Cable & Wireless Bvi Ltd (“Lime Bvi”) v Telecommunications Regulatory Commission
| Jurisdiction | British Virgin Islands |
| Judge | Ellis, J. |
| Judgment Date | 09 August 2013 |
| Neutral Citation | VG 2013 HC 23 |
| Docket Number | BVIHCV 179 of 2012 |
| Court | High Court (British Virgin Islands) |
| Date | 09 August 2013 |
High Court
Ellis, J.
BVIHCV 179 of 2012
Mr. Brain Marc Kennelly for the applicant.
Ms. Keisha Durham and Kissock Laing for the respondent.
Administrative Law - Application by defendant/applicant to set aside ex parte order granting claimant/respondent leave to apply for judicial review — Anti-competitive conduct — Margin squeeze — An ex parte applicant for leave has a duty to make full and frank disclosure to the court of all material facts and matters within its knowledge, including matters which would militate against the grant of leave or relief — Duty of disclosure extends to adverse legal principles and authorities — Ex parte order granting claimant/respondent leave to apply for judicial review set aside — Claimant/respondent granted leave to file a claim for judicial review on the grounds of illegality and irregularity — Stay granted in respect of part of defendant's/applicant's decision relating to payment of fine prescribed under Section 75(2)(b).
This is an application by the applicant, Telecommunication Regulatory Commission (“TRC”) in which it seeks to set aside the ex parte order the Honourable Mr Justice Redhead dated 28th June 2012 which granted LIME BVI leave to apply for judicial review and suspended in the interim, the TRC's decision dated 1st June 2012 regarding LIME BVIs pricing practices in relation to mobile calls made from the BVI to other Caribbean Islands (the Decision).
The Application is brought within the context of a somewhat protracted history between the Parties which is critical to the matters in issue. For that reason the relevant background is summarised below.
By a written complaint to the TRC dated 14 July 2009 Caribbean Cellular Telephone Ltd. (CCT) claimed that LIME BVI (by certain “All Talk Calling Plans”) was charging average retail prices to its mobile customers for calls to LIME affiliates in other Caribbean jurisdictions which were below the wholesale charges available to CCT from those LIME mobile network operators.
This price differential was claimed to be extremely damaging to CCT. In order to run a viable business, CCT needed to be competitive in pricing calls to LIME mobile customers in other Caribbean countries. CCT could not, however, profitably cut its retail prices to match those of LIME BVI because CCT had to pay wholesale charges to LIME affiliates which were significantly higher than the retail prices offered by LIME BVI for calls to those LIME affiliates.
The TRC conducted an extensive investigation into the compliant. The TRC gave LIME BVI notice of its concerns in two substantial documents on 17 June and 4 October 2011. LIME BVI responded in correspondence of 11 August 2011 and 14 October 2011 and the TRC contends that the Company was afforded an opportunity to challenge the TRC's concerns at an oral hearing before a panel of the Board of the TRC.
The TRC contends that after considering LIME BVI's submissions, the recommendation of the investigation team and with the benefit of external and independent legal and economic advice, the Board of the TRC took the Decision on 1 June 2012.
The TRC's position is that it considered the CCT complaint in light of section 75(1) (a) (iii) of the Telecommunications Act, 2006 (the “Act”) which provides that the Commission may take enforcement action against a licensee or authorization holder if in the opinion of the Commission, the licensee or authorization holder is carrying on or is likely to carry on business in a manner that is detrimental to the public interest, including in an anti-competitive manner, or detrimental to the interest of clients, creditors or investors.
The TRC found that carrying on “business in a manner that is detrimental to the public interest, including in an anti-competitive manner” included participating in a “margin squeeze”. The TRC Decision defined a “margin squeeze” as follows:-
“a margin squeeze occurs when there is such a narrow margin between an integrated provider's price for selling essential inputs to a rival and its downstream price that the rival cannot survive or effectively compete. A margin squeeze can arise only when (a) an upstream firm produces an input for which there are no good economic substitutes, (b) the upstream firm sells that input to one or more downstream firms and (c) the upstream firm also directly competes in that downstream market against those firms”.
In investigating whether a margin squeeze existed, the TRC adopted a well-established margin squeeze test in economics known as “the equally efficient operator test”. On this test, the TRC found that there was a margin squeeze from January 2009 to August 2010 between the relevant average retail price paid by LIME BVI customers to make calls to other LIME affiliate numbers (fixed and mobile) in the Caribbean ($0.03pm) and the average wholesale price charged to LIME BVI to terminate calls to other LIME affiliate numbers in the Caribbean ($0.164pm) and other LIME affiliate fix numbers in the Caribbean ($0.0865). Thus, the wholesale charge for termination was over five times the retail price to make the call to the terminating mobile network and nearly three times the retail price to make the call to the terminating fixed network.
On the basis of the facts set out in the Decision, LIME BVI was found to have incurred average monthly losses of ($28,905) from January 2009 to August 2010. The margin squeeze was found to have ceased when LIME BVI began to earn low but positive revenues on these calls after August 2010. The TRC found that the effect of this conduct would have had significant commercial implications for CCT because CCT's inability to offer a comparable Caribbean plan meant that it could not compete on the broader market for mobile subscription in the BVI on an equal basis with LIME BVI.
The TRC found that “continuation of the margin squeeze may be expected to contribute to CCT's declining market share of subscribers, falling prepaid subscribers, falling prepaid revenues and increasing losses…Over time, it is realistic to suppose that CCT would be forced to exit the market or would be absorbed into a competitor's operations, leaving two mobile network operators in the BVI market”. The TRC further found that competition and ultimately consumers would be harmed by the reduction of the number of competitors in the market.
The TRC therefore ordered LIME BVI under section 75(2)(g) of the Act to desist from offering in the BVI the relevant “All Talk Calling Plans” to the extent that they contributed to the margin squeeze identified in the Decision. Furthermore, the TRC imposed a fine on LIME BVI under section 75(2) (b) of the Act by reason of its anti-competitive conduct in the sum of $493,665.
On 26 June 2012, LIME BVI applied by an ex parte Notice of Application to the Court for leave to apply for judicial review of the Decision. This application was supported by the affidavit of Sean Auguste dated 26 June 2012. On 28 June 2012, counsel for LIME BVI appeared before the Honourable Mr Justice Redhead in an ex parte hearing. The Court granted the following relief to LIME BVI:-
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i. Leave to apply for judicial review in respect of the Decision; and
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ii. A declaration that the grant of leave to make a claim for judicial relief operate as a stay of the Decision, thus preventing any party from seeking to rely on the Decision pending the determination of the judicial review.
On 29 June 2012, LIME BVI notified the TRC that leave to apply for judicial review had been granted and that the Decision suspended by order of the Court. By letter dated 10 July 2012 Forbes Hare, solicitors for the TRC, wrote to Harney Westwood & Riegels (“Harneys”), solicitors for LIME BVI, to request inter alia that Harneys send to Forbes Hare all documents and materials relied on before the Court on 28 June 2012. On 18 July 2012 the TRC formally applied to the Court for the disclosure of these materials. The TRC also applied for an extension of time to make an application pursuant to CPR Part 11.16 to set aside or vary the ex parte Order.
Further to LIME BVI being granted the Order for leave, a Fixed Date Claim Form was filed on 13 July 2012 and came on for its first hearing on 24 July 2012. An order was made by this Honourable Court adjourning this first hearing to the first available date after the expiration of the time period given to the TRC for making or obtaining a determination in respect of its application to set aside the Order permitting Judicial Review.
Following the hearing of an application filed by LIME BVI on 13th July 2012, the Honourable Mr Justice Wallbank by order dated 17 July 2012 directed LIME BVI to deliver to Forbes Hare forthwith copies of all documents filed at Court on behalf of LIME BVI in these proceedings, and in particular any skeleton argument for the ex parte hearing, the original and typed up notes of that hearing and a transcript when available. Time to apply to set aside or vary the Ex Parte Order was extended to 14 days following the supply of the transcript and costs order was made against LIME BVI.
On 9th October 2012, the TRC filed the subject Application in which it seeks an order to set aside the ex parte order of the Honourable Mr Justice Redhead. The grounds upon which the TRC relies are set out in the Affidavit of Joanna Jerrard – Dunne dated 9th October 2012 in which she contends:-
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i. That Cable & Wireless BVI Limited doing business as LIME (C&W) contrary to its duty to the Court, failed to give full and frank disclosure to the Court in respect of its material filed and submissions made in the course of its ex parte 28 June 2012 application which resulted in the ex parte order.
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ii. C&W failed to give notice of the 28 June 2012...
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