High Court hears claims of collusion

Networks have been accused of unlawful anti-competitive conduct disregarding proper competition law protocols, and their own compliance rules, by meeting competitors without agendas, minutes, or lawyers. This was the accusation made in the High Court this week by the administrators of Phones4U.

O2, Vodafone and Orange have been accused of colluding to destroy Phones4U to leave the way clear for their own retail chains.

Phones4U collapsed spectacularly in 2014 after the networks pulled their involvement.in September 2014 leading to the loss of 5,596 jobs and the close of hundreds of outlets.

Accountancy firm PwC was been appointed to oversee the administration.

The case has been brought by Phones4U (In Administration) against EE Ltd,. Deutsche Telekom AG. Orange S.A, Vodafone Ltd , Telefonica UK Ltd. Telefonica S.A., Telefonica O2 Holdings.

Responsible 

The administrators are holding the networks responsible for the collapse of Phones4U.

In their opening submission to the High Court they alleged: “All of the operators saw an urgent need to ‘correct’ or ‘repair’ the UK market’s low profitability. This low profitability was seen as being due, at least in part, to the strength of the indirect sector.

“Three MNOs (Mobile Network Operators) were supplying Phones 4 at the beginning of 2014. By September, all of them had pulled out, supposedly unilaterally, and P4U had gone into administration. Defendants were acutely aware of how this looked, and anticipated questions that the media and Ofcom had not yet asked. The more material has emerged (notwithstanding very extensive document destruction), the more the evidence of unlawful collusion has deepened”.

The Court heard that each network operator made a strategic decision not to do a deal with P4U, “because each chose instead to participate in the coordinated diminishment, and then destruction, of P4U.

“All of the operators saw an urgent need to ‘correct’ or ‘repair’ the UK market’s low profitability. This low profitability was seen as being due, at least in part, to the strength of the indirect sector”.

The opening submission describes conversations between O2 chief Ronan Dunne and Orange CEO Olaf Swantee (below) about the low profitability of the indirect channel and also discussions with Vodafone said to be of an anti-competitive nature.

Pull-out

The submission continued: “In April 2014, EE believed that P4U would survive an EE pull-out and that it would cost EE £58 million. In May 2014, it believed that P4U would not survive and that a pull-out would gain EE £177m. But this change was not based on any knowledge of what Vodafone’s plans were. Vodafone expected that P4U would survive a Vodafone exit.

“It then apparently changed its mind and decided to exit P4U despite its analysis showing that would make financial sense only if P4U did not survive. “That change was not based on any knowledge of what EE’s plans were. Senior executives at all MNOs disregarded proper competition law protocols, and in some cases their own compliance rules, by meeting competitors without agendas, minutes, or lawyers. They did this not for any illicit reason, but (presumably) because they were lazy or careless.

When EE/DT/Orange and Vodafone repeatedly avoided creating written records of discussions about indirect distribution, that was for solely innocent reasons, and did not reflect any desire to avoid documenting unlawful activity”.

Read the opening submission HERE



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