Expert view – inside the Competition Appeal Tribunal25 February 2015
What is the Competition Appeal Tribunal and why is it so important? Here Professor Gavin Reid, the Head of Dundee Business, explains his role and the case he is considering this week between BT and Ofcom.
What does your role in the Competition Appeal Tribunal involve?
I was appointed a Member of the Competition Appeal Tribunal (CAT) by the then Competition Minister Edward Davey in January 2011, at which point I was Professor of Economics at the University of St Andrews. I have continued to play that role since my move to Dundee Business School.
Formally, the CAT is a judicial body which possesses cross-disciplinary capabilities and expertise in law, economics, business and accounting. As my research and expertise cross the boundaries of economics, accounting and finance, and also have legal elements such as intellectual property, my ‘fit’ to CAT activity was deemed appropriate.
The purpose of the CAT is to hear and decide appeals and other applications or claims which arise from competitive or regulatory economic issues. As an Ordinary Member you are trained in the elements of UK and EU law. In a tribunal setting you are led by a senior figure as Chairman (typically a high court judge), and your duties include assimilating large volumes of complex evidence, and contributing to decisions on substantive issues in a case.
Finally, in considering a case, you work jointly with the tribunal members to assess the evidence and to reach a judgment, drawing on the facts and the relevant law. The body of evidence includes written submissions, and oral evidence presented in court at a hearing. Members also meet regularly to update their skills, and to exchange views on pivotal matters in cases, past and present.
Can you explain the details behind this particular case?
Obviously at this stage I can only refer to what is in the public domain; and how a case proceeds is a matter of the completely impartial weighing of evidence as it unfolds. In the UK, telecoms are subject to quite close and intense scrutiny. The regulatory body of telecoms is known as Ofcom, and it had taken a close interest in the relation between wholesale operators and mobile phone operators. In particular, it had scrutinised what is known as ‘ladder’ or ‘tiered’ wholesale pricing.
This occurs when the wholesale price goes up with the retail price: hence its description as a ‘ladder’. To illustrate, UK providers of fixed line networks recently introduced ladder pricing for 080 calls which used to be free to those who used fixed lines, but were quite expensive for those who used mobile network operators for these calls. The aim of fixed line providers was to share revenue with mobile network providers. The latter objected to the ladder pricing, and a kind of regulatory ‘ping pong’ contest ensued.
The matter was considered by Ofcom (who objected to ladder pricing), and then went to the CAT (who approved of it), the Court of Appeal (who objected to it), and then the Supreme Court (who approved of it, in July 2014). The present proceedings (British Telecommunications Plc v The Office of Communications et al) (Case 1211/3/3/2013) involve a further set of ladder prices, for a wider range of call numbers.
How does this work link to your research and teaching at Dundee Business School?
My research in Dundee Business School is grounded in industrial organisation in a broad sense, and includes such matters as corporate finance, corporate governance, financial reporting, innovation, hi-tech business, venture capital, small and medium sized enterprises, intellectual property, oligopoly analysis, dominant firms, cartel pricing and partial monopoly.
All of these topics are relevant to activity in the CAT, especially oligopoly analysis, the topic of my earliest book. My teaching in DBS involves topics like managerial economics, competition policy, globalization and corporate governance. The kind of research I do naturally feeds into these teaching topics.
My earlier work with the CAT has especially drawn on my expertise in oligopoly analysis (competition among few firms in significant strategic interaction), and corporate strategy. The economics that underlies ladder pricing is modern, innovative and challenging, and relates to my own research agenda.
It is an example of modern microeconomics that is both rigorous, in that the analysis is mathematically tight, yet highly applicable to current, real circumstances in UK telecoms markets.
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