between the parties, the litigation in general, and the Ciara Banks episode in particular. 176. Moreover, it did not in general terms at all effect the time it took to process transfer requests to Meridian/Cellular 3. Such requests were at that time being sent, not to, or through the Optima help desk, but directly to Fergus Devereux and his team. It might have a slight effect on a particular request, the subject matter of a query which in the normal course of events would be directed to the Optima help desk but in general terms it had no effect on the speed of processing transfer requests. It is my view therefore that no delay of any significance was occasioned by the decision complained of.
(7) The appointment of Fergus Devereux.177. The final complaint with regard to changes which occasioned delay in the processing of transfers to Meridian/Cellular 3 concerned the appointment of Fergus Devereux himself to deal with the affairs of the plaintiffs. 178. The evidence of Brian D'Arcy was that after the change from transfer requests being processed by the Optima help desk team to their being processed under the supervision of Fergus Devereux, problems were caused because of his occasional unavailability. To the knowledge of Brian D'Arcy there were eight people in the Optima help desk at the time. "So we had a situation where we were effectively dealing with a team of eight to look after our needs and requirements, but now it was being dealt with by one person, who as you can see, I think his title was head of corporate operations, so obviously he was a very busy person to deal with these transfers and certainly it proved difficult, because Fergus was not always contactable." I do not accept that the appointment of Fergus Devereux was intended to, or had the effect of delaying transfers to Meridian/Cellular 3 except insofar as it was connected with the sending out of the process letter, a matter in respect of which I have already given my decision. 179. The evidence from Mary Murtagh was that the processing of transfers was not either the first or the second priority for the Optima help desk team. The first priority was answering calls and the second dealing with new connections. Work on transfer requests took place when the calls ended at 5:30 in the evening, or on Saturdays when people were available to do such administrative work. Moreover, the evidence discloses that the staff at the Optima desk had a great number of duties besides the processing of transfer requests. The evidence (which is somewhat confusing on this point) appears to be that apart from Fergus Devereux who has other duties, there was one other person who did all the transfer work for Meridian but also had other Meridian-related work; He sent out the process letter. Another person devoted about 50% of his work time to Meridian affairs, including transfer requests. The Court is not convinced that the appointment of Fergus Devereux to deal with Meridian/Cellular 3 transfer requests occasioned any delay affecting them. The appointment of a senior person in Eircell was a natural and prudent step in view of the fact that litigation was likely.
Preferential treatment for Meridian/Cellular 3 transfers?.180. The defendant contended that, far from Meridian/Cellular 3 being delayed in relation to transfers, they were actually given more favourable treatment in terms of speed than other corporate customers of Eircell. Eircell produced a number of tables purporting to prove this contention. The first Exhibit D23 contained an error and was withdrawn by the defendants. They produced Exhibit D23 (a) in its place. It showed that:-
- 22.2% of transfers to Meridian and 23.3% of transfers to other corporate customers of Eircell were affected in one working day.
- 56% of transfers to Meridian and 34% of transfers to other corporate customers were affected within 3 working days.
Average Time Taken to Process (based on working days)
|Working Days to Process||Meridian Transfers||Other Corporate Transfers||Meridian %||Other Corporate %||Cum Meridian||Cum Corporate|
- It shows that 27% of transfers to Meridian and 23.3% of transfers to other corporate customers of Eircell were effected in one working day.
- 55% of transfer to Meridian and 37% of transfers to other corporate customers were effect in 3 working days.
Were the Meridian/Cellular 3 transfers effected 'as soon as possible'.189. Counsel for the plaintiffs however argues that the comparison with other customers does not address the real issue, which is whether Eircell is in breach of its contractual duty to effect transfers 'as soon as possible'. The relevant provision of the VDA states that 'Any instructions regarding additions to or removals of Nominated Eircell Numbers from the Eircell Volume Discount shall be implemented as soon as possible'. The evidence discloses that the process of transferring a line is simple and could be effected in approximately 10 minutes. It would be within the capability of the person who was looking after the Meridian/Cellular 3 transfers to do sixteen transfers in half a day, if that was the only work in which they were engaged. At the time transfer requests were arriving at Eircell at approximately the rate of sixteen per day. The plaintiffs pointed out that any delay in effecting transfers results in financial gain to Eircell, because when the customers line is transferred to Meridian/Cellular 3, Eircell are obliged to give a discount whereas when the line is with Eircell no such discount is provided. In those circumstances the plaintiffs contended that the transfers were not effected as soon as possible. 190. Counsel for the defendant submitted that the phrase 'as soon as possible' must be construed as meaning that the obligation on Eircell was Lewison, The Interpretation of Contracts, 2nd Ed., at p. 145 where it is stated:
"Where a contract does not expressly, or by necessary implication, fix any time for the performance of a contractual obligation, the law usually implies that is shall be performed within a reasonable time".191. The Court readily accepts that the phrase, 'as soon as possible' must be interpreted in the light of what is reasonable. Otherwise Eircell might be faced with the absurd-although engaging-prospect of the entire workforce from Chief Executive to cleaning staff abandoning all other tasks to ensure that the transfers were effected as soon as possible. 192. Mr. Brady further submits that the Court should take account of the following in interpreting the phrase:
(a) The fact that it is a clause in a standard form agreement.
(b) The fact that at the date of the agreement and renewal of the VDA there were many other customers availing of the VDA.
(c) The fact that at the date of the renewal of the VDA there were customers availing of an Estimated Eirtime Usage which had an identical provision.
(d) The fact that Eircell is involved in a business providing service to the customers and is not in the business of competing with the customers.193. The factors listed at (a), (b) and (c) above appear to me to constitute part of the "factual matrix" in the light of which the term of the contract is to be interpreted. While (d) is also a part of the factual matrix, it does not appear to me to be particularly helpful in construing the words 'as soon as possible' in this cause. If the submission implies that Eircell's contractual obligations to the plaintiff under the agreement are somehow less because it is in competition with Meridian, I cannot accept such assertion. However, I accept that part of the factual matrix is that the purpose of the VDA was to enhance Eircell's position vis á vis Digiphone its sole competitor at that stage. 194. Mr. Brady also referred me to the following dicta in the case of Attwood and Others -v- Emery 1 C.B. (N.S.) 108. The head note of that case reads as follows:-
"A contract by a manufacturer to furnish certain specified goods "as soon as possible" means, within a reasonable time, regard being had to the manufacturers ability to produce them, and the orders he may already have in hand."195. It is submitted that it is authority for the proposition that if a party wants goods or services within a specified period of time he must state that period in the contract. I was referred to a passage from Creswell J. in that case where he stated:-
"Mr. Petersdoff has argued this case an assumption that the plaintiffs engagement was to execute the work with more speed than would have been required had the words been "within a reasonable time." If that had been so, the contract must have been very differently framed from that now before us. If the defendant had intended to have the hoops within limited time, he should have taken care to express himself accordingly. I think this contract means no more than a reasonable time, regard being had to the plaintiffs' facilities and the extent of business, and the contracts they already had in hand."196. I was also referred to a passage in the judgment of Crowder J. in the same case:-
"I am also of opinion that the acceptance of this order in the vague terms in which it was given, only bound the plaintiffs to take care that they were guilty of no unreasonable delay in its execution. It is contended that my Brother Willes misdirected the jury, in referring to the ability of the parties contracting, and not to the general ability of the trade. I think he was quite right. How can it be supposed for a moment that the contracting parties meant the performance of the contract should depend upon anything but what the plaintiffs themselves could do? The words "as soon as possible" clearly meant "as soon as you possibly can". Nor can I understand how it can reasonably be suggested that either party contemplated that the plaintiffs were to put aside any other engagement, in order that this particular one should be performed. If the defendant had desired to have the goods by a limited time, he should have taken care to give a more limited order."197. Insofar as the case is authority for the proposition that the term must be construed in the light of other obligations on the defendant, I readily accept such a proposition. I cannot, however, agree that the phrase 'as soon as possible' has means no more than within a reasonable time, in my view it connotes something more urgent. 198. In deciding the matter, therefore, I have to take account the fact that Eircell was entitled to have as its priority the connection of new customers. Commercial entities are entitled to establish their own policies and strategies and to conduct their business accordingly. As such a commercial entity Eircell was entitled to prioritise these connections in its efforts to compete with Digiphone. 199. I must have regard to the fact that customers who avail of the Estimated Eirtime Usage had the benefits of a similar clause. I am entitled too, to take into account the fact that the number of such transfer requests was rapidly increasing. I think it is legitimate also to have some regard to the fact that very considerable delays occurred in the processing of their customers requirements by Meridian/Cellular 3. While this does not have direct bearing on the contractual obligations of Eircell to Meridian/Cellular 3, it is of some minor assistance in that it is part of the general background in the context of which the phrase 'as soon as possible' must be interpreted. My conclusions, however, are not dependent on the consideration of that factor and would be the same were it to be excluded from my considerations. 200. I am entitled to have regard to the fact that as of February, 1999, when the evidence of Orlagh Deegan was to the effect that, the time to process a request took 3 - 4 days, there were no complaints as being evidence from which I can infer that the plaintiffs, at that time, were not concerned with such a level of delay. 201. Finally, a meeting was held be on the 12th August, 1999 to discuss operational issues. The defendants point out that although the question of delays was on the agenda prepared by Brendan Dowling, that question were not discussed. Brendan Dowling's evidence was that the reason for not discussing the issue was that it was the subject matter of litigation and that he tried to avoid contentious issues. Fergus Devereux does not accept that explanation and pointed out that the issues concerning transfer books, which were also contentious and the subject matter of litigation, were discussed. In my view, the very fact of putting the topic on the agenda, was proof that the issue of delay was of concern to Meridian/Cellular 3. In those circumstances I am not prepared to infer that the failure to discuss it at the meeting implied that it was not a genuine source of concern to the plaintiffs. 202. Taking into account all the factors mentioned above, in my view, there was a failure to process the transfer requests as soon as possible in the cases where a process letter was sent. In all such cases Eircell chose to delay effecting the transfers as soon as possible in order to send out the process letter. While it was quite at liberty to send the letter, it should have had regard to the fact that by sending it Meridian/Cellular 3 transfers were not dealt with as soon as possible. Other than in regard to the sending of the process letter, however, I am not convinced that Eircell was in breach of this clause in the VDA. 203. In summary, therefore, I do not consider that any of the procedural changes complained of by the plaintiff's with the exception of the sending out of the process letter had the intention or affect of delaying the effecting of transfer requests made by Meridian/Cellular 3. Furthermore, in my view the transfer requests of Meridian were not treated unfavourably in comparison with other corporate customers. In fact they were processed slightly more swiftly. Although it would have been technically possible to transfer all lines in a speedier fashion, the term in the VDA must be interpreted in the light of the surrounding circumstances of the case. Not least of these is the fact that Eircell as a commercial entity is entitled in general to set its own business priorities. Viewed in the light of all the surrounding circumstances the court is satisfied that the transfers (other than in respect of delays caused by the process letter) were effected as soon as possible.
3. The Process Letter204. One of the most serious complaints of the plaintiff, and the matter that triggered this litigation was the sending of the so called 'process' letter by Eircell to their subscribers who wished to transfer to Meridian/Cellular 3. The first such letter went out on April 26, 1999. Following the Supreme Court hearing of the interlocutory aspects of this case, the letter was slightly modified, but not in any way pertinent to these complaints. The sending out of the letter continued until February, 2000 with, perhaps the exception of one letter that may have been sent in March. In all, process letters were sent to two hundred and forty eight customers of Eircell who wished to change to Meridian/Cellular 3. The evidence was that, of the persons to whom it was sent, 187 did not proceed with their transfer to Meridian/Cellular 3. The transfer of approximately 850 lines did not proceed. 205. The process letter was only to be sent to those Eircell subscribers who were listed on their computers as having fax numbers. However, in the case of Ronan Higgins, (of whom more later) a phone call was made by Eircell enquiring if he had a fax number. It is reasonable to infer that similar enquiries by telephone were also made in the case of other subscribers, as it is very unlikely that the only person phoned to enquire whether he had a fax number was Ronan Higgins, an employee of Meridian. 206. Furthermore it is clear that the process letter was sent by post to at least fourteen subscribers. However, since those fourteen letters were all posted in the same two day period in September 1999, I am prepared to accept that the sending of them was an isolated occurrence rather than a practice of Eircell. 207. The sending of the process letter was regarded by the plaintiffs as being a matter of the utmost gravity. Indeed, Brendan Dowling chief executive of Meridian/Cellular 3's irish operations said "commercially it killed us in the market place." 208. The following are the complaints made by the plaintiffs concerning the process letter. They claim:
(a) It brought about an inevitable delay in processing transfers to Meridian and is therefore in breach of contract (This complaint is dealt with in the section of the judgment dealing with delays in transfers).
(b) It amounted to a breach of contract.
(c) It amounted to an inducement to breach of contract.
(d) It contained injurious falsehoods.209. Given the importance attached to the process letter it is appropriate that it should be analysed in detail. The letter reads as follows:
Eircell has today received a request to transfer your mobile telephone service to Meridian Communications Limited.
Eircell shall of course process the transfer in accordance with this instruction. However, if you have not already committed yourself to a rental agreement with Meridian, we believe you should first be aware of the following.
Meridian is in a position to offer you its service by virtue of a Volume Discount Agreement which it has with Eircell. This agreement is due to expire at the end of this year and will not be renewed. Consequently,
Meridian may not be able to continue to provide its service to you on the terms and conditions which it may now be offering;
When you transfer your mobile phone service from Eircell to Meridian, your mobile number is also transferred to Meridian. You may not be able to regain this number in the future;
If you have signed an agreement with Eircell in the last 12 months you should be aware that by terminating that agreement you will render yourself liable to a termination charge in accordance with the terms of the agreement.
Of course, if you have already contractually committed yourself to a rental agreement with Meridian, you are obliged to comply with the terms thereof and Eircell does not in any way invite you to do otherwise.
However, if you have not already entered into a rental agreement with Meridian and, having considered the above, you wish to continue your mobile service with Eircell, please complete the form below and fax it back to us at 01 203 7811.
In the event that we do not receive the form below within 24 hours of our sending this letter to you we will proceed with the transfer of the service.
If you have any queries in relation to the above, contact 01 203 7829.
Head of Corporate Operations
To: Eircell Limited
Hereby confirm that I have read the above and I do not wish to transfer my mobile telephone service to Meridian Communications Limited.
Company (if applicable): _________________________________
Dated: ______________________________210. I will now proceed to analyse the relevant parts of the letter. 211. Paragraph 3 reads as follows:
'Meridian is in a position to offer you its service by virtue of a Volume Discount Agreement which it has with Eircell. This agreement is due to expire at the end of this year and will not be renewed.'212. The first sentence is merely a statement of fact. The second sentence contains an accurate and unemotive statement of Eircell's intention, to which exception cannot be taken.
Meridian may not be able to continue to provide its service to you on the terms and conditions which it may now be offering.'213. This is an accurate and moderately phrased observation. It is to be noted that it does not categorically state that Meridian will not be in a position to continue to offer its services on the same terms as heretofore, but merely refers to that possibility.
'When you transfer your mobile phone service from Eircell to Meridian, your mobile number is also transferred to Meridian. You may not be able to regain this number in the future;'214. The first sentence is merely a statement of fact. The second sentence, however, is the subject of a vigorous complaint by the plaintiffs. They make the case that it was the invariable policy of Meridian/Cellular 3 to return the mobile numbers of the customer. Moreover, it is common case that the question of number portability would be a factor of considerable importance in deciding whether to change from Eircell to Meridian. It would be a particular importance to corporate customers contempling such transfers who formed the majority of the plaintiffs' customers. 215. The first version of the Meridian contract after the VDA which was used from September 1997 until December 1998, made specific provision for the return of the number to the customer. The second version of the post VDA Meridian contract which operated December 1998 until March 1999 contained a similar clause. However, in the first Cellular 3 contract which was used from March 1999 until around September/October of that year there was no clause concerning the return of the number to the subscriber. I accept the evidence that its omission occurred through error. The next version of the Cellular 3 contract contained such a clause. 216. It was, moreover, the uncontradicted evidence of Brendan Dowling that in fact Meridian/Cellular 3 always returned the number to the customer on termination of the contract. The plaintiffs argue that a simple enquiry to Meridian/Cellular 3 would have elicited this information. 217. The defendant makes the point that there is no privity of contract between the subscriber to Meridian/Cellular 3 and Eircell, who therefore cannot act on the instruction of that user. On transfer Eircell's contract is with Meridian/Cellular 3 and accordingly Eircell is obliged to cut out he instructions of Meridian. The former subscriber to Eircell loses control of his number which control is now examined by Meridian/Cellular 3. Counsel for the plaintiff submitted that the question at issue is not whether or not the customer will control the line, but whether he will get it back. While this is true, the question of control, clearly, is linked to the possibility of not getting back the number. In that regard the evidence is that until such time as the termination charges are paid or agreed to be paid that Meridian/Cellular 3 will not return the number. It is correct to state that, in those circumstances at least, that the subscriber to Meridian/Cellular 3 may not be able to regain the number in the future. To this exception however must be added, the fact that the Cellular 3 contract contemplates the possibility of an operator other than Eircell being used by the plaintiffs. This is evident for the definition of Designated Operator contained in the contract which is as follows:-
"A designated operator shall mean such provider of telecommunication services as Cellular 3 may elect to use for the provision by Cellular 3 to the Hirer of the service."218. Furthermore, the possibility of moving from Eircell is specifically mentioned in Meridian/Cellular 3's letter to their customers in response to the process letter. 219. The letter states:-
"At present Cellular 3 is supplying services via the Eircell Network. However we are not contractually bound to use this network to the exclusion of any other, we are already in discussions with other operations both her and across Europe so that we are in a position to expand the services and benefits offered to you both now and in the future."220. Thus, in the circumstances which were contemplated by the plaintiffs, their subscriber could be moved to another operator. The customer thereby was liable to lose the prefix part of their number. In those circumstances the statement by Eircell in the letter was true and accurate. 221. The last part of the fourth paragraph of the letter reads as follows:-
'If you have signed an agreement with Eircell in the last 12 months you should be aware that by terminating that agreement you will render yourself liable to a termination charge in accordance with the terms of the agreement.'222. That is an accurate statement of the position. It is the same information that Meridian/Cellular 3 themselves impart to their customers and in my view could not be validly criticised. It does not in any way constitute a threat. 223. The plaintiffs claim that it was disingenuous of the defendant to send out the process letter in view of the fact that it knew, or should have known, that those the subscribers to whom it was sent had already signed a contract with Meridian/Cellular 3 prior to the request to a transfer being made. They point out to the fact that a copy of it had been faxed to Claude Kinsella on or about the 27th January, 1999. Fergus Devereux may have seen the front of it but did not study it. 224. On 11th May, 1999 just over two weeks after the first process letter was sent Mr. Dominic Dowling the plaintiffs' solicitor wrote to Eircells legal department. Paragraph 2 of the letter reads:-
"I also wish to refer to a course of conduct in which your staff have engaged since 19th Ultimo, apparently under direction and presumably with the benefit of legal advice. I refer in particular to the practice under which Fergus Devereux, your head of corporate affairs has been writing directly to my client's customers. This letter can only be characterised as an inducement or solicitation to my client's customers to breach the agreements which they have with my clients."225. The evidence of Fergus Devereux was that he only saw that letter at a late stage in the hearing. However, in a letter to Fergus Devereux dated 12th October, Mr. Brendan Dowling stated:-
"I have clearly explained in the past that before we forward any forms to Eircell allowing the transfer of a customer to Eircell, we have entered into a contract with the customer for the supply of mobile services."226. Dominic Dowling's evidence was to the same effect. Yet Fergus Devereux's evidence was that he did not know that the customers had signed a contract with Eircell. With some hesitation, I am prepared to accept Fergus Devereux's evidence on this point. He failed to enquire into the matter. I accept his evidence that the reason for ceasing to send the process letter was as a result of learning at the hearing that the contract with Meridian/Cellular 3 had been signed, by those to whom the process letter was addressed. The failure of Fergus Devereux to advert to the fact that the persons to whom the process letter was sent was surprising indeed. The legal department, in Eircell, in consultation with which the letter was sent, must be deemed to have known that the persons to whom the process letter was addressed had signed a contract with Meridian/Cellular 3, at least from the receipt of Dominic Dowling's letter dated 11th May. 227. Nonetheless, in my view the letter is true and accurate. Eircell had a right to communicate the information contained in it to its customers - and all those to whom it was addressed were Eircell's customers - provided that the communication did not contain an inducement to a breach of contract. 228. The purpose of the letter was not, as asserted by Fergus Devereux, primarily out of customer concern. I accept, his evidence that the initiative was taken as a result of customer queries. Nonetheless in my view the purpose of the letter was to use Fergus Devereux's words to "save the customers". That is a perfectly legitimate object for a commercial enterprise. Indeed it would be surprising if it had no such concern. However, it would not be permissible conduct to save the customer by inducing a breach of contract. It is therefore necessary to decide whether the sending of the process letter constituted such an inducement. 229. In Halsbury's Laws of England, 4th Edition, paragraph 687, the following passage occurs:-
[Interference with contractual relationships]
"687: Inducing or procuring a breach of contract. Where one person by either direct or indirect means intentionally induces a second person to commit a breach of contract against a third person or prevents or hinders the performance of that contract, so that that third person suffers damage, the first commits a wrong actionable at the suit of the third, unless the inducement is justifiable. Mere interference not involving breach of contract or illegal means does not appear to be tortious. Direct means may be either inducing a party to a contract to act in breach of it or physical restraint on a party or intervention preventing performance or dealings with a party inconsistent with performance. Indirect means involve constraining by illegal means employees or associates of a party to a contract so that they may induce that party to act in breach of it."230. It the essence of the tort of inducing breach of contract that the complaining party establishes:
(a) knowledge of the contract and
(b) an intention to induce a breach of contract.231. I have already indicated that the defendant had at least constructive knowledge of the existence of a contract between Meridian/Cellular 3 and their customers on the receipt of the letter of Dominic Dowling dated 11th May, 1999. In Clerk and Lindsell on Torts, 17th Edition the following passages occur at 1180:-
'Knowledge and intention are, of course, intimately connected; but their problems are not coterminous. Thus, affirmative proof that the defendants did not intend to induce any breach can rescue them even if all other constituents of liability are present'.232. It is essential, therefore, for the success of the plaintiffs argument for them to prove that the defendant intended to procure a breach of contract. Given that the defendant knew or ought to have known of the existence of the contract, the plaintiffs contend that the only conclusion that can be drawn is that Eircell sent the process letter with the intent of inducing the addressees to breach their contracts with Meridian/Cellular 3. The defendant however, submits that the information contained in the process letter was fair and accurate and that Eircell was entitled to send it to persons who were at the time of sending the letter, their own customers. It is in that context that the process letter must be examined. 233. I was referred to McMahon and Binchy's 'Irish Law of Tort, 2nd Edition' where the following observation occurs at p. 560:-
"It has been said many times that a distinction must be drawn between 'pressure, persuasion or procuration,' on the one hand and mere information or advice, on the other".234. In Hynes -v- Conlon  IR. Jur. Re p. 49 union officials informed employers that a certain individual was not a member of the union, and that accordingly he should be dismissed in accordance with current agreements between employers and the union. Hanna J. held that no tort had been committed. He stated (at p. 51 of the judgment):-
"..... satisfied that there was nothing improper in anything these gentlemen did and that they were all well within the law. There was nothing in the nature of a threat to the employer or in the nature of a severe warning that might be construed into a threat, and the view I take of what took place was that it was no more than telling the employer the attitude which the union was taking up. If union officials could not do what was done in this case, they would be of little use. ......So far as I can see in this case there were no threats, no warnings and no violence."235. In Cotter -v- Ahern and Others (1976-7) ILRM 248 Finlay P. (as he then was), considered the topic in the context of a visit of a delegation from a union to persuade the manager to change his mind about the appointment of a principal to a national school. The following passage occurs at p. 259.
"I am further satisfied that the intention and effect of the visiting by the officers of the INTO of the defendant Canon Ahern on the evening of 6 June 1974 was to use the most powerful persuasion available to them to try and prevent the appointment of the plaintiff to the post of principal of Ovens National School and that this was being done not on the basis of any lack of suitability arising from qualification, experience or character in the plaintiff to be the principal of a national school but solely on the grounds that he was a person who had resigned from the INTO and who had up to that time at least refused to rejoin it. I am satisfied in particular that the reference by the delegation to the projected visit by them to the Bishop of Cork to protest against the appointment of the plaintiff as principal of Ovens National School was a subtly contrived representation likely to have the effect which it dramatically did have of changing the mind of the 70 year old defendant Canon Ahern as to whether he would persist with the appointment to which he had previously agreed."236. The learned Judge made it clear that the representation and the manner in which they were made, were factors which he took into account in arriving at this conclusion. He specifically rejected the contention that the defendants in that case were offering only advice and stated at p. 260 of the judgment that: "if the purpose of these defendants was simply to convey information or in that sense advice only .........it could have been done by a simple letter." 237. Counsel submits that that case is by implication authority for the proposition that to provide information by letter does not amount to an inducement or procurement of a breach of contract. While in my view, that submission of counsel is over broad, it is the case that the manner and circumstances of the delivery of information are proper considerations to which the court should have regard in assessing whether or not in a given case there was an inducement to breach contract. 238. The plaintiffs submit that the instant case can be distinguished from Cotter -v- Ahern in that in the present case, the sending out of the process letter, per se, brought about a delay in transfers and was therefore a clear breach of Section 5 of the VDA. 239. The sending out of the process letter did involve a delay, which, in my view was a breach of the term of the VDA that required transfers to be dealt with as soon as possible. However, the breach of contract was not the sending of the process letter - it was the unwarranted delay. That breach of contract - to wit the delay, did not induce a breach of contract. The submission of Counsel based on the proposition that a wrongful act which induces a breach of contract is sufficient for the tort of inducement to breach of contract is therefore not applicable in the present case. Furthermore, that breach of contract does not address the issue of the authority contain within Cotter -v- Ahern. 240. In view of the fact that the contents of the process letter are true and accurate, reasonably expressed, and were communicated by letter, in my view they do not go beyond what could be considered - at the very most - advice. They do not, go beyond it, and they do not constitute inducement or procurement of a breach of contract. My view, is very much fortified by the specific injunction in the body of the letter. The letter contains the following short paragraph:-
"Of course if you have already contractually committed yourself to a rental agreement with Meridian, you are obliged to comply with the terms thereof and Eircell does not in any way invite you to do otherwise."241. The person to whom the letter is addressed is being told that he is obliged to honour his contractual commitment. That paragraph in my view, constitutes an insurmountable barrier to the plaintiffs in their attempt to demonstrate that the letter constitutes an inducement to bring about a result directly opposite to the injunction addressed to the readers of that paragraph. The words of Decius Brutus in Act 2 Scene 1 of Shakespeare's Julius Ceasar are apposite.
'But when I tell him he hates flatterers, He says he does, being their most flattered' I am not satisfied therefore, that the process letter was an inducement to breach of contract.242. If contrary to my conclusion the letter does amount to an inducement, it is important to consider whether it was an inducement to break a contract, as alleged by the plaintiffs, or merely to lawfully terminate it, as contended for by the defendant. 243. The defendant argues that in order to constitute the tort of inducement to breach of contract it is necessary that there be an inducement to break some term of the contract. There is no tort committed in inducing the lawful termination of a contract. 244. The law is thus stated in Clerk and Lindsell on Tort, 17th Edition, at pages 1185:
'Where the contract is determinable, the defendant incurs no liability merely by inducing the contracting party to determine the contract lawfully, for there is then no breach'.245. The case of Cutsforth -v- Mansfield Inns Limited  1 All E. R. 557 was cited as an example where that principle was applied. In arguing that if the process letter constituted an inducement it was not an inducement to breach of contract, but at most to terminate it lawfully. Counsel for the defendant pointed out it is common case between the parties that notice periods in mobile telephony contracts are never enforced but are always waived. Contracts may be terminated without notice. That being so, the argument goes, all that the process letter could have induced was the termination of the contract between the new subscriber and Meridian/Cellular 3. 246. Mr. Gordon, in rebuttal, submitted that although the contract between Meridian/Cellular 3 and its customers came into effect on the signing of the contract documents, there was no right to terminate it until such time as the service was provided. 247. He submitted that
'There is a window of time in the contract between the signing of the contract and the transferring of the service where there is no provision in the contract and the client has no lawful ability to terminate the contract. If he terminates the contract or refuses to proceed with the service, he is then in breach of contract.'248. It was not argued that a contract in being could not be ended without notice, it being accepted by both sides that such was the practice in the industry. As Brendan Dowling said:-
'If the customer decides that they want to cease the service of Eircell they advise Eircell of that. If they do that they can terminate the contract, but they just pay termination charges for that. It is clear that the normal practise in the industry was such that the parties were free to solicit business from customers already in contract with somebody else. This was the position of the customers of Eircell who transferred to Meridian/Cellular 3.'
249. It is to be noted that the duration of the contract is not from the provision of service but from the signing hereof. This was stated at paragraph 6 of the contract:
'This agreement may be terminated on the happening of any of the following events.
(a) after the expiry of 12 months from the date hereof or of the date of the addition of the last mobile phone numbers and/or lines and/or upgraded mobile phone numbers added to the service, whichever is the more recent, upon either party giving to the other one month's notice in writing of their intention to terminate.'250. The words of the contract itself therefore do not support the plaintiffs' contention. The right to terminate is expressed to be '12 months from the date hereof', not 12 months from the date of connection to the services. Although it is clearly the case that, in the vast majority of instances, the termination of the contract would be after the provision of services, and would involve ceasing such a supply and returning handsets, and the contract makes provision for those activities, that does not alter the fact that the contract came into being on the day that it was signed. 251. I cannot accept that, by implication, the termination clause was contingent on the supply of service. It was the contract that was to be terminated, not the service, although naturally the termination of the contract led to the ending of the service as well, in such cases where it had been provided. 252. The fact that under the contract as framed there is aright to levy termination charges and such charges are expressed to be for "line(s) number(s) and /or upgraded mobile phone(s)" does not in my view sustain the implication that the termination provision is in abeyance until the provision of service. 253. In his evidence on day 42 of the case Mr. Dowling stated as follows:-
"I have already said in evidence that if Eircell had gone through with the transfer as per the request and once it had been completed and done, then went out and went out in a competitive vein using competitive strategic advantages or whatever they may have to offer, be it cheaper prices or better phones or better service and went out and the customer said: I am happy, I am going back to you; that is fair that is competition. But not what we are talking about here, the process letter is something that is at a totally different level from this."254. Mr. Gordon submitted that if the transaction envisaged by Mr. Dowling occurred that Eircell's inducements would be merely inducements resulting in the lawful termination of the contract with its terms and not a breach of contract. 255. Leaving out the question of causality, the result of the process letter (assuming it was an inducement) would be the same. It would bring about the lawful termination of the contract. The only differences contended for by Mr. Gordon is that in the situation envisaged by Mr. Dowling, the customer would have to serve a termination notice on Meridian and Meridian would be entitled to levy termination charges on its customers. In my view there was no requirements for service of notice of termination as it is common case that such requirement was waived in the industry. In my view the ability of Meridian to levy service charges is not a distinction which would make the transaction envisaged by Mr. Dowling a lawful termination, and the termination allegedly to be induced by the process letter, a breach of contract. 256. Mr. Brady had an alternative submission. It only arises if I am wrong in deciding that notice periods were waived by the parties because of custom of the trade. If the notice period has not been waived, then the defendant submits that Meridian/Cellular 3 procured or induced a breach of contract by requiring Eircell to transfer customers without the requisite 28 days notice of termination having been given. Counsel submits that in those circumstances the defendant is in turn justified in inducing a breach of contract by failing in turn to give Meridian/Cellular 3 the necessary 28 day notice of termination. For this proposition Mr. Brady relied on the following passage in Clerk and Lindsell on Torts, 17th Edition, pages 1220/1221:
"The fact of an earlier contract with a defendant inconsistent with the plaintiff's contract may well afford a justification to the defendant for procuring a breach of the latter, or in other words.
There are circumstances in which A is entitled to induce B to break a contract entered into by B with C. Thus, for instance, if the contract between B and C is one which B could not make consistently with his preceding contractual obligations towards A, A may not only induce him to break it, but may invoke the assistance of a Court of Justice to make him break it.
But where there are two independent contracts, the breach by B of the contract with A cannot justify A in inducing C to break the other contract between C and B. These situations largely fall within principles already discussed applicable to "inconsistent transactions"; but insofar as the courts accept as justifiable the protection of contractual or property rights which are 'equal or superior' to the contractual rights of the plaintiff, the doctrine of justification plays an independent role."257. The defendant contends that the contract between the customer and Meridian/Cellular 3 is inconsistent with the contract between Eircell and its customers, and that Eircells right to notice (if it was not waived) is at least equal to the similar right of Meridian/Cellular 3. 258. In my view the submission is not well founded. If the right to a notice period under the contract was not waived by the universal practice in the industry, it could have been invoked by Eircell but it did not do so. Furthermore, I cannot see any inconsistency in the co-existence, for a period of time, of a contract between a customer and Eircell and a contract between the same customer and the plaintiffs. Mr. Gordon illustrated the point by using the example of a contract for employment. He pointed out that it is possible for an employee to have a contract of employment with an employer which will expire at the end of a month. Before the end of the month, while that contract is still in place, the employee can sign another contract with a different employer. The contract can come into effect on the day it was signed but the obligations thereunder only arise at the end of the month. Such contracts are not inconsistent. If the customer contracted to receive the same service simultaneously from both Eircell and the plaintiff, that might well involve an inconsistency of the type contemplated in the passage cited by Mr. Brady. However, this does not happen. To effect a transfer, a number is deallocated and then reallocated to another account. 259. Apart from constituting an inducement to a breach of contract the plaintiffs also complain that the process letter is:
(a) a breach of confidence, and
(b) an injurious falsehood.260. I will deal with these matters in turn.
(a) Breach of Confidence261. The plaintiffs make the case that the sending of the process letter was a breach of an implied term in the VDA that the defendant would maintain confidentiality in respect of information received in the course of its business with the plaintiffs' customers concerning the terms of the VDA, particularly those pertaining to its renewal. 262. Counsel argued that this term of confidentially can also be regarded as part of the obligation under an implied term in the contract not to frustrate it. I was referred to passages in Commercial Secrets by Lavery and in particular to a passage at page 26 of that work where it is stated:-
"...where the express contract between the parties does not define any obligation in relation to the use or disclosure of confidential information, the courts will readily imply an obligation of confidence."263. At page 27 of the same work the learned author refers to a passage by Bowen L. J. in Lamb -v- Evans  1 Ch. 218 where he stated at page 229 of the judgment that an obligation of confidence would be implied in a contract where it is necessary "to give the transaction that effect which the parties must have intended it to have and without which it would be futile." The author also refers to Deta Nominees Pty Ltd. -v- Viscount Plastics Products Ltd  V.R. 167 where per Fullager J. stated at page 190:-
"The circumstances in which the law will imply a term in a contract are well known and clear ......For the most part the cases where the law implied a contractual obligation not to divulge or use information are confined to those cases where the implication or importation is 'necessary to give efficacy to the contract' ......to give efficacy to some truly contractual relationship existing apart from the contentious term ......such an implication will be made when it is necessary in order to give the transaction that efficacy which both parties must have intended it to have."264. The plaintiff referred me House of Spring Gardens -v- Point Blank Limited  IR 611 the leading authority in this jurisdiction where the decision of Costello J. as he then was, was approved by the Supreme Court. The decision is referred to in Intellectual Property Law in Ireland by Clark and Smyth where the following passage occurs at page 437 of the work:
"In House of Spring Gardens Ltd. -v- Point Blank Ltd, Costello J. indicated that in determining the nature of the relationship and the information, the expenditure at skill, time and labour in compiling the information is relevant in determining whether the duty of confidence arises. Costello J was, of course, considering these factors in the context of industrial trade secrets, some of which were already in the public domain and these remarks are therefore to be seen in context. In general terms, however, if the information is seen as being management data rather than a trade secret the action will fail."265. In the present case, in my view, there is no need to imply a confidentiality term into the contract in order to give it business efficacy. It is clearly capable of being operate in default of such term being implied. Furthermore, I cannot agree that the implication of a term that the defendant's would not attempt to frustrate the contract would render it unpermissible to communicate the contents of the process letter to persons, who were, at the time, customers of Eircell who had a contractual relationship with it. In particular, in the circumstances of this case there was nothing to prevent Eircell from communicating the fact that Meridian had the benefit of the VDA and that Eircell did not intend to renew it. 266. The information was not the type of information protected by intellectual property law - in my view it could not be legitimately regarded as a trade secret. It was not data in the compilation of which skill time and labour was expended. Indeed I did not understand that the plaintiffs contended that it was such. In my view therefore the plaintiffs are not entitled to succeed in this aspect of their claim.
(b) Injurious falsehood267. The parameters of this tort are outlined in the following passage from Clerk and Lindsell on Torts, 17th Edition, at page 1160
Essentials of the Action
"The essentials of this tort are that the defendant has published about the plaintiff words which are false, that they were published maliciously and that special damage has followed as the direct and natural result of their publication."268. In Gatley on Libel and Slander, 9th Edition, the following passage appears at page 493:
"Falsity. It is essential that the statement should be false. In a case concerning disparagement of the plaintiff's title Maule J. said: "It is essential, to give a cause of action, that the statement should be false ........ If the statement is true, if there really be the infirmity in the title that is suggested, no action will lie, however malicious the defendant's intention might be."
269. As I have already stated in my view the statements contained in the process letter are true and accurate. Furthermore, even if I am wrong in this conclusion, it is for the plaintiff to prove malice and I am not satisfied that they have succeeded in doing so. Put at its highest, the plaintiffs' case concerning the possible loss of the telephone number to the Meridian/Cellular 3 subscriber is that it was the invariable practice of the plaintiffs to restore the telephone number to the subscriber at the end of the contract. They argue that Eircell could have verified this by a simple enquiry. So indeed they could. However negligence does not constitute malice as is stated at page 494 of Gatley:
"A statement false in fact and calculated to produce actual damage will therefore not support such an action if it was made in the belief, even a careless belief, that it was true".270. The plaintiffs have failed to demonstrate that the defendant had not an ongoing belief in the truth of the statement made in the process letter. The plaintiffs claim under this heading must therefore fail. 271. The plaintiffs also submitted that the very sending of the process letter was a breach of an implied term in the VDA, in that it was designed to frustrate the operation of the contract. I cannot accept that proposition. The process letter was in my view a valid communication by Eircell to its own customers. Its contents were accurate. No term implied in the VDA can be said to have abolished the right of the defendants to have such a communication with its customers. 272. Insofar as the suggestion was made that even if individual components of the process letter were justifiable their cumulative effect was in some way objectionable, I cannot agree. I am not convinced that the process letter taken as a whole was untrue, inaccurate and unfair or that it constituted any of the wrongs complained of by the plaintiffs. 273. The findings of the Court concerning the process letter may be summarised as follows:-
- The information contained therein is true and accurate.
- The letter is not an inducement to breach of contract and did not go beyond - at most - permissible advice.
- If contrary to what I have found the process letter constitutes an inducement it is an inducement to lawfully terminate the contract between Meridian/Cellular 3 and its customers and not an inducement to breach it.
- If contrary to what I have found the process letter is (a) an inducement and (b) an inducement to breach a contract rather than to lawfully terminate it then such conduct cannot be justified on the 'inconsistent transactions' grounds contended for by the defendant.
- The sending of the process letter does not amount to a breach of confidence or breach an implied term not to frustrate the operation of the contract.
- The sending of the process letter does not constitute the tort of injurious falsehood.
- The sending of the process letter did not constitute a breach of contract.
(4) The restriction on the provision of transfer books to the plaintiffs.274. The plaintiffs claim that for the period from May 1999 until February 2000 the defendant either refused to supply books of transfer forms to the plaintiffs, or only supplied them as it saw fit, and failed to supply adequate numbers of such books. The plaintiffs do not make the case that they lost any individual customers because of the lack of transfer forms, but argue that they were unable to expand their business because they lacked books of transfer forms. They claim that the deprivation of books of transfer forms was a breach of contract and an abuse of dominant position.
A. The following is the history of the dispute.275. On the 29th of April, 1999 Orlagh Deegan of Meridian wrote to Fergus Devereux of Eircell seeking 100 Eircell transfer books. Meridian were told that the printers were on their holidays.
- On the 14th of May, 1999 Meridian were told that there was a shortage of stock and that only 5 books could be made available to them.
- On the 21st of May, 1999 Brian D'Arcy wrote a letter, again requesting 100 transfer books and stating that such delays were damaging to the plaintiffs' business.
- On the 14th of June, 1999 Fergus Devereux replied to Brian D'arcy concerning the transfer books and stated that Meridian had been given 60 transfer books and he stated: "I believe that this quantity of books should be adequate for your current needs - I see no reason for your request for additional transfer books at this time"
- On the 30th of June, 1999 Orlagh Deegan spoke with Ciara Banks of Eircell and requested further transfer books. She was told that the transfer books were no longer being supplied to Meridian.
- On the 1st of July, 1999 the plaintiffs' solicitor Domonic Dowling wrote on their behalf to Arthur Cox the solicitors for the defendants' in respect of this matter.
- On the 1st of July, 1999 a further letter was written by the plaintiffs' Solicitor to Arthur Cox pointing out that it had been indicated by the defendants' Counsel that if the plaintiff were to contact Fergus Devereux the matter would be regularised without delay. However, when Meridian contacted him, Fergus Devereux said that he had to obtain legal advice before he issued any further transfer forms.
- On the 2nd of July, 1999 Messrs. Arthur Cox responded on behalf of the defendant. They explained the issue as a misunderstanding because of the unfamiliarity of Ciara Banks with the dispute between the parties. The Court accepts this explanation as being correct. That letter also referred to the fact that no reply had been received to Fergus Devereux's letter of the 14th June to Brian D'Arcy. In fact no reply was necessary to that letter.
- On the 2nd day of July, 1999 Orlagh Deegan had a telephone conversation with Fergus Devereux, in which he stated that the transfer forms could no longer be supplied to Meridian. The reason put forward by him was that the matter was now with the legal team and outside of his control.
- On the 2nd of July, 1999 Fergus Devereux wrote to Brian D'Arcy. In this letter he stated that he had not received a reply to his letter of the 14th of June, 1999. He further stated that Meridian had been supplied with 60 books in that year and had only used a fraction of them and that they had a sufficient quantity. He said "given the cost incurred by Eircell in producing transfer books it is incumbent on Meridian to justify why a further 10 book/500 forms are required by you at this time"(In fact most of the books contained 25 forms and not 50 forms)
- On the 5th of July, 1999 Orlagh Deegan in a letter to Fergus Devereux stated that the plaintiff required 100 transfer form books. She further stated that it was intended to use photocopy transfer forms to help both parties.
- On the 6th of July, 1999 Fergus Devereux replied saying that Eircell would not accept photocopies of transfer forms as this would be "an unacceptable departure from Eircell's normal process". He further stated that Eircell was not prepared to issued Meridian with further books until they accounted for the previous transfer forms they had received.
- On the 8th of July, 1999 Dominic Dowling wrote to the defendants' solicitors offering to pay the cost of obtaining the books of transfer forms.
- On the 8th of July, 1999 the solicitors for the defendant replied stating that they failed to see why Meridian would not deal with the simple issue of what use had been made of the transfer books in the past. Furthermore, the letter said that a new version of the transfer form was currently with the printer and new transfer books would be produced in the following week. The letter also stated that "our client has no difficulty in furnishing your clients with sufficient books for your clients need".
- On the 15th of July, 1999 Brian D'Arcy wrote to Fergus Devereux again requesting transfer forms and reiterating that "the absence of the forms would have a negative effect on our business",
- On the 19th of July, 1999 Fergus Devereux replied, again demanding an explanation as to what use had been made of the previous transfer books, and also stating that it was difficult to appreciate that there would be any negative effect on the plaintiff's business.
- On the 16th of August, 1999 Orlagh Deegan wrote a letter to Fergus Devereux and explaining that Meridian had only received 25 transfer books of which 17 had been forwarded to agents nationwide and 8 had been retained. She also stated that the plaintiffs had a large number or sales representatives and agents and therefore required 100 books to be forwarded to them.
- On the 17th of August, 1999 Fergus Devereux repeated that Eircell had supplied Meridian with over 60 books and asked Meridian to account for the 35 of them not covered in Orlagh Deegan's letter. In evidence Orlagh Deegan stated that she had only received 25 books and not the 60 books which Fergus Donnegan had stated. This evidence was unchallenged as Fergus Donnegan for the defendant did not give evidence. This letter also referred to the proposal for a new procedure suggested by Eircell at a meeting of the 12th of August. That proposal was that Eircell would send the transfer out to the customer directly rather than to Meridian. Such a proposal if adopted would obviate the necessity for Meridian/Cellular 3 to have any transfer books. However, quite understandably, that proposal was unacceptable to the plaintiffs because Eircell wished to send out the process letter with the transfer form. Mr. Brendan Dowling made it clear by letter of the 17th of August, 1999 that he was not willing to consent to such a procedure.
- On the 18th of August, 1999 Brendan Dowling wrote to Fergus Devereux stating that:"we cannot continue in our business without transfer forms and the current situation is causing serious difficulties for our business. As you are aware we are effectively out of transfer forms which means that our agents and representatives cannot sign customers until the situation is resolved" This was the third time Eircell was put on notice that the non availability of transfer forms was causing difficulties for the plaintiff. In the letter Brendan Dowling repeated the offer that the plaintiffs would pay for the printing costs or any costs associated with the transfer books. He also stated that he could not account for the number of books which Eircell contended that Meridian had received because Meridian believed it had got a lesser number of books. Moreover, he gave an assurance that they were not misused and undertook to account for all future forms.
- On the 20th of August, 1999 Fergus Devereux replied to that letter and the effect that it was not sufficient for the plaintiff to state that it could not account for the number of books it received.
- On the 26th of August, 1999 Michele Hook of Meridian wrote to Fergus Devereux concerning the transfer books and stated that Meridian did not believe that Eircell had supplied 60 books of transfer forms and asked for details of delivery to be sent. She requested proof of delivery and, the dates and addresses of these deliveries. This was described in evidence by Fergus Devereux as "turning the tables" on Eircell.
- On the 6th of September, 1999 the defendant replied to this letter stating that it was not able to account for the delivery of books to Meridian and that it had not been the practice for Eircell's merchandising team to keep such records.
- On the 13th of September, 1999 Brendan Dowling replied to that letter repeating that only 25 books had been supplied to the plaintiff and asking him for books of transfer forms.
- On the 15th of September, 1999 Fergus Devereux once again asserted that Eircell had supplied 50 to 60 transfer books to Orlagh Deegan. He agreed to provide 5 books of transfer forms which he said would be more than adequate to meet the plaintiffs' requirements. He stated that these were sent without prejudice to Eirecell's requirement that "the transfer process be modified".
- On the 17th of September, 1999 Brendan Dowling replied stating that 5 books were inadequate and asserted that Eircell was directly interfering with the plaintiffs business and frustrating its operation and growth.
- On the 21st of September, 1999 Fergus Devereux agreed to supply a further 10 transfer books as a gesture of goodwill but stated that "we will not issue you with transfer books indefinitely while the transfer process issue remains unresolved".
- On the 28th of September, 1999 Brendan Dowling replied. He once more repeated his assertion that the refusal to supply transfer forms was a direct attempt by Eircell to frustrate the plaintiffs' business. He indicated that the plaintiffs employed over 50 representatives to sell the services and each of these representatives required forms.
- On the 6th of October, 1999 Fergus Devereux replied to this letter. He rejected the allegation that Eircell was attempting to frustrate the plaintiffs' business and stated that Eircell were unwilling to supply transfer forms because of the Roundhall Sweet and Maxwell incident. He repeated that Eircell would not issue transfer books indefinitely while the process letter issue remained unresolved.Because the Roundhall Sweet and Maxwell incident was relied on by the defendant in the context of the dispute concerning books of transfer forms it is appropriate to deal with it here.In July, 1999 a member of the firm Roundhall Sweet and Maxwell wished to transfer from Eircell and to avail of the services of Meridian/Cellular 3. For such a transfer to be effected it is necessary that the prospective customers sign their forms to wit a contract for service with Meridian/Cellular 3, a transfer from Eircell and an authorisation to transfer. In this instance the would be subscriber signed the contract for the service of the plaintiffs but did not sign the authorisation from. What purported to be her signature was wrongly appended to the authorisation form by an employee of the plaintiffs.
- On the 12th of October, 1999 Brendan Dowling replied to this letter explaining the Roundhall Sweet and Maxwell incident and asking for further books of transfers.
- On the 13th October, 1999 Fergus Devereux replied denying that Eircell was intentionally attempting to obstruct Meridian and also stating that he had sufficient authority to resolve the issue between the parties
- On the 18th October, 1999 Brendan Dowling replied this letter. Yet again he made the point that the refusal of the defendant to supply transfer books was damaging to the plaintiffs business. In that letter he refused to accept a proposal by Fergus Devereux which would involve a process letter being sent to all of the plaintiffs customers and which would thereby render it unnecessary for the plaintiffs to have any transfer books. This letter also refers to a conversation between Fergus Devereux and Brendan Dowling in which Fergus Devereux stated that he was unaware that the customer from Roundhall Sweet and Maxwell had actually signed the plaintiffs' contract for service and the Eircell transfer form. Certainly the contract for service had been signed, and there is a dispute as to whether or not the transfer form had been signed.
- On the 6th December, 1999 at a meeting between Meridian and Eircell to resolve operational issues, Brendan Dowling asked Fergus Devereux for two books of forms for the representatives country-wide, and for the numerous agents that they had. Fergus Devereux again maintained that the plaintiffs had sufficient forms, and again pointed out that if Meridian agreed to the proposal which included the sending out of the process letter there would not be any need for Meridian/Cellular 3 to have transfer forms.
- On the 17th January, 2000 Brendan Dowling asked Fergus Devereux for books of transfer forms for the Court proceedings, which were due to start the next day. Fergus Devereux refused to supply them.
- In February, 2000 there was a complete change of attitude the part of Eircell. The plaintiffs now have no difficulty in obtaining as many books of transfers as they require.
- The excuses given by the defendants for failing to supply the necessary transfer books are varied and singularly unconvincing. In my view it was not the cost of the books, as Meridian/Cellular 3 offered to pay for the them. It was not the need for security. I consider that the Roundhall Sweet and Maxwell incident was used as a spurious excuse to deny to the plaintiffs books of transfer forms. Moreover it appears that Fergus Devereux was not familiar with all the details of that incident. The printers holidays was not the reason for the failure for the supply of books to Eircell. I consider that it is of relevance that Fergus Devereux regarded the plaintiffs as competitors, although he denied that this was the reason for the failure to supply transfer books. On day 81 the following passage occurs.
"No, that is not a reason. Certainly they were a competitor. I would have been aware they were a competitor. The reason I didn't give them books of transfer forms is because my firm belief was they had sufficient quantities available to them."278. The behaviour of the defendants outlined above, concerning the transfer books could fairly be characterised as obstructive, obdurate and arrogant. The defendant desired to exercise control over the plaintiffs by limiting the supply of the transfer books to the plaintiffs except on the basis of the defendant's assessment of their requirements. I am not convinced that there was any valid financial, logistical or security justification for such conduct. I am convinced that the Roundhall Sweet and Maxwell episode was seised upon by the defendant as a convenient pretext to coerce the plaintiffs into agreeing a change in the procedures. The procedure which Eircell tried to enforce by the depriving or threatening to deprive the plaintiff of transfer books, was that the transfer forms would be sent directly to the customer proposing a transfer from Eircell to Meridian/Cellular 3. This would enable Eircell to send the process letter to all their customers who wished to change to Meridian/Cellular 3. 279. The question arises as to whether the conduct of Eircell amounted to breach of an implied term in the VDA. 280. In his closing submission Mr. Brady pointed out that no mention of this issue is contained in the amended Statement of Claim dated the 21st February, 2000. He argued that under the principles governing the implied terms in a contract no such term should be implied in the present case. He correctly submitted that the Court should look at the term as of the date of the VDA in August 1997 and of its renewal in November, 1998. He went on to point out that the number of transfers for that time was very low. (Between the months of March and November 1998 there were only 13 transfers and in the months of June and July and August of that year there were no transfers at all). Mr. Brady contrasts that with the present position where more than 50,000 lines have been transferred. 281. It seems apparent from the evidence that, although Mr. Dowling had informed Eircell that he required the VDA to 'grow his business' that Eircell were not aware that he intended to use the VDA to compete with them. At no stage was this information conveyed to the defendant. Mr. Brady submits that this is of relevance, argues that the defendant would not have agreed a term to supply whatever number of books where required by the plaintiffs in the knowledge that they would compete with Eircell and use the discount to take customers from it. The use made by the plaintiff of the VDA does not seem to me to be helpful in deciding whether a term should be implied in it. It is agreed between the parties that the Court must look at the circumstances which occurred as of August 1997 and November 1998 when Eircell were not aware that Meridian would use the VDA as they subsequently did. 282. Relying on the legal principles contained in his submissions and outlined above, Mr. Brady for the defendant argues that no term can be implied in the VDA which would oblige Eircell to provide an unlimited supply of transfer books to the plaintiffs, either on the basis of being necessary to give business efficacy to the contract or has been impugned agreed but not expressed or on any other basis. 283. It is quite clear that a clause such as was contended for by the plaintiffs is not required to give business efficacy to the contract. This is evident from the fact that other users of the VDA have been operating without such a clause. In the case of other customers the transfer forms are sent directly from Eircell to the person wishing to transfer. Such a clause is thus not necessary to give business efficacy to the Agreement. If the term cannot be implied to give business efficacy to the standard form agreement in respect of other users, it cannot be implied in the same standard form agreement merely because of the use which Meridian makes of it. 284. A term cannot be implied in the VDA providing for the granting of transfer forms to Meridian, on the basis that their provision is something that was obviously agreed between the parties but unexpressed. If the officious bystander had inquired of the Eircell representative whether there was an agreement concerning the supply of transfer books to Meridian he would probably been met with the response "What ever for?" from a baffled Mr. Hennessy. 285. Mr. Gordon for the plaintiffs submitted that a term should be implied with the contract that the defendant would do nothing to frustrate its operation. He referred me to passages in Chitty on Contract, 28th Edition; (1-019 - 1-021) and to an interesting discussion on the question of implied terms of fairness into a contract contained in Friel's Law of Contract 2nd Edition 183 ff. I was also referred to the unreported judgment of Barron J. in Royal Trust Company of Canada and Others -v- Kelly and Others dated 27th February, 1989 which contains a useful summary of some of the authorities - The relevant passage at pages 12 and 13 of the judgment read as follows:
Counsel for the defendant submits that the contract of loan contains an implied term that the first-named plaintiff would not do anything to make it inoperable. He referred to Stirling -v- Maitland (1864) 5 Best and Smith 840. In that case, the plaintiff had been appointed an agent upon terms inter alia that if the agency was terminated he would be paid a specified sum of money. The principal went out of business and claimed that it no longer had any liability to the plaintiff. The plaintiff sued for the agreed sum and succeeded. The Court read the covenant not as one which prevented the principal from dismissing the agent, but as one which obliged them to pay a particular sum of money to the plaintiff if they did. A further expression of the same principle is contained in the following passage from the Judgment of Lord Blackburn in Mackay -v- Dick and Stevenson (1881) 6 App Cas. 251 at page 263 cited in Sprague -v- Booth 1909 AC 576 which is as follows:
"Where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing."
In William Cory and Son Limited -v- London Corporation 1951, 2 K. B. 476 at page 484 in a passage approved by Keane J. in Massarella -v- Massarella, an unreported Judgment delivered on the 18th July 1980 Lord Asquith dealing with the same principle says:
"In general, no doubt, it is true that a term is necessarily implied in any contract whose other terms do not repel the implication, that neither party should prevent the other from performing it, and that a party so preventing the other is guilty of a breach".
Examples of the application of the principle are to be seen in Ogdens -v- Nelson 1905 A. C. 109, where as in Stirling -v- Maitland a company which had covenanted to pay the plaintiff annual sums was held not to be able to escape its liability by voluntarily closing down its business. In Southern Foundries -v- Shirlaw 1940 2 All E. R. 445 and in Schindler -v- Northern Raincoat Company Limited 1960 2 All E. R. 239 it was held that a managing director could not be removed by the company in pursuance of the provisions of its articles when he had a service contract the term of which had not yet expired. Similarly in Brewer Street Investments -v- Barclays Woollen Company Limited 1953 2 All E. R. 1330 a prospective tenant for whom a landlord had carried out alterations on the premises was not permitted to break off negotiations for the lease solely to escape liability for the cost of such alterations.
These cases establish that a party to a contract cannot voluntarily create conditions which will prevent the performance of the contract. So where A contracts with B to catalogue his library, he cannot sell his books before B commences work. Where A agrees to assign a leasehold interest to B and to obtain the necessary consent of the lessor, he cannot refuse to seek such consent. The rule is analogous to the rule in property law that a grantor cannot derogate from his own grant.286. In my view, while the present case is less extreme than the authorities cited, it can be fairly said that the actions of the defendant were intended to, and did in fact prevent the plaintiffs from operating the contract - if only to the extent that it effectively prevented them from expanding their business. Despite the behaviour of Eircell, Meridian/Cellular 3 do not make the case that they lost any customers for want of transfer books. I accept the evidence however that because of the failure to supply transfer books as required, Meridian were unable to expand. 287. The VDA did not impose any particular administrative arrangements on the defendant. Eircell was free to adopt whatever administrative arrangements it saw fit. Certain procedures considering transfer methods had been implemented, between Eircell and Meridian/Cellular 3 prior to the involvement of Fergus Devereux. There is nothing to prevent Eircell changing those procedures provided that they are not in breach of contract. However, Eircell was not entitled by its actions deliberately to frustrate the contract in order to bring about a change in established procedures, and replace them with procedures which it favoured. 288. In my view there was a term implied in the contract that either party would not deliberately seek to frustrate the operation by the other party. Such a term is not only reasonable (which would not be sufficient), it was agreed but unexpressed. It would pass the officious bystander test. 289. The plaintiffs may well have major difficulty in establishing their loss before a Court. That however, is for another hearing.
5. The Electronic Information/Brio Complaints.290. The entitlement (or otherwise) of the plaintiffs to electronic billing, or billing information was the subject matter of prolonged and at times confused (and confusing) evidence. In the closing submission the plaintiffs claimed that they required all the data contained in the paper bills furnished to Meridian/Cellular 3 in electronic format. At present the plaintiff receives its bills in printed form. They point out that this method is ungainly and inefficient because of its sheer volume. It also inhibits the ability to bill their own customers quickly and efficiently, thereby causing significant cash flow problems. The provision of the data in electronic format would also enable Eircell to provide a more focused and comprehensive service for their customers. Such services would include ongoing monitoring of their Eirtime uses and thus enable Meridian/Cellular 3 to advise their customers as to which would be the best tariffs for that customer, the provision of tariffs for specific types of customers, as well as the general development of Meridians services. Although the information sought in electronic form can be gleaned from the present bills, it is pointed out that the gathering of such information is a slow and tedious process, expensive to do on an ongoing basis and no substitute of for getting the data in the electronic format. 291. The plaintiffs submitted that the entitlement to such information arises as an implied term in the VDA. 292. In paragraph 5(00) of the amended Statement of Claim dated the 21st February, 2000 it was pleaded that it was "an express and/or implied term" of the said VDA "that billing information, which the plaintiffs might use for the purpose of preparing their own customer bills, would be provided in electronic format in a timely manner." The breach of contract relied on by Meridian was pleaded at 7(G)(dd) of the Statement of Claim as follows:-
"The defendant has denied the plaintiffs timely and/or accurate electronic billing information with the intent and/or effect of depriving the plaintiffs of the ability to issue bills saved by manual analysis of the defendants paper bill, so placing the plaintiffs at a disadvantage in the market place with the intent of favouring the defendant."
The Evidence.293. Brian D'Arcy gave evidence that in 1998 one of the areas that Meridian was looking at was billing information. He said "now what we had done is based on the fact that we were supposed to get correct information from Eircell electronically, which is referred to as the Brio package - we had built some very very strong packages which would manipulate that information and provide to our customers very detailed information......". It is apparent therefore, that Mr. D'Arcy considered that Brio was electronic information which could be used with a package which Meridian had developed. He said that he had spoken to Mr. Hennessy as to what Brio was or was not. It was an electronic billing system. In early 1998 Mr. Hennessy said that "they were developing an electronic billing package. It was not finalised yet but it certainly was going to be available and when it became available he would contact me." Mr. Hennessy later contacted Mr. D'Arcy and told him that the package was ready but that Meridian would have to buy the software to manipulate the data. Mr. 294. Hennessy put them in touch with a company called the Bromley Group who provided the software and they bought the package for about £950 or £1000 or thereabouts. 295. On day 40, question 31 Mr. D'Arcy said "my plan was to get the electronic data from Eircell which I'd been told I would receive. I had told Mr. Hennessy on what grounds I needed it, what I needed it for and he said yes, that package is being developed at the moment and it will become available." On page 20 question 71 the following exchange took place
"Q. We have being all over that before and I do not intend to repeat it, Mr. D'Arcy, but it was the 17th November when the VDA was renewed and I must put it to you that Mr. Hennessy said there was a software package called Brio, it was available from the Bromley Group but it was not electronic billing?
A. That is correct the Brio software, we have all agreed is not electronic billing. I was not looking for an analysis software package. As I said before John Hennessy told me about it I did not even know about such a thing, I was looking for an electronic format for my bills."
296. It is clear that Mr. Hennessy had a different understanding of Brio. He said that it was an electronic calls detail package which could be interrogated to analyse calls made in a particular month. He stated that Mr. D'Arcy was looking for the calls detail in some sort of electronic format he could use for his customers. His account is as follows and occurs at day 28 questions 32 and following:-
"Q. 32 Can you tell his Lordship do you recall having a conversation with Brian D'Arcy concerning Brio?
A. I did have a conversation with Brian D'Arcy, yes.
Q. Can you tell his Lordship in your own words what was said by Brian D'Arcy in relation to bills?
A. Brian was looking for basically the calls detail in some sort of an electronic format which basically he could use for his customers. So for instance, lets say in one month he rented out a phone for two weeks and the next two weeks he rented out to a separate customer he could then split the bill, if it came electronically he could split the bill and add up the two sides.
Q. Was that your understanding?
A. That is what my understanding was, yes.
Q. What did you do then about that request?
A. I approached Claude Kinsella and said that Brian was looking for Brio.
Q. What did you then do having spoken to Claude Kinsella, did you go back to Brian?
A. Yes, I went back to Brian.
Q. And what did you say?
A. I gave him the name of the Bromley Group to arrange purchase of the Brio software."297. Claude Kinsella confirms that he was advised by John Hennessy that Meridian had asked for "the call details electronically". In that context he said ".... fine, set them up on Brio".
Copy of information sent to printers.298. In early 1999 Paul Cullen, Operations Director of Meridian/Cellular 3 was asked to evaluate Meridians operational systems from a technological point of view and in particular with a view to the ability to deal with the anticipated growth in customer numbers and also in terms of its ability to provide for the customisation of bills, that is the ability to offer particular customers different display options on their bills according to their requirements. He found the systems in place at the time were elementary and in particular the billing was being done on a basic off the shelf package. He wanted to develop a system within the company that would cater for the projected increase in customers, that had some customer care capability, that was capable of being used for customised billing and ultimately a system that could be capable of being integrated with a rating engine which would enable Meridian to create their own tariffs systems on the market. In June 1999 he examined the billing system and in co-operation with Mr. Philpottt he brought in a company called Telepath to generate a report writer. A report writer is a machine which allows for information to be drawn down from a database and to be processed in such a way as to focus on particular aspects of such information as required. Telepath were to provide a report writer which was capable of taking and processing the information from the Brio system. Mr. Cullen's understanding was that Brio was an electronic version of the billing information available on the paper bills, the information contained was the same. 299. In July, 1999, 150 of Eircells bills in paper form were compared with the equivalent information provided by the Brio system, that is the information supplied by Eircell and processed by the Brio software package which had being purchased for £980. The comparison showed major discrepancies between the paper bill and the information on the Brio system. Analysis showed that there were a number of errors in the system. There were discussions between Mr. Philpottt and Mr. Cardiff concerning problems and possible solutions which are well documented in an E-mail from Hugh Cardiff of Eircell to Fergus Devereux on the 9th July, 1999.
The conversation with Conor Philpottt from Meridian was regarding how best to eliminate the discrepancies appearing between Brio call details and the bill statements. They have an electronic billing system, so he wants to be able to rely totally on the Brio and not have to cross-reference with the statements.
He's in their technical dept., so he just wanted to iron out all technical issues and the reasons for discrepancies, as he wants to get their electronic billing system up and running smoothly, without manual intervention.
The main issue was with Roaming Calls appearing on the bill, but not appearing on Brio. I explained that Roaming calls can take up to a couple of weeks before being loaded on to our system. So a roaming call made on the 26th April, may not get loaded on our system until mid/late May, by which time the Brio call details has been sent out. As Corporate Sales run call details for specific months, they would not rerun April, and when they run May details, the call would not appear, as it has a Data Stamp of 25/4/99. Whereas the billing realises this call hasn't been billed, so it appears on the May bill.
I suggested a way around this would be for Corporate Sales to run 2 Brio queries each month - one for all call details for the previous month (May), and one for all roaming calls for April would have already appeared in the normal Brio that was sent out at the start of May, but it would be up to Meridian to filter out any roaming calls they've already received.
(ii) He said there was also a chunk of calls missing for some subscribers (not all) on the 18/19 May. I said that we'd had a machine failure during May and had to restore calls, and that there was a chance that some calls may not have been restored. He accepted this explanation.
(iii) He said every month there was 4 or 5 calls appearing on Brio which weren't on the statement. I said I'd have to look into the reason for this and that I'd get back to him about it. (I've since found out that there have been delays in ICCS loading up Easy Connect calls in the last few months, so this explains it)
I said that in general, since the bill statements come from our Production Billing system that, where discrepancies occur, he should always go by what's on the bill, since Brio looks at a different source - and as this involves copying over vast amounts of data and loading it up onto a different machine on a daily basis, the margin for error is greater.
(iv) Finally he asked was it possible to get a soft copy of what's exactly on the bill, as this would eliminate all discrepancies. I said I didn't know, and I'd have to look into it.
PS. Fergus, can you let me know the next course of action. I said I'd get back to him on point (iii). The reason for this is Easy Connect delays, and he's going to see these calls anyway on the June bill. On point (iv), who should I refer him to - yourself, or the Corporate Account manager?300. Fergus Devereux's response was contained in an E-mail to Paul Tully which was circulated to Hugh Cardiff amongst others, reads as follows:-
Fergus Devereux To: Paul Tully/Eircell
09/07/99 15:19 cc: Anne Carroll, Hugh Cardiff/Eircell, Paul Condgon/Eircell, David McCarthy/Eircell, Peter Curran/Eircell
Subject: Re: Meridian
Thank you for the information.
This company, Meridian, are in dispute with Eircell (currently ongoing in the High Court).
I am now the point of contact for them in Eircell and have advised Hugh and Nicola of this.
I have asked Hugh to advise any callers from Meridian to contact me.
I am in total agreement that Brio is not a billing solution. However, Meridian are clearly endeavoring to use it as one. They have been advised that Brio is not an 'electronic billing system' (on several occasions).
Any requirements that Meridian have should be channelled through myself.
Thus, please take it that I will be responding to Meridian and that you or the IT department have nothing further to do with their request.
Hope this clarifies matters.
We will have to discuss on Monday with a view to issuing a response.
301. Mr. Cardiff informed Mr. Philpott that future contact was to be with Mr. Devereux only. The matter was not pursued by Mr. Philpott who considered it a matter for management. Mr. Philpott was cross examined at length concerning the technical feasibility of providing such information and I am satisfied that there were no major technical reasons why such information could not have being supplied. Indeed, Mr. Devereux for the defendants conceded as much. The evidence however, established that some discussion or consultation between the parties would have to take place to implement such a proposal. 302. In December, 1999 Meridian/Cellular 3 worked in co-operation with 4th Millennium, distributors of an advanced scanning system called OCR (Optical Character Recognition scanning). The primary capability of that system is to copy the text details from the paper bill and to transpose the information into a database which in essence would give an electronic version of the information in the typed bills which they had hoped to get from Eircell. Had they got the electronic data in the same format as was given to the printers they would not have to incur the expense involved with this undertaking which was in the region of £230,000.00. The print system was commenced in February, 2000.
(A) Implied term. I do not consider that the provision of billing information was an implied term in the VDA. Such a term is not necessary to give business efficacy to the contract. It was not agreed between the parties. If the officious bystander were asked if the parties had agreed that Eircell should provide billing information in electronic format, it is most unlikely that the answer would have being "a testy - oh, of course". It is much more probable that Eircell would have replied that it would be necessary to discuss the matter further or that it would have to enquire the purposes for which such information was required and the financial terms on which such information would be provided. Furthermore, as the information was not provided to other customers in electronic format it is not reasonable to expect that such a term could be implied in the contract between Eircell and Meridian. Furthermore, in a letter of the 18th October 1999 from Brendan Dowling of the plaintiffs to Fergus Devereux the following passage occurs. "Brian D'Arcy of our company approached John Hennessy and clearly indicated to Mr. Hennessy that we wished to receive billing information in electronic format to allow us to bill our customers. It took many months of numerous conversations with John Hennessy of Eircell to finally receive agreement from Eircell to supply our customers with Brio as a billing tool". This account strongly suggest that so far from being a matter obviously agreed in the VDA, it was an agreement which had been made after a protracted period of negotiations. This is incompatible with the claim now being advanced. If the term had already being agreed it would not need to be the subject of negotiation which is the word used in the same letter to describe the circumstances leading to the supply of Brio.In giving evidence on the topic of electronic billing Mr. Brian D'Arcy stated as follows:-"In terms of how we would do it, I spoke about it to Brendan Dowling and obviously the logical question to ask was: can we get this in electronic format? which I did, I went to John Hennessy asked a question; if he had said a flat no then obviously alternatives would have to be looked at. But he didn't, he said yes a package is being worked on, it will become available, I'm not sure when, but when it does we will see that you avail of it". That passage is clearly not indicative of an agreement already having been made, but of a request for something which Mr. Hennessy had a right to refuse.
(B) A possibility of a legal obligation arising out of the conversations between Brian D'Arcy of Meridian and John Hennessy of Eircell was not part of the pleadings nor was it pursued by Counsel in his closing submission. However since it was mentioned in the correspondence and also in the course of the trial matters should be dealt with. The evidence in regard to what transpired between Mr. D'Arcy and Mr. Hennessy is incomplete and unsatisfactory, in particular in the following respects.(i) It is unclear when the discussions took place. From the evidence of Mr. D'Arcy the matter was first discussed in late 1997. At another stage in his evidence he said that the matter was first discussed in early 1998. Mr. Hennessy's evidence doesn't deal with the time of the conversation at all. (ii) While Mr. D'Arcy refers to, the topic being mentioned a number of times over a period of time, , Mr. Hennessy does not describe protracted discussions. (Mr. Dowling mentions negotiations over a "period of many months") (iii) Mr. D'Arcy's evidence was that Mr. Hennessy referred to a package that was not yet ready but was in the process of being developed. Mr. Hennessy makes no reference to a package which was in the course of being developed and was not cross examined about the matter. Mr. Brady, Counsel for Eircell suggested in closing that the only billing package that was being considered by Eircell was a possible E-mail billing facility. However, since the existence of this was not known to Fergus Devereux until mid 1999 it is unlikely that it would have been known to Mr. Hennessy in late 1997 or in early 1998. Mr. Kinsella thought that Brio was introduced to Eircell in late 1997 as a result of requests from various customers for some call detail information. While it appears from Eircell it was not a billing package and it was not something they were developing.When Mr. Hennessy with the agreement of Mr. Kinsella provided Mr. D'Arcy with the Brio system subject to the purchase of the software by Meridian it is clear that he considered that that was what was required, it was all that he had offered. It is of significance that Brio could be used as a billing device for short term rentals of less than a month which was the business which Mr. Hennessy understood Meridian to be involved in. Mr. Philpott in his evidence confirmed that Brio was being used for billing in short term rental for people who were using it on the rental fleet for less than a calendar month. It appears to me that they were likely to have been a number of conversations between Mr. D'Arcy and Mr. Hennessy in which mention was made of some electronic information. It seems likely on the balance of probabilities that what Mr. Hennessy had in mind was the Brio system which could be used for call detail analysis and to a limited extent for billing purposes for short term letting. What Mr. Hennessy had in mind was call detail information which could be used in conjunction with some "very strong packages" which Meridian had developed. There was confusion, imprecision, and no meeting of minds. Both sides now accept that Brio is not an electronic billing package, and Brio is all that was on offer from Eircell. Furthermore, the duration of such alleged agreement does not appear to have being discussed though Mr. D'Arcy was of the impression that once Meridian/Cellular 3 received the data they would continue to receive it. There was no agreement as to what payment would be forthcoming for such a service but Mr. D'Arcy said "If a question of payment had arisen that would have been addressed, but it never requested payment for it (sic), but certainly if payment had been expected it would have being addressed." I cannot accept on the basis of the evidence that Eircell were contractual obliged to supply to Meridian/Cellular 3 electronic data suitable for billing purposes for an indefinite period for no monetary consideration. The maximum extent of Eircells obligation was the provision of Brio.
(A) The provision of a copy of the bill that went to the printer. As I have already stated, in my view, there was no compelling technical reason why the relevant information supplied to the printers could not have been supplied to Meridian/Cellular 3. This solution to the problems being encountered by Meridian/Cellular 3 with the Brio based information first emerged in discussions between Mr. Philpott of the plaintiffs and Mr. Cardiff of Eircell. The provision would undoubtedly save Meridian/Cellular 3 a great deal of administrative trouble and enable them to improve their service and alleviate their cash flow problems. It is, however, a service that Eircell does not supply to any other customer. Notwithstanding the fact that there are no insurmountable technical problems, discussions would have to take place on a technical level as to how the information could be supplied in the desired form. Following the intervention of Mr. Devereux no further efforts were made to advance the matter. Either of the provision of the information that the printer received, or the solution to the problem of the roaming calls. Mr. Devereux did not consider the matter and was expecting a call from Mr. Philpott. In any event he would not have been prepared to give Meridian more than he gave to any other customers who were merely looking for the Brio. In May or June 2000 when faced with the request to supply the electronic billing in the form sent to the printers Mr. Devereux indicated that the matter would be considered if they put together detailed documents outlining their requirements. He passed the matter on to Mr. Fahy. Mr. Fahy considered that negotiations for such a request should be taken in the context of Meridians application for the status of MVNO (that is Mobile Virtual Network Operator). I do not consider that Eircell have an obligation to supply the plaintiffs with the information in electronic form such as was sent to the printers. They are clearly entitled to supply it should they wish. Moreover, in my view Eircell is not obliged to subsidise the billing system of a commercial rival. Meridian/Cellular 3 are capable of developing their own billing systems without Eircell supplying the information in the format sought. In my view therefore there is no obligation on Eircell implied by the VDA to supply Meridian/Cellular 3 with electronic billing information. Furthermore there is no binding agreement reached between Meridian/Cellular 3 and Eircell for the provision of billing information in an electronic form negotiated between Mr. D'Arcy and Mr. Hennessy. Moreover, the defendant is not obliged to supply the information now supplied electronically to its printers to Meridian/Cellular 3. Finally, and for the sake of completeness I should mention some of the problems which were encountered with Brio, in my view it is clear that there were problems encountered in the operation of the Brio system. These problems were not confined to Meridian/Cellular 3 but applied to all customers. It is not now contended that these problems were deliberately contrived so as to hurt the plaintiffs. In my view the problems encountered with the Brio were operational and technical problems and did not amount to a breach of contract. A similar observation applies to the difficulties encountered by Meridian/Cellular 3 because of the physical dimensions of the paper bill.
6. Miscellaneous.In addition to the matters already dealt with the plaintiffs have further complaints that do not fall into the categories already discussed: The Ronan Higgins Episode was the cause of one such complaint. 303. Ronan Higgins was the Assistant Manager of Lets Talk Phones on Grafton Street, Dublin an enterprise which was owned by the defendant. In April of 1999 he was offered employment by Meridian and discussed the matter with his area manager Gary Doyle. Enquiries were made on his behalf as a result of which Ronan Higgins contacted Stephen Tabor, Eircell's Account Manager for Lets Talk Phones. Ronan Higgins' evidence which was challenged but uncontradicted is that
"Stephen Tabor categorically said to me that Meridian was a dodgy company and also that they would not be around in six months time".304. I accept that such a conversation took place. 305. The plaintiff argues that the statement constitute the tort of injurious falsehood. In McMahon and Binchy's Irish Law of Torts, 2nd Edition, at pages 673/674 the authors state that the tort "It now encompasses not only "slander of title" but also false statements calculated to injure a person in his trade or more broadly, even damaging falsehoods of a non-commercial nature. The essence of the tort is that the falsehood deceives others about the plaintiff so as to cause loss to the plaintiff.......... The tort differs from that of negligent misstatement in that the statement must have been made maliciously". In my view the statement that Meridian was a dodgy company was clearly false. In the ninety four days of hearing there is nothing that would support that contention. The statement that they would not be around in six months, proved to be inaccurate. However, there is no evidence that the words were said maliciously, and I am not prepared to infer that they were. Counsel's case was that the damage sought to be done was the dissuasion of Ronan Higgins from joining Meridian. That damage however did not, occur as Ronan Higgins did in fact take up employment with Meridian. No special damage was caused but the plaintiff argues that such is unnecessary by virtue of the provisions of Section 20 of the Defamation Act 1961 which provides as follows:-
(1) In an action for slander of title, slander of goods or other malicious falsehood, it shall not be necessary to allege or prove special damages -
(a) if the words upon which the action is founded are calculated to cause pecuniary damage to the plaintiff and are published in writing or other permanent form; OR
(b) if the said words are calculated to cause pecuniary damage to the plaintiff in respect of any office, profession, calling, trade or business held or carried out by him at the time of the publication.306. Section 1(a) clearly does not apply because the words were not published in 'permanent form'. In my view neither does Section 1(b), because I do not consider that the solicited advice given by Stephen Tabor which was solicited was calculated to cause pecuniary damage to Eircell in trade or business. 307. Even if I am wrong so deciding, no blame can attach to Eircell for remarks made in a private conversation by its employee in response to contact from Ronan Higgins. Stephen Tabor was not speaking as an employee of Eircell, but in a private capacity when he made the remarks complained of. They were made outside the scope of his authority, actual or ostensible. 308. Insofar as it was argued that this matter was part of a 'whispering campaign' or 'part and parcel' of an effort "to stymie" the plaintiffs' business as their counsel put it, I reject these contentions. There is no evidence of a whispering campaign, and Stephen Tabor's conversation with Ronan Higgins cannot be ascribed to Eircell. For that reason also, the conversation cannot amount to an inducement to breach of contract, the commission of which in any event generally require the inducement to be successful, which was not the case in respect of Ronan Higgins. I have already given my findings in relation to the sending of the process letter generally. Those findings of course also apply to the sending of the process letter to Ronan Higgins. The sending of the process letter did not amount to an inducement to breach of contract. Insofar as it is alleged that the phone conversation with Fergus Devereux constituted an inducement, I am not prepared to hold that it did. Ronan Higgins cannot recollect specifically what was said, and relies on his impression of the conversation and his perception thereof. It is not a sufficiently reliable basis on which to conclude that the telephone call constituted an inducement. 309. In paragraph 7G(R) of the amended statement of claim the plaintiffs claim that "the defendant has threatened to initiate a fraud investigation against the plaintiffs their servants or agents when the defendant its servants or agents knew that there were no grounds for such an investigation," 310. Contrary to a term which they pleaded in paragraph 5(cc) of the amended statement of claim, was implied in the VDA. That subparagraph was included in the closing submission in written form but was not otherwise pursued in the closing arguments. For the sake of completeness I should state that in my view no such term as contended for by the plaintiffs can be implied in the VDA. The evidence of Mr. D'Arcy of Meridian on this point revealing: The following passage of significance took place at day 21 p. 109.
"Q. 479 I want to deal with this meeting as well and the issue about the fraud department. As I understand what you are saying it is essentially that there was a threat by Sean Kinsella to involve the fraud department of Eircell.
A. No it wasn't, there wasn't a threat. As I saw it, it was an insinuation that what we were doing was fraudulent, because there was a fraud department in Eircell looking after this kind of thing. It wasn't a threat that the fraud department was going to come after me, it was a threat [that] what we were doing was fraudulent."311. Mr. D'Arcy agreed that it was never alleged that what Eircell were doing was fraudulent: He also said that "Claude Kinsella made reference to the fact that they had a fraud department", and elsewhere gave evidence of 'the fraud department being mentioned'. There is another portion of his evidence that could be interpreted been agreeing that threats were being made 'about fraud departments'. I am satisfied however that there was no threat to initiate a fraud investigation, as the plaintiffs claim. The plaintiffs claim in this regard fails both because in my view there was no such implied term in the VDA as the plaintiff contended for, and also because, on the evidence there was no such threat as was alleged by the plaintiffs. In those circumstances it is unnecessary to decide whether the reference to Eircell's fraud department was in an entirely different context as alleged by Mr. Kinsella, or in the context of the transfers to Meridian of Eircell's customers as was stated by Mr. D'Arcy. Even were Eircell dominant, the conduct complained of concerning the alleged threat would not constitute an abuse of dominance, even if my finding on dominance were in error. The incident clearly could not be regarded as 'seriously distorting the market' nor could it conceivably be regarded as affecting trade between member states. 312. The letter from Mr. Kinsella dated 15th February, 1999 setting out Eircell's understanding of the VDA in which he stated "Eircell reserves the right to pursue whatever course of action it deems necessary and appropriate to resolve the current dispute".... was merely a statement of the defendants position which they were entitled to communicate to the plaintiffs. It did not constitute a threat. 313. The plaintiffs' amended statement of claim dated 21st February 2000 includes a claim for damages for conspiracy but such claim is not being pursued and Counsel so informed the Court. 314. The plaintiffs also contend that Eircell sought to undermine Meridian/Cellular 3, 'an enterprise which they had undertaken to support'. Eircell was in breach of contract in the instances already dealt with in the judgment, but the evidence does not sustain the proposition that Eircell tried to undermine the plaintiffs in their activities. Moreover Eircell was not either by virtue of the VDA (with its incentive to buy more airtime) or otherwise, obliged to support the development of Meridian/Cellular 3. It was obliged only to deal with the plaintiffs in accordance with its contractual obligations. 315. The Court has found breach of contracts in relation to the suspension of the transfer forms, the delay caused by the sending of the process letter, and the denial of the transfer books to the plaintiffs except on Fergus Devereux's assessment of their requirements. The failure to notify Meridian/Cellular 3 on demand or shortly thereafter if the line was connected, other than in the first bill was also a breach of contract. These breaches do not sustain the proposition that Eircell attempted in a concerted fashion to frustrate the operation of the VDA, or any term in it, express or implied. 316. In closing submissions.
"The plaintiff contends that the activities of the defendants in suspending transfer forms, delaying transfer forms, frustrating the operation of the contract by changes in their operational procedures, sending out the process letter, refusal to supply books of transfers and refusal to supply electronic billing also amount to an abuse by the defendant of their dominant position in the market"317. Although the Court has found that Eircell is not dominant in the market, it may be of assistance to the parties to express a view on the validity of that submission in the event that my finding on dominance is found to be incorrect. 318. The plaintiffs adopted a quotation from Bellamy and Child, Common Market Law of Competition, 4th Ed., at p. 617 where the authors observe:
"In general the governing principle of Article 86 is that conduct by a dominant firm which seriously and unjustifiably distorts competition within a properly defined relevant market will be prohibited, in so far as it affects trade between Member States."
(1) Suspension of transfers. The suspension of the transfers for a period of a few days could not be regarded as seriously distorting competition, nor did it affect trade between member states. It could not constitute an abuse of a dominant position.
(2) Delay. I have already found that there was unjustifiable delay in processing transfer requests other than that occasioned by the sending of the process letters. The delay caused thereby was for a very short duration and in respect of a relatively small number of customers. It could not be said either to have seriously distorted competition within the relevant market nor could it be said to have had any real effect on trade between member states.
(3) Changes in procedures. With the exceptions of (a) the failure of the defendant to notify the plaintiffs on demand or at least within a reasonable time, whether they were connected to Eircell's service, and (b) the delays caused by the sending of the process letter, I have found the procedures justified and/or unlikely to cause delay. I have also rejected the plaintiffs contention that the defendant generally frustrated the operation of the contract, though I have found the defendant committed certain breaches. I already indicated my view of the sending of the process letter, in terms of an abuse of dominant position. The failure to notify Meridian/Cellular 3 of demand, or shortly thereafter, whether a connection had been effected could not be deemed to distort competition in the market, nor has it been demonstrated to have affected trade between states.
(4) The process letter. The sending of the process letter constituted a breach of contract only by reason of the delay it caused in effecting transfers to Meridian/Cellular 3. It did not amount to a tort. Except for the delay it caused, it was justifiable, and in my view the sending of the process letter would not be an abuse of dominance had Eircell been found to be dominant.
(5) The refusal to supply transfer book as required by the plaintiffs. This was a breach of contract. Depending on the extent of such a breach it may have seriously and unjustifiably distorted competition within the market for mobile telephony in Ireland, and it may have affected trade between member states. The extent of the breach and its effects are matters which have been postponed until the assessment of damages. In my view a decision as to whether the breach complained also constitutes an abuse of dominant position depends on the evidence on the assessment of damages. In my view it is a matter which should be open for argument in the event of the finding of this Court on dominance being reversed.
(6) Electronic Billing. The failure to provide electronic billing information in the sense complained of was not a breach of contract by Eircell. Were Eircell dominant in the market they would still be under no duty to provide electronic billing for the plaintiffs who are their competition. It is for the plaintiffs to develop their own electronic billing system. In circumstances where they were dominant, Eircell might well be under an obligation to supply information in electronic form, perhaps similar to that at present furnished to their printers. However, they would only be obliged to do so on a commercial basis. The evidence on this matter is the subject of discussion. In any event the conduct of the defendants up to the present concerning the Brio/Electronic billing information would not constitute an abuse of dominance, should Eircell be held to be dominant.319. In their list of issues furnished to the Court on the penultimate day of the case the plaintiffs attempted to raise certain complaints concerning the Estimated Eirtime Usage agreement. The Court ruled that the plaintiffs were precluded from arguing therein. It would be inappropriate therefore to discuss this issue. An issue concerning the reasons for the failure to renew the VDA, was also included in the list of issues, but for the same reason as applies in the case of the EEU dispute that issue also will not be considered. A final issue to wit - Did the defendant engage in threatening conduct towards the plaintiff amounting to an abuse by the defendant of its dominant position - is too vague for me to make a finding contingent on any finding on dominance being in error. cfeircellvmeridian(joh)