Sel-Imperial Ltd v The British Standards Institution

This is an application by the defendant to strike out the claim under CPR rule 3.4(2)(a) on the ground that it discloses no reasonable grounds for bringing the claim, alternatively for summary judgment pursuant to CPR rule 24.2(a)(i) on the basis that the claim has no real prospect of success. Save on one point, as explained below, it is a “pleadings-based” application: that is to say, the defendant relies on the pleaded case and not any extraneous evidence. Hence it is to be assumed for the purpose of this application that the allegations of fact pleaded by the claimant can be made out.

The defendant is the British Standards Institution (“BSI”), a non-profit organisation incorporated by Royal Charter. It is engaged in the development and publication of private, national and international standards covering a wide range of industries and goods. BSI standards are often recognised as establishing a set of codes or benchmarks of quality or good practice. BSI is also one of the UK national standardisation bodies under Annex II to EU Directive 98/34. The drawing up of such standards is generally conducted with the close involvement of bodies or organisations from the relevant industry.

However, BSI is also involved in a distinct, but related, activity that is material to this case. It is engaged in certification for compliance with its standards through its “Kitemark” schemes. Not every BSI standard has an associated Kitemark. BSI currently has over 30,000 standards in publication whereas it runs some 430 Kitemark schemes. Where a standard has an associated Kitemark scheme, BSI recruits and trains inspectors who carry out inspection of a particular business or firm that applies for a Kitemark to determine whether it meets the standard, in which case it will be granted a licence to carry the BSI Kitemark. The Kitemark logo is widely recognised by consumers. BSI charges for this inspection and certification service.

These proceedings concern one aspect of a particular BSI standard, known as “PAS 125”. “PAS” stands for “publicly available specification”. A PAS is described by the BSI as “a step in the process of standardisation.” It does not have the status of a full British Standard, which requires several further stages of development, but it can be made available more quickly to satisfy a market need and it can form the basis of a Kitemark certification scheme.

PAS 125 is entitled “Vehicle Body Repair Specification”. It was first published in late 2006, coming into force on 1 January 2007. A revised version was published in 2008, but the revisions are immaterial for present purposes. As indicated by its title, it is designed to provide a specification for automotive vehicle body repair, and it covers both the repair process and the management of that process (documentation, internal auditing, etc.). The Foreword to PAS 125 states that it:

The development of PAS 125 was the result of an approach to the BSI from the Motor Insurance Repair Research Centre (generally known as “Thatcham”), a non-profit organisation funded by the British motor insurance industry. PAS 125 was accordingly sponsored by Thatcham, along with a number of so-called “project partners” including the Institute of Automotive Engineer Assessors and The Institute of the Motor Industry, and its preparation involved consultation with the automotive repair industry, insurance companies and other bodies. Among those listed in the Acknowledgments at the start of PAS 125 are Norwich Union Insurance, RBS Insurance, Zurich Financial Services and the Society of Motor Manufacturers and Traders.

Section 4.5 of PAS 125 covers Materials. The one aspect of the specification with which this case is concerned is paragraph 4.5.1, which provides:

A note to this paragraph states that “Original Equipment” and “Matching Quality” are defined terms under the EC Motor Vehicle Block Exemption, Regulation 1400/2002. In fact, Regulation 1400/2002 does not use the term “original equipment” but “original spare parts”, defined in article 1(1)(t) to mean

The result of these provisions is that in order for a vehicle repair workshop to satisfy paragraph 4.5.1 of PAS 125, any parts used in repair which are not “original equipment” must be independently certified under such a “recognised conformity certification scheme” unless they are “non-safety related”.

The claimant (“SEL-Imperial”) imports and distributes parts for motor vehicle repairs and specialises in particular in external bodywork panels. A substantial proportion of the several thousand parts which it supplies are so-called “replica parts”, i.e. parts which are not “original equipment” in terms of the PAS 125 definition and which are often less expensive. It states that it supplies some 20-25% of the market for replica vehicle body parts in the United Kingdom. SEL-Imperial asserts (and for the purpose of this application that must be accepted) that the cost of independently certifying a part under a recognised conformity certification scheme is relatively high, amounting to some £750-£1000 per part.

However, SEL-Imperial makes clear that it does not complain about the terms of PAS 125 as such, including specifically the distinction made between “safety-related” and “non safety-related” parts in paragraph 4.5.1. The basis for its claim is the interpretation that has been given to these terms in the application of PAS 125 under the BSI Kitemark scheme.

PAS 125 contains no definition of “parts of a non safety-related status” as used in paragraph 4.5.1(d). However, it is alleged that for the purpose of establishing whether a vehicle repair workshop complies with PAS 125 so as to qualify for a Kitemark, BSI has determined that all body parts in front of the “A-pillar” of a motor vehicle are “safety-related”. The A-pillar is the foremost and outermost roof support extending from the vehicle chassis to the roof. SEL-Imperial claims that this interpretation is over-inclusive, unnecessarily causing a large number of body parts to fall outside sub-paragraph 4.5.1(d) and thus, where they are replica parts, to require independent certification.

Motor insurers, who commission a large proportion of vehicle repair work, typically require that such work is done by an approved repairer. There is another accredited certification body, independent of the BSI, namely Consortium for Automotive Registration Services (Quality Assurance) Limited (“CARS QA”), that also can certify compliance with PAS 125 and may adopt a different and narrower interpretation of “safety-related” for the purpose of paragraph 4.5.1(d). But SEL-Imperial contends that the role and influence of the BSI Kitemark is such that there are significant incentives for repair workshops to hold the Kitemark. In particular, three of the five largest UK motor insurers (RBS, Norwich Union and Zurich) have made achievement of the PAS 125 Kitemark mandatory for their network of approved repairers. Moreover, SEL-Imperial relies on a survey as showing that insurers representing 65.5% of all motor premiums have made the Kitemark a mandatory requirement for their networks. It is also alleged that repairers holding the Kitemark can benefit from lower insurance premiums.

Accordingly, it is claimed that BSI’s broad interpretation of “safety-related” has substantially limited the demand for replica parts which are not independently certified under a recognized conformity certification scheme so as to fall within paragraph 4.5.1(c). That has therefore limited SEL-Imperial’s ability to provide lower price replica parts which, it claims, had also acted as a competitive constraint on original equipment manufacturers in their pricing of replacement parts.

SEL-Imperial’s claim is brought only under competition law. It relies on both EU and UK competition law (as contained in the Competition Act 1998) but since the relevant provisions are in all material respects identical I shall refer only to EU law in this judgment.

As stated at the outset, BSI seeks to have the claim struck out or summarily dismissed. The general principles that apply to such an application are well-established and are not in dispute. They were helpfully summarised by Lewison J in The Federal Republic of Nigeria v Santolina Investment Corp and ors [2007] EWHC 437 (Ch) at [4]:

Moreover, it is important that competition claims are pleaded properly. To contend that a party has infringed competition law involves a serious allegation of breach of a quasi-public law, which can indeed lead to the imposition of financial penalties as well as civil liability. A defendant faced with such a claim is entitled to know what specific conduct or agreement is complained of and how that is alleged to violate the law. As Laddie J observed in BHB Enterprises Plc v Victor Chandler (International) Ltd [2005] EWHC 1074 (Ch), [2005] EuLR 924, at [43]:

This is not to adopt an over-technical approach to pleadings. It is consistent with the overriding objective to enable the case to be dealt with expeditiously and fairly. It is only through the clear articulation of each party’s position in its statement of case, with appropriate factual detail, that the other side can know what case it has to meet and what issues any experts have to address, and that the court can effectively exercise its case management powers.

Article 101(1) TFEU (formerly Article 81 EC) provides:

If an agreement, decision by an association of undertakings or concerted practice falls within Article 101(1), then Article 101(3) provides that if the conditions there set out are satisfied, the prohibition will not apply. Although BSI pleads in its Defence that the exempting conditions in Article 101(3) are in any event fulfilled, those would clearly be matters for trial. Its submission on the present application is that none of the matters alleged in the claim fall within Article 101(1) in the first place.

It is not in dispute that BSI is an undertaking as are the various bodies and companies involved in the preparation of PAS 125. The prohibition prescribed by Article 101(1) applies where either the object or the effect of the agreement, etc, is to restrict or distort competition. In the present case, what is alleged is a restriction by effect not by object. But the claim regarding the agreement, decision or concerted practice alleged to fall within Article 101(1) and the equivalent section 2 of the Competition Act 1998 is pleaded as follows in SEL-Imperial’s Particulars of Claim: (Footnote: ¹)

Although the opening sentence of paragraph 21 of the Particulars of Claim refers to BSI and the other undertakings which “acted together” to create PAS 125, that cooperation is not the arrangement alleged to infringe competition law. As explained above, SEL-Imperial does not complain about the text of PAS 125 as such. In effect, SEL-Imperial alleges four ways in which there is an arrangement falling within Article 101, that do not correspond precisely to the four sub-paragraphs of paragraph 21 of its Particulars of Claim:

That the undertakings that sponsored or were involved in the development of PAS 125 “entrusted” BSI with the interpretation of the standard.

That the undertakings that sponsored or were involved in the development of PAS 125 and BSI together comprise an “association of undertakings” so that BSI’s interpretation of “safety-related” is a decision of an association of undertakings.

The series of individual Kitemark licence agreements between BSI and body repair shops, whereby the repair shop may hold a Kitemark only if it complies with PAS 125 as interpreted by BSI.

That the implementation of PAS 125 by BSI and the undertakings that sponsored or were involved in its development and others “who in practice are affected by” its terms, such as other motor insurers, amounts to an “agreement” between them for the purpose of Article 101.

Although not entirely clear in the way this is expressed in the pleading, as explained in the course of argument SEL-Imperial means by this allegation that these various undertakings agreed with BSI that they would delegate to BSI the interpretation of PAS 125 and thus would accept and adopt its interpretation.

BSI’s case in response is that this cannot amount to an agreement restricting competition for the purpose of Article 101(1). The interpretation of PAS 125 is not the result of any agreement between the alleged participants but is a unilateral interpretation by BSI. Although an agreement for the purpose of Article 101(1) of course does not have to be legally binding and can indeed be informal or only a common understanding, nonetheless there must be a consensual ‘meeting of minds’ as to the restrictive element relied upon. In that regard, BSI relies on the ADALAT case, Case T-41/96 Bayer v Commission [2000] ECR II-3383, where the Court of First Instance (“CFI”) said (omitting the cases referred to):

In that case, the CFI annulled a finding by the Commission that Bayer’s policy of restricting parallel imports of its pharmaceutical drug, ADALAT, constituted part of its dealership agreements. Although Bayer clearly intended to restrict parallel imports by limiting the deliveries of ADALAT to its wholesalers in France and Spain to the quantities that they required for their domestic markets, the CFI found on analysis of the facts that the wholesalers had not acquiesced in a policy of restricting their exports, which was indeed against their interests. On appeal, the European Court of Justice (“ECJ”) upheld the CFI’s approach: Cases C-2 & 3/01P BAI and Commission v Bayer [2004] ECR I-23. The ECJ stated:

Approving the statement of general principle in paragraph 67 of the CFI’s judgment, the ECJ turned to the findings of fact made by the CFI:

Finally, the ECJ made this very pertinent observation (at paragraph 141):

The ADALAT judgments were strongly relied on by the Court of Appeal in Unipart Group Ltd v 02 (UK) Ltd (formerly BT Cellnet Ltd) [2004] EWCA Civ 1034, [2004] UKCLR 1453. There, Unipart, an independent service provider (“ISP”) purchased airtime from Cellnet, a mobile network operator under various agreements which provided that the price would be at Cellnet’s charges from time to time. There were also a number of service providers, competing with Unipart, that were tied to Cellnet (tied service providers or “TSPs”). Unipart claimed that Cellnet was in breach of Article [101] by operating a margin squeeze whereby the price for airtime that Unipart (and other ISPs) were charged relative to the retail price charged to the TSPs was such as to eliminate its margin and thus place the TSPs at a competitive advantage. However, the Court of Appeal upheld the judge’s grant of summary judgment in favour of Cellnet, whereby he held that even if there was such a margin squeeze, this was not the subject of any relevant agreement between the undertakings within the meaning of Article [101(1)].

Although the agreement for the supply of airtime as between Unipart and Cellnet obviously covered the price, that in itself was not sufficient. After quoting extensively from the ADALAT judgments of the CFI and ECJ, Jonathan Parker LJ (with whose judgment Peter Gibson LJ and Laddie J agreed) stated the position as follows:

On the basis of those authorities, BSI submitted that unless the various parties involved in the sponsorship or creation of PAS 125 actually agreed upon the impugned interpretation by BSI of “safety-related”, the necessary collusive element as regards that interpretation is lacking. Here, the whole of SEL-Imperial’s Particulars of Claim, and indeed this very allegation of “entrustment”, shows that this was a unilateral interpretation by BSI and that no ‘meeting of minds’ or ‘concurrence of wills’ was involved.

However, what the careful analysis in the ADALAT and Unipart judgments show, as indeed do the other cases in the Community Courts concerned with this unilateral/multilateral distinction, is that the issue depends upon a careful analysis of the specific allegation and the facts then relied upon. Those cases significantly concern vertical agreements, where the parties are not actual or potential competitors. However, the essence of Article 101, as applied to horizontal agreements, is to prohibit the substitution of co-ordinated action between competitors for the independent policy that each would otherwise pursue. In a seminal passage in its judgment in Sugar, that has been repeated many times since, the ECJ referred to:

SEL-Imperial’s case under this head is not that the various bodies referred to as having participated in the sponsorship or development of PAS 125 agreed that all parts forward of the A-pillar should be regarded as “safety-related”, but that they agreed to delegate the interpretation of “safety-related” to the BSI. In other words, they reached an understanding whereby they gave up their individual freedom to adopt their own interpretation or to choose which certification body they would use to interpret PAS 125 (e.g. CARS QA) and instead collectively decided to adopt the interpretation applied by BSI through its Kitemark service. Among those parties, it should be recalled, were major motor insurers. If that interpretation was restrictive, then this collective agreement could have the effect of restricting competition in the supply of replica parts. I should add that I did not find this allegation readily apparent from the concise and somewhat opaque wording of the second sentence of paragraph 21 of the Particulars of Claim: see at paragraph 21 above. But that is how it was explained by SEL-Imperial’s Counsel and in my view it is capable of bearing that interpretation, although I consider that it would benefit from clearer articulation in the pleading.

The Commission’s Guidelines on the applicability of Article [101] to horizontal cooperation agreements, OJ 2001 C3/2, discuss the potential application of Article [101(1)] to “standardisation agreements” which have the objective of defining the technical or quality requirements with which products must comply. The Guidelines state (at para 167):

The position is therefore very different from the conduct sought to be impugned in either the ADALAT or Unipart cases. Here, what is alleged is a multi-lateral agreement whereby the participants gave up their independent right to determine how “safety-related” is interpreted and thus whether a part complies with this provision of PAS 125. Since the parties to the agreement are alleged to include the 17 entities listed at paragraphs 7-8 of the Particulars of Claim, SEL-Imperial would have been entitled on this allegation to join any or all of them as defendants but it is not suggested that it was under any obligation to do so. Crucial to its claim against BSI is that it contends that BSI was party to an agreement with those entities to that effect.

Whether or not there was in fact any such agreement is a question of fact to be determined at trial. But assuming for present purposes that this is made out, I find it impossible to say that SEL-Imperial has no realistic prospect of showing that such an agreement had the potential to restrict competition so as to come within Article 101(1).

In addition to agreements and concerted practices, Article 101 applies to decisions by “associations of undertakings.” This is a term of art under Article 101(1). It is not to be confused with association in the sense of several independent undertakings associating together, for example in meetings or on a particular project or venture. An “association of undertakings” here refers to a representative or cooperative body or entity, usually with members, whose rules or decisions or recommendations are followed, whether as a matter of obligation or practice, by its members or those whom it represents. “Decision” is therefore given a wide meaning so as to encompass those acts of the association which serve to coordinate the conduct of its members or those subject to its authority. On that basis, seemingly unilateral acts of a trade association or professional body can infringe Article 101.

The importance of this concept was explained by Léger AG in his Opinion in Case C-309/99 Wouters [2002] ECR I-1577:

Hence, it is well-established that trade associations, agricultural cooperatives and associations of sporting bodies may be “associations of undertakings” within Article 101(1). And in Wouters, the Dutch Bar Council was held to be an association of undertakings such that the rules of professional conduct which it promulgated constituted “decisions” of such an association for the purpose of Article 101(1).

SEL-Imperial seeks to rely on Organic Peroxides [2005] 5 CMLR 579, where the Commission put forward an expanded view of the concept of an “association of undertakings”. By its decision, the Commission found that five producers of organic peroxides (“OP”) took part in an international cartel over a period of more than 20 years. The Commission held that AC Treuhand AG (“Treuhand”), a Swiss company which provided administrative and organisational services to facilitate coordination between the producers for part of this period, also infringed Article 101. The Commission rejected Treuhand’s argument that it could not itself be liable for the violation, stating (at paras 345-346):

Accordingly, the Commission found that Treuhand was liable both as an undertaking in its own right that was party to the cartel agreements and also as an association of undertakings. On Treuhand’s appeal, the CFI upheld the Commission’s decision on the former basis: Case T-99/04 Treuhand v Commission [2008] ECR II-1501. As regards the question whether Treuhand could be considered to be an “association of undertakings”, the Court stated (at para 158):

The Commission’s subsidiary approach therefore provides a very slender foundation on which to base a claim. But in any event, the circumstances there are readily distinguishable from the position here. It is nowhere alleged that BSI was itself an association of undertakings. Mr Hollander QC, appearing with Mr O’Donoghue for SEL-Imperial, sought to extract such an allegation as buried in the claimant’s pleadings, but even his excavatory skills could not identify it. Nor was any proposed amendment to that effect put forward. On the contrary, paragraphs 21(1)-(2) of the Particulars of Claim clearly allege that the association of undertakings is constituted by the undertakings which sponsored and were involved in the development of PAS 125 “together with” BSI. That is to confuse the concept of an association of undertakings as used in Article 101(1) with the notion of a group of undertakings associating together in the more general sense. The “association” referred to in the pleaded sub-paragraphs is not a self-standing entity with ongoing existence, analogous to Treuhand. Accordingly, this allegation is in my judgment wholly unsustainable as a matter of law and should be struck out.

The agreements between BSI and vehicle repair workshops are vertical as opposed to horizontal agreements: that is to say, they are not agreements between undertakings at the same level in the chain of production or service supply. There clearly is a series of such agreements on the terms of the BSI standard Kitemark licence, and since BSI is an undertaking, each of those licence agreements is an agreement between undertakings.

A copy of the BSI Kitemark licence conditions is before the Court. They provide, as one might expect, that an applicant for a licence must satisfy the BSI that its product (which includes where appropriate a service) conforms to the appropriate standard (clause 4.4); that if the BSI is satisfied that the applicant for a licence is capable of consistently producing the product in conformity with the relevant Standard then it shall issue him with a licence (clause 5.4); and (by clause 6.2) that a licensee shall:

The licence agreement therefore does not incorporate the BSI’s particular interpretation of a standard. But in reality, BSI will of course apply its interpretation of the relevant standard when dealing with applications for and the grant of a Kitemark licence. It is well arguable that vehicle repairers wanting a Kitemark for PAS 125 will be, or become aware of, that interpretation. But does that give rise to the requisite “meeting of minds” or “concurrence of wills” as between the repairers and BSI as to that interpretation so as to engage Article 101(1)? It is here that the jurisprudence as explained in the ADALAT and Unipart cases discussed above is of particular relevance.

Further illustration of the required approach can be found in the CFI’s judgment in Case T-368/00 General Motors Nederland and Opel Nederland v Commission [2003] ECR II-4491. (Footnote: ²) The case concerned the agreements between Opel’s national sales company in Holland and its authorised dealers. The Commission had found that the agreements incorporated Opel’s policy of trying to restrict export sales to consumers in other Member States. On appeal, the CFI upheld the Commission’s finding that Opel had adopted a strategy of seeking to curtail exports. However, the Court found that the Commission had failed to prove that this strategy had been communicated to the dealers, still less that it had become incorporated into their dealership contracts. Although that aspect of the decision was therefore annulled, the CFI nonetheless found that the terms of Opel’s bonus payment scheme for its dealers, which expressly excluded export sales from the bonus system, became an integral part of the dealership contracts and thus were governed by the pre-established general agreement. They therefore constituted an agreement within the terms of Article 101(1) which had the object of restricting exports.

Accordingly, close attention to the facts in the context of the underlying agreement is required. Here, it seems to me that I cannot conclude that SEL-Imperial has no realistic prospect of showing that a repairer who signed up to a Kitemark licence with BSI for PAS 125, and who became aware of the BSI interpretation of paragraph 4.5.1(d), would not regard himself as bound under the provisions of the agreement set out above to comply with that interpretation as regards the replica parts which he should use. I would emphasise that the “concurrence of wills” required to constitute an agreement of course does not mean that the other party should necessarily approve of or support the restriction – for example, it is clear that the Opel dealers in Holland did not like being subject to an export ban. And I should add that whether such agreements by repairers holding a Kitemark for PAS 125 in fact had an appreciable effect on competition is a separate question which was not raised on this summary application. In the case of a network of licence agreements which individually would not appreciably restrict competition, that will no doubt involve consideration of the principles set out in the Delimitis case: Case C-234/89 Delimitis v Henninger Bräu [1991] ECR I-935.

There is nothing in the pleaded sub-paragraph 21(4) which provides any basis on which it could be concluded that the fact that BSI and a number of others (whether that number be large or small) all implemented PAS 125, constituted an “agreement” between them. The mere fact of common implementation would not even, without more, amount to the looser concept of a “concerted practice” within Article 101(1), which in any event is not alleged. And even if there were to be implied in this sub-paragraph an allegation that these various undertakings all implemented PAS 125 in the same way, that is to say by adopting the same interpretation of “safety-related” for the purpose of paragraph 4.5.1, that would not suffice to give rise to an agreement between them to that effect.

Mr Hollander QC did not press reliance on this allegation very hard in the argument before me. I regard it as, frankly, hopeless and it should be struck out.

In both its written skeleton and oral argument, SEL-Imperial sought to advance a further and distinct allegation of infringement. It asserts that there was a multi-lateral agreement between those involved in developing PAS 125 and BSI that parts forward of the A-pillar should be treated as “safety-related” for the purpose of paragraph 4.5.1. Hence there is reference in the skeleton argument to discussions that took place in the Steering Group for both PAS 125 and the Kitemark scheme. For this allegation, reliance was placed on a witness statement filed on behalf of the claimant. It was emphasised that this agreement was distinct from the drafting of PAS 125 itself, which may well have been a collaborative process but to which no objection is taken.

However, such a distinct, and potentially significant, allegation is not pleaded. Although there is reference to the meeting apparently relied on in this regard in the response to a further information request under paragraph 18(1), the Particulars of Claim as presently formulated is inconsistent with the allegation of such a multi-lateral agreement on the interpretation of safety-related: see, for example paragraph 23, which expressly refers only to “the Defendant’s interpretation”. If such an allegation is to be made of a collective agreement on the meaning of safety-related, it has to be set out expressly. During the hearing, Mr Hollander indicated that an application would be made to amend to that effect, and after the hearing concluded I was sent the text of the proposed amendment. However, that was only by way of information and there is no application to amend before the Court. Accordingly, I say no more about it.

Article 102 TFEU (formerly Article 82 EC) provides:

Here, it is alleged that BSI is dominant in the market for testing and certification of automotive vehicle body repair facilities in the United Kingdom. Thus the allegation of abuse concerns BSI’s role in certifying vehicle repairers for the purpose of its Kitemark. Although BSI by its Defence denies that this is a relevant market or that it is dominant, it accepts that its present application must be considered on the assumption that it is found to hold such a dominant position.

The critical issue for present purposes is the allegation of abuse. This is pleaded at paragraph 28 of the Particulars of Claim as follows:

Paragraph 23 of the Particulars of Claim in turn incorporates paragraph 17 which sets out the interpretation of “safety-related” as covering all body parts in front of the “A-pillar” and which contends that this covers parts that are not normally considered to relate to the vehicle’s safety. Therefore, what is alleged (as confirmed by Mr Hollander) is that this over-inclusive interpretation of “safety-related” by BSI in the context of PAS 125 constitutes an abuse.

Although the list of abusive practices in Article 102 is of course important, it is only illustrative and the ECJ has repeatedly stressed that it is not exhaustive: e.g., Case C-333/94P Tetra Pak v Commission [1996] ECR I-5951, para 37. What the allegation comes down to in the present case, and I consider that this is set out with sufficient clarity and put under different heads by reference to the list in Article 102, is that for BSI to apply an interpretation of “safety-related” that is over-inclusive and not objectively justified (see paragraph 30 of the Particulars of Claim) in determining certification for its Kitemark amounts to an unfair condition in its Kitemark certification service, limits the supply of crash repair parts, and discriminates between manufacturers of body parts.

Although BSI by its skeleton argument sought to suggest that this is a case where dominance is alleged in one market but the impugned conduct and effect on competition are alleged to take place in another market – which would be an unusual case for a violation of Article 102 and would require consideration of the criteria for such a situation set out in Tetra Pak - in the hearing Mr Jonathan Crow QC, appearing with Mr Tim Ward on behalf of BSI, very properly accepted that the allegation here is of dominance and abuse in one market, with an effect in another market (or markets). Such ‘related-market’ abuses are not unusual. Refusal to supply is the most obvious. Price discrimination cases provide another example since those subject to the discrimination are not the competitors of the dominant undertaking in its market but its customer or customers but who are competing in the downstream market.

Often, the purpose of such ‘related market’ abuses will be for the undertaking to leverage its power in the market where it is dominant into a market where it is not dominant. In a useful analysis in the Tetra Pak case of the relationship between abuse and markets, Ruiz-Jarabo Colomer AG referred to two cases of refusal to supply (Commercial Solvents and CBEM v CLT and IPB) and continued (at para 44 of his Opinion):

There is no doubt that a dominant undertaking which engages in abusive conduct usually does so to gain or preserve some economic advantage. But Mr Crow, on behalf of BSI, sought to elevate this into a principle of law. He submitted that in cases where the dominance and abuse are in one market and the effect is felt in another market, “the alleged abuser must at least have some economic interest in the outcome for there to be an abuse within Article 102.” Since BSI submits that as a neutral standards and certification body it derived no commercial or economic benefit from the conduct complained of, it follows that even if SEL-Imperial established the effects alleged, there could be no infringement.

In support of the principle advanced, Mr Crow relied on the judgment of the CFI in Case T-155/04 SELEX Sistemi Integrati v Commission [2006] ECR II-4797. This case concerned Eurocontrol, the European Organisation for the Safety of Air Navigation, which was established by various states, both EU and non-EU members, under the International Convention on Cooperation for the Safety of Air Navigation (“the Convention”). The Commission rejected a complaint by SELEX that Eurocontrol through certain of its activities was infringing the competition rules of the Treaty, in particular what is now Article 102, on the basis that as an international organisation performing public function, Eurocontrol was not an “undertaking” for the purpose of the competition rules. SELEX, an Italian company operating air traffic management (“ATM”) systems, appealed to the CFI, applying for annulment of the Commission’s decision.

The CFI held that although Eurocontrol clearly carried out certain public functions as regards air space management and the development of air safety, the question whether Eurocontrol was an undertaking could not to be determined in the round but had to be considered separately in respect of each of the specific activities called into question by SELEX. As regards two of the three activities that were challenged, the CFI upheld the Commission’s finding that Eurocontrol was not an undertaking. But as regards the giving of advice to national administrations in the drafting of technical specifications in the invitations for public tenders for ATM equipment or the selection procedures of those submitting tenders, the CFI held that Eurocontrol was carrying on an economic activity and, therefore, acting as an undertaking. Accordingly, the CFI proceeded to consider under Article 102 the allegations by SELEX as regards that activity. The CFI held that there was no violation of Article 102. The material paragraphs of the judgment state as follows:

Eurocontrol appealed further to the ECJ, which reversed the CFI and held that Eurocontrol’s activity of assisting national administrations was not separable from its tasks of air space management and the development of air safety, and accordingly was not to be regarded as an economic activity in respect of which Eurocontrol acted as an undertaking: Case C-113/07P SELEX Sistemi Integrati v Commission [2009] 4 CMLR 1083, paras 71-80. On that basis, the ECJ expressly did not address the challenge to the CFI’s reasoning in respect of abuse. However, Trstenjak AG in her Opinion did consider the argument under Article 102. Referring to the CFI’s finding at paragraph 104 of its judgment, she said:

Accordingly, the Advocate General upheld the CFI’s reasoning on the basis that SELEX had failed to prove that Eurocontrol had in fact ever influenced a national administration’s decision on the award of a tender. She did not address separately the question of whether, if it had had that effect, the lack of any resulting advantage to Eurocontrol was in itself a ground to hold that there was no infringement of Article 102.

I accept that the final sentence of paragraph 108 of the CFI’s judgment in SELEX provides support for the principle advanced by BSI. However, as explained, the related factual findings and the subsequent development in that case meant that the point did not receive thorough consideration. Moreover, as against that, it is well-established that price discrimination by a dominant supplier in giving reductions to certain customers can constitute an abuse, and such reductions are not inevitably to the economic advantage of the supplier. Mr Crow argued that the situation of a discriminatory low price to one customer can equally be regarded as one of a discriminatory high price to another customer. In a simple sense, that is obviously correct, but it does not necessarily reflect the commercial reality of a discount scheme to regard it as a means of charging a higher price to certain customers. For example, in Case C-18/93 Corsica Ferries [1994] ECR I-1783, the ECJ held that the public corporation of pilots of the port of Genoa was in breach of what are now Articles 102 and 106(1) TFEU (formerly Articles 82 and 86(1) EC) by charging reduced rates to vessels permitted to carry on maritime cabotage between domestic Italian ports, an activity which at that time was restricted to vessels flying the Italian flag. There was no benefit to the corporation in granting these reductions, which clearly favoured Italian flag-carriers over other maritime transport undertakings, and the corporation was not itself engaged in the provision of maritime transport services.

As the Commission observed in one of its earlier decisions finding an abuse of dominance in the differential charges of airport landing fees that favoured the national carrier, Brussels Airport, OJ 1995 L216/8, [1996] 4 CMLR 232, at para 17:

Indeed, the wording of Article 102(c), the legislative provision that relates to price discrimination, refers to conditions which place “other trading parties ….at a competitive disadvantage.” There is no requirement that the discrimination should place any advantage upon the dominant supplier.

Moreover, one can consider the hypothetical possibility of a situation where BSI decided that it would restrict the number of repairers, whether generally or by region, to which it would grant a Kitemark in respect of PAS 125. That could clearly result in a severe restriction of competition. It is no answer to say that BSI as a responsible body would never contemplate such action. If an undertaking with market power through its widely recognised approval process were to act in that way, I find it impossible to hold on the current state of the jurisprudence that as a matter of law this could not constitute an abuse just because this was not to the undertaking’s economic advantage. It is possible that the above passage in the CFI’s SELEX judgment points in that direction; or alternatively that observation may be confined to the special facts of that case and not be of universal application. It is notable that apart from that one passage, BSI did not rely on any authority from the extensive jurisprudence on abuse of dominance in support of its proposition.

The law under Article 102 is still developing. As I consider that the position is insufficiently clear on this point, and thus that the allegation of abuse should not be struck out, I refrain from expressing any further view on the issue. Indeed, this question could at some stage require a reference to the ECJ for a preliminary ruling, but it would clearly be inappropriate to make a reference at the present stage of these proceedings. BSI contends that its interpretation of “safety-related” is not over-inclusive but objectively justified. Should it succeed on that argument, then this point may not need to be decided in this case at all.

Furthermore, if it be necessary to show some economic advantage to BSI from the conduct which is challenged, SEL-Imperial contends that it can do so. In paragraph 34(2) of its Reply, SEL-Imperial alleges that BSI:

BSI charges a vehicle repairer that applies for a Kitemark a fee for inspection and assessment. SEL-Imperial contends that the broad interpretation of “safety-related” means that a large number of additional spare parts are subject to audit. In that regard, reference is made to BSI’s guidance on PAS 125/Kitemark which states that the costs of certification will depend on “the number of technicians and level of certification required”. Further, since BSI’s charges are calculated on the basis of a daily fee, SEL-Imperial argues that if more parts have to be inspected, an audit that otherwise would have taken a half-day may last one day or a one-day audit may spill over into a second day. BSI’s certification operation for the Kitemark is clearly an economic activity and “over-inclusion” as alleged may therefore be to the BSI’s economic benefit.

Mr Crow accepted that on this particular point BSI could not succeed in the present application purely on the face of the pleadings under CPR Part 3.4. However, he submitted that as a matter of summary judgment, this allegation could be dismissed. On this point alone on the present application, it was therefore appropriate to consider the evidence. In fact, despite the lengthy witness statements filed before the Court that mostly were of no assistance whatever in considering the matters to be decided, this particular point is addressed very briefly. Mr Webb, the in-house solicitor at BSI, explains (at para 58 of his witness statement) that apart from an annual licence fee, BSI charges body shops for the Kitemark conformity audit on the basis of a daily fee. He says that “[a]n initial assessment typically takes 1-2 days (depending on the size of the body shop) and routine 6 month inspections take a similar amount of time, although usually they are shorter.” He explains that if an inspection takes half a day, it would cost half the daily fee. And he states:

On that basis, it was argued for BSI that it cannot be that an over-extended definition of “safety-related”, as alleged, leads to higher revenue for BSI. These body parts are only a small part of the totality that BSI inspectors have to take into account on an audit visit and such visits in any event involve only a sampling process, not a total stock-check. Indeed, it was submitted that if a narrower view of “safety-related” meant that less parts had to be inspected, then it was more likely that a body shop would pass the inspection process and thus BSI would get more subscribers to the Kitemark and thus higher licence income.

These arguments seem to me to go beyond the evidence before the court, which does not specifically deal with the question whether, and to what extent, a narrower definition of safety-related would reduce the time taken for inspections so as to affect the inspection fee payable. While I am doubtful that this is likely to make an appreciable difference, on the state of the evidence this is not a matter that can be resolved on a summary application. In my judgment, it requires a further exploration of the facts and appears likely to give rise to factual dispute.

Accordingly, if, contrary to my holding above, it were necessary for SEL-Imperial to show that BSI gains some economic advantage from its impugned conduct, I would find that the prospects of SEL-Imperial succeeding in that regard cannot be dismissed as fanciful.

For the reasons set out above, I therefore decide that:

paragraphs 21(1)-(2) and (4) of the Particulars of Claim should be struck out; and

the application by BSI should otherwise be dismissed.