Judgment (CPO Application)

The Tribunal’s judgment in relation to: (i) the application by the Proposed Class Representative (“PCR”) for a Collective Proceedings Order (“CPO”) in relation to a proposed collective proceedings against the Proposed Defendants (“Sony”); and (ii) the Sony’s application to strike out and/or obtain summary judgment against the PCR in respect of part of the PCR’s claim.

Application for a CPO

Sony identified four areas which it argued meant the claim was unsuitable under the Eligibility Condition for the grant of a CPO:

1. The PCR’s case ignored the well-established consensus that console gaming takes place in a two sided market, leading to direct and indirect network effects (the “Two Sided Market Issue”).
2. The PCR had failed in its analysis of the excessive pricing abuse to take account of the likely counterfactual response of Sony and publishers to a reduction in Sony’s commission and the consequent impact on prices to consumers (the “Excessive Pricing Issue”).
3. Mr Harman adopted a selective and partial approach to presenting his expert opinions (the “Expert Report Issue”).
4. The class definition put forward by the PCR was defective. Sony attacked the inclusion in the PCR’s proposed class definition of PlayStation users who purchase games after the date of the claim form, on the basis that the claims need to be extant at the time the collective proceedings are issued (the “Class Definition Issue”).

In relation to the Two Sided Market Issue, the Tribunal was satisfied that the PCR met the requirement for a sufficiently credible and plausible methodology, as far as necessary for the grant of a CPO. The Tribunal noted that it is important to recognise that these proceedings are at an early stage and there is a degree of asymmetry between the knowledge of the PCR and its team and the knowledge of Sony, as owner of the PlayStation system.

In respect of the Excessive Pricing Issue, the Tribunal was satisfied that the PCR had met the requirement for an adequate methodology in relation to this point, at least as far as necessary for the grant of a CPO.

As regards the Expert Report Issue, the Tribunal considered the criticisms which Sony made of Mr Harman’s approach were not sufficient to affect its decision about the Eligibility Condition.

In relation to the Class Definition Issue, the Tribunal agreed with Sony that the present class definition is not adequate for the purposes of the Eligibility Condition, and particularly the suitability requirement in Rule 79(1)(c), and is also liable to be struck out. The Tribunal directed that the PCR should amend the class definition so that the Relevant Period terminates as at the date of filing of the Claim Form.

In relation the Authorisation Condition, the Tribunal was satisfied that it is just and reasonable for the PCR to act as class representative in these proposed proceedings, having considered the factors set out in Rule 78(2).

Summary judgment/strike out applications

There were four strands to Sony’s summary judgment and/or strike out applications:

1. Sony argued that the PCR’s allegations of abuse in relation to exclusive dealing and tying are in substance allegations of a refusal to allow access to Sony’s PlayStation Network (“PSN”), which is a proprietary system involving Sony’s intellectual property rights. As a consequence, the PCR needs to plead, and to meet, the test established in a line of cases, commencing with Case C-7/97 Oscar Bronner GmbH v Mediaprint, which concern refusal to grant access to essential facilities (the “Bronner Conditions”). Given the PCR’s failure to address this issue, the claims of exclusive dealing and tying should be struck out.
2. As an alternative, Sony said that the inevitable consequence of the PCR’s arguments, if successful, is to require Sony to grant access to the PSN. In setting out its counterfactual, the PCR had failed to advance any admissible factual material which explains how this might be achieved.
3. Sony also argued that the PCR cannot prove to the requisite standard for the purposes of its pleaded tying abuse that the tied product (the PlayStation Store) and the tying product (the PlayStation Console or system software) are distinct.
4. Sony also applied to strike out that part of the PCR’s claim which sought to define the class by reference to people who have not yet purchased PlayStation products. This matter was considered in relation to the Eligibility Condition.

In relation to (1), the Tribunal considered the exercise of properly characterising the abuse in question will involve resolving the application of potentially competing policy considerations – the effective implementation of Article 102/Chapter II on the one hand, and the protection of property rights. The Tribunal determined that in order properly to resolve the dispute between the PCR and Sony about the existence of an exclusive dealing or tying abuse which is principally independent of any refusal to supply, it is not necessarily appropriate simply to apply the Bronner Conditions and further detailed factual inquiries, potentially involving expert evidence on technical matters, are required to resolve that question. The Tribunal concluded that the PCR’s case is properly pleaded and not liable to be struck out and the Tribunal is not in a position to answer the question at this stage, where such facts have only been partially explored and a trial of the matter is the appropriate mechanism to determine the dispute.

As regards issues (2) and (3), the Tribunal stated that seeking summary judgment against the PCR on this issue was artificial and misconceived. Further evidence from the parties is likely to be necessary and helpful in determining the issues and such matters should properly be explored at trial.

Funding Arrangements

On 26 July 2023, the Supreme Court handed down its judgment in R (PACCAR Inc and others) v Competition Appeal Tribunal and others [2023] UKSC 28 (the “PACCAR Judgment”) in which the Supreme Court held that litigation funding agreements (“LFAs”) pursuant to which the payment to the funder is calculated as a percentage of the damages award were unenforceable insofar as they relate to opt out collective proceedings.

Following the PACCAR Judgment, the PCR entered into an amended Litigation Funding Agreement (“LFA”) on 4 September 2023 and a further amended LFA on 31 October 2023.

The Tribunal determined that:

• The words “only to the extent enforceable and permitted by applicable law”, as inserted into clauses 11.1.2 and 11.2.2 in the amended LFA, operate with a contingency, such that they have no legal effect until the contingency (legislation by Parliament to reverse the effect of the PACCAR Judgment) eventuates. There was therefore no logical possibility that section 58AA of the Courts and Legal Services Act 1990 could be engaged to make the provisions unenforceable.
• Section 58AA had no application to the wider provisions of the amended LFA so as to make it unenforceable.
• The funding arrangements do not create unacceptable risks of perverse and unmanageable incentives at this time.
• Prior to the hearing on 9 October 2023 the Tribunal had satisfied itself that the PCR (and Ms Neill as its sole director) were aware of and able to discharge their responsibilities adequately for the purposes of the Authorisation Condition. The Tribunal did not consider that any of the issues that arose from the relevant features of the amended LFA justified it reaching a different conclusion. Those issues, to the extent they arise, should be able to be managed adequately by the PCR, its sole director and its advisers, recognising their duties to the class, and with the oversight of the Tribunal.

Save in respect of the Class Definition Issue, the Tribunal was satisfied that the Authorisation Condition and the Eligibility Condition had been met and, subject to the revision of the class definition, the Tribunal granted the PCR’s application for a CPO.

Aside from the Class Definition Issue, the applications by Sony for strike out/reverse summary judgment were dismissed.