Judgment on appeals brought by the Racecourse Association and the British Horseracing Board against a decision of the OFT dated 5 April 2004 that the collective sale of certain media rights under an agreement dated 2 May 2001 infringed the Chapter I prohibition imposed by section 2 of the Competition Act 1998 and did not qualify for individual exemption under section 9. The relevant rights were sold to Attheraces, a joint venture company which intended to launch a pay-TV channel and associated website to provide live pictures of British horseracing and an interactive betting service.
The Tribunal upheld the appeal and set aside the OFT’s decision. The Tribunal held that the OFT’s central conclusion that the relevant media rights constituted a distinct, narrow, product market was flawed. In particular, the OFT had attempted to apply the hypothetical monopolist test to the provision of a novel service where there was no empirical evidence of a competitive price. The OFT’s economic analysis of the market in the decision relied on a counterfactual that the OFT subsequently disclaimed in its submissions at the hearing of the appeal and therefore could not be upheld. Even on the assumption that the counterfactual relied on by the OFT was correct there were serious flaws in the economic analysis.
The Tribunal further found that even if the OFT had identified the correct relevant product market, in the circumstances of this case, an acquisition of the media rights via a central negotiation was the only realistic way forward from the viewpoint of both bidders and sellers and was therefore necessary for the legitimate commercial objective of launching a new product.
The Tribunal further held that the OFT had failed to prove that the relevant agreement had had an appreciable effect on competition, either by increasing prices or by restricting incentives for competition and this was a further reason to set aside the OFT’s decision.
