Virgin has filed its case in the High Court and its
arguments centre on the high fees demanded by Sky for Virgin's
right to broadcast its channels.
But Angelo Basu, a competition law expert at Pinsent Masons, the
law firm behind OUT-LAW.COM, anticipates a delay. "I would expect
that the Virgin litigation may be stayed pending the outcome of the
Ofcom market study," said Basu.
Virgin asked Ofcom to conduct a market study into the pay TV
market to determine whether or not Sky had and was abusing a
dominant market position. Ofcom has agreed to carry out the
study.
"Virgin in the market study will be trying to persuade Ofcom to
find that the pricing dispute it has with Sky is an abuse of Sky's
dominant position. Once this happens, the litigation will gather
pace," said Basu.
Sky's basic stations were carried on Virgin's cable service
until this year. When renegotiating a deal for the carriage, Sky
asked for more money, and Virgin refused to pay it. The channels,
including Sky One and Sky News, were withdrawn from the Virgin
service.
The case is based on the Competition Act and on the EC Treaty
which prohibits a company from abusing a market dominating
position.
Virgin may find it difficult, though, to prove that Sky is
abusing its position, said Basu. "Recent cases have shown that the
courts are reluctant to find excessive prices," he said. "This is
as a matter of evidence difficult to do and needs really detailed
economic analysis."
A recent case may have some resonance for the Virgin action.
Attheraces sued the British Horseracing Board over the high fees it
charged for information about horse races in the UK. Attheraces, an
overseas betting company, said that the BHB, racing's governing
body in the UK, abused its position in charging such high fees.
The High Court backed Attheraces, but the Court of Appeal this
year overturned the decision. Though it conceded that the BHB had a
dominant market position, it said that the BHB was entitled to
charge high prices for the data because it could be used by third
parties to make a lot of money, principally in the betting
business.
"In the Attheraces case the Court of Appeal said that it will
only in exceptional cases interfere in businesses' freedom of
contract and would only do so in an excessive pricing case if
serious consumer detriment could be demonstrated," said Basu. "The
pricing principle adopted in that case was that pricing may be set
by a dominant company to reflect the value to the customer of the
product being licensed. Given that the channels Sky is withholding
are ones which many Virgin customers will think are really
important, I would expect Sky to rely on this to say that they are
not pricing excessively in the light of that value."
