UK telcos didn't collude to put Phones 4u out of business – judge

OK gr8. CU down the pub

A lengthy lawsuit is nearing an end after a judge dismissed a claim from defunct British phone retailer Phones 4u that local telco operators conspired to put it out of business.

The Honorable Justice Roth oversaw the claim and ruled [PDF] that the defendants, including EE, Vodafone, Orange, and Telefonica O2 Holdings, had not breached either UK or EU competition law. The judgment also noted that EE was not in breach of the EE Agreement with Phones 4u.

The EE agreement was the final nail in the coffin for the retailer, which was placed into administration in 2014. EE's withdrawal came shortly after Vodafone had ended its contract with the firm and left the retailer without mobile network partners.

Phones 4u was once a common sight on UK high streets, and phones were sold from various manufacturers on contracts from all of the UK's major network providers. However, mobile operators ditched the retailer and business dried up.

Yet that was not the end of the story. The company's administrators claimed in a 2020 lawsuit that a cartel of British telcos deliberately caused the company to collapse.

Summarizing the case, Justice Roth noted the allegations from Phone 4u that its demise had come about not by independent actions from the operators but as a result of the group acting together - breaking competition law. The telcos denied all wrongdoing.

However, while Justice Roth concluded there was no breach of either UK or EU competition law, he directed harsh words at some telco employees - and former employees - over their behavior. For example, there were problems with the preservation of documents. In 2015, Phone 4u's solicitors wrote to Telefónica SA and Telefónica Europe regarding the action and requesting confirmation that Telefónica had "taken all reasonable steps to preserve documents" relevant to the claim.

Alas, the message did not make through to César Alierta Izuel, chairman and CEO of Telefónica SA, from July 2000 to April 2016. It took until March 2020 before he was told that any documents about Phones 4u should not be destroyed – years after his retirement from the role.

Considering that a part of the claim concerned alleged commitments given by Alierta and Eva Castillo Sanz – chair and CEO of Telefónica Europe between September 2012 and February 2014 – to individuals at Vodafone, Justice Roth was not happy.

He said: "I consider that the conduct in this respect by Telefónica showed an arrogant disregard of the seriousness of the allegations being made." However, he went on to note an apology from the Telefónica defendants and rejected the submission by Phones 4u that "at least part of the document destruction was deliberate."

Justice Roth also noted that former Vodafone UK CEO Jeroen Hoencamp had thrown away old notebooks after completing his stint in the role, and commented that "one will never know whether those notebooks would contain anything relevant regarding various critical meetings which Mr Hoencamp attended." However, Roth again remarked that drawing any adverse inference from their absence would be inappropriate.

And so it went on as the activities and behavior of the telcos a decade ago was outlined. There may also be some relief from the operators. In its latest report [PDF], Vodafone put the value of the claim at around the £1 billion ($1.23 billion) mark.

It isn't over just yet. A decision hearing [PDF] is scheduled for the first available date after December 5, 2023, where an application for permission to appeal can be made and costs decided.

An O2 spokesperson told us: "From the outset, we have strongly refuted all allegations of collusion or anti-competitive conduct in relation to the decision to let our agreements with Phones 4u expire. We are pleased that the court supports our position and has ruled in our favor."

Vodafone told us: "We are pleased that the judge found that none of the defendants breached the law, consistent with our view that the case was always without merit and based on false inferences. Vodafone UK terminated its relationship with Phones 4U for clear commercial reasons and Phones 4U's substantial debt left it no financial flexibility to deal with changing market conditions, nor the ability to offer Vodafone commercially attractive terms."

An EE spokesperson said: “We’re pleased that the court has dismissed all the allegations made in the Phones 4U administrators’ case. Our code of business sets out how we compete to win fairly and connect for good. The judgement clearly demonstrates that EE’s decision to exit Phones 4U was taken independently and based on sound business reasoning.”

We asked all operators named in the lawsuit to comment. ®

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