Broadcsters – Media and entertainment acquisitions – Judicial review

British Sky Broadcasting Group Plc v (1) Virgin Media Inc (2) Competition Commission (3) Secretary of State for Business, Enterprise & Regulatory Reform: CA (Civ Div) (Lords Justice Rix, Lloyd, Mr Justice Mackay): 21 January 2010

The appellant broadcasting company (S) appealed against a decision ((2008) CAT 25, (2008) Comp AR 223) dismissing its application for review of a decision of the Competition Commission.

The respondent media company (V) had announced an offer for the shares of the UK’s largest commercial broadcaster (X). S, which was a competitor of X in the TV market, then acquired 17.9% of X’s shares. The secretary of state, having regard to the public interest requirement under section 58(2C)(a) of the Enterprise Act 2002 for there to be a sufficient plurality of persons with control of the media enterprises serving audiences in the UK, referred the acquisition to the commission.

The commission concluded that the acquisition had resulted in a relevant merger situation but, having regard only to the public interest consideration specified in section 58(2C)(a), that would not be expected to operate against the public interest. However, the commission found that the acquisition was likely to result in a substantial lessening of competition with resulting adverse effects on the public interest based on an assessment of the competitive effects of the acquisition.

The commission recommended that S be required to divest itself of enough shares to reduce its holding to below 7.5% and the secretary of state accepted that recommendation and the findings of the commission, and imposed that remedy.

S applied for the commission’s findings and the secretary of state’s direction to be reviewed by the Competition Appeal Tribunal. The tribunal held that the commission had erred in law when considering the media plurality point, but held that the secretary of state’s decision as to remedy was unaffected and dismissed the review application.

S contended that: (1) the tribunal, as a body with specialist expertise, should have applied a greater intensity of review than would be applied on a normal judicial review application; (2) the tribunal should have set aside the commission’s decision because it had wrongly applied the relevant standard of proof and the necessary ‘counterfactual’ analysis when ­considering what would have happened if the acquisition had not taken place; (3) the commission’s decision to reject alternative remedies proposed by S was incorrect in law; (4) the commission’s interpretation of the legislation in respect of the media plurality issue was correct and the tribunal was wrong to set aside that part of the decision.

Held: (1) The tribunal was to apply the normal principles of judicial review under section 120(4) of the 2002 act, IBA Health Ltd v Office of Fair Trading [2004] EWCA Civ 142, (2004) 4 All ER 1103 followed. It would apply its own specialised knowledge and experience, which enabled it to perform its task with a better understanding, and more efficiently. The possession of that knowledge and experience did not in any way alter the nature of the task.

(2) The challenge on standard of proof and the counterfactual analysis was not really a point of law, but an attempt to reassess the evidence and to produce a different conclusion.

There was no error of law on the part of the tribunal as regards the application of the standard of proof. The standard of proof applied to the commission’s conclusion on the points which it had to decide, namely first whether the acquisition gave S the ability materially to influence the policy of X, and then whether that would cause a substantial lessening of competition. It did not have to be applied separately to each element in the analysis which was used to reach a conclusion on each of those points.

Even if the standard of proof did have to be applied separately, there was enough material available to the commission for it to conclude that each element was adequately proved.

(3) The tribunal was right that the commission was not irrational in rejecting the alternative remedies put forward by S.

(4) The commission was correct to hold that, whereas in reckoning the number of controllers of media enterprises for the purposes of section 58(2C)(a) only one controller was to be counted in respect of both or all of the relevant enterprises (in the instant case S and X), nevertheless, when assessing the plurality of the aggregate number of relevant controllers and considering the sufficiency of that plurality, the commission could and should take into account the actual extent of the control exercised and exercisable over a relevant enterprise by another.

The tribunal was wrong to hold that that approach was excluded by section 58A(5) which provided that, where there was any degree of control over one such enterprise by another, both of them had to be ­treated as under the control of only one person.

It was not right to read the artificial effect of section 58A(5), in a case within section 58A(5)(a), as extending farther than was necessary and clearly required by that provision. It should not be read as having an overriding effect, excluding a consideration of the extent of any control actually exercised or exercisable by a controlling enterprise over another enterprise in the course of the qualitative assessment required on an investigation by the commission in relation to the particular public interest consideration identified in section 58(2C)(a).

Appeal allowed in part.

Michael Beloff QC, James Flynn QC (instructed by Allen & Overy) for British Sky Broadcasting Group; Richard Gordon QC, Marie Demetriou (instructed by Ashurst) for Virgin Media; John Swift QC, Daniel Beard, Rob Williams (instructed by the Treasury Solicitor) for the Competition Commission; Paul Lasok QC, Elisa Holmes (instructed by the Treasury Solicitor) for the secretary of state.