Claim No. CP-2018-000038 IN THE HIGH COURT OF JUSTICE BUSINESS AND PROPERTY COURTS COMPETITION LIST (Ch D) BETWEEN: LIMITED (In Administration) Claimant - and -

(1) EE LIMITED (2) AG (3) ORANGE SA (4) LIMITED (5) VODAFONE GROUP PUBLIC LIMITED COMPANY (6) TELEFONICA UK LIMITED (7) TELEFÓNICA, S.A. (8) TELEFONICA EUROPE PLC Defendants ______D2 SKELETON ARGUMENT FOR CMC ON 2–4 MARCH 2020 ______

An Agreed Reading List has already been provided to the Court

I. INTRODUCTION AND OVERVIEW

1. This is the skeleton argument of D2, Deutsche Telekom AG (“DT”).

2. DT comes at this litigation from a very different perspective to the other parties. Its role in these proceedings arises from its 50% ownership of D1, a joint venture named EE, which it sold five years ago. The other former shareholder is D3, Orange.

1

The Claim In Essence

3. P4U was an intermediary engaged in the retail sale of mobile network connections supplied by UK mobile network operators (“MNOs”). It did so pursuant to agreements with various MNOs, namely: (i) an agreement with (the “O2 Agreement”); (ii) an agreement with Vodafone (the “Vodafone Agreement”); and (iii) an agreement with EE (the “EE Agreement”).

4. Each of these arrangements came to an end: the O2 Agreement expired in stages in January 2013 and January 2014 and O2 decided against any renewal; Vodafone gave notice in August 2014 that it would not renew the Vodafone Agreement; and on 12 September 2014, EE informed P4U that it would not renew (or replace) the EE Agreement, due to expire on 30 September 2015. EE sent a further letter to P4U on 17 September 2014, to exercise its right to terminate the EE Agreement, as P4U’s entry into administration was an automatic breach of that agreement.

5. P4U’s case is that the expiry and, in EE’s case, non-renewal of these agreements was the result of unlawful collusion between some or all of the MNOs, seeking to reduce their reliance on retail intermediaries in the UK. The essence of P4U’s case alleging a breach of Article 101 TFEU and/or s.2 of the Competition Act 1998 against DT (and EE/Orange) is summarised as follows in the Agreed Case Summary (para 8 (footnotes omitted) [B/1/001]):

“P4U contends that on or before 27 January 2014, Telefonica and Telefonica Europe gave commitments to Vodafone Group, the effect of which was to prevent O2 extending/renewing its trading agreement with P4U. Further, P4U contends that one or more of Vodafone Group, Telefonica and Telefonica Europe discussed or attempted to discuss their future intentions as regards the use of retail intermediaries in the UK with EE, and that EE did not distance itself from the collusion between those parties, publicly or at all.”

6. These essential allegations are then recycled by P4U into other claims under contract law and tort against DT and certain other defendants.

7. The essence of DT’s defence to the collusion claim is (Agreed Case Summary, para 9 (footnotes omitted)):

“EE, DT and Orange deny that they participated in any collusive or anticompetitive conduct. They contend that in May 2014 EE’s board acted independently and preferred a strategy under which EE would not enter into a new contract with P4U. EE says that it expected that over a five-year period this strategy would result in gains that would significantly outweigh any losses as a result of not renewing its agreement with P4U. It is EE’s case that in Autumn 2012 it was a recipient of approaches at various times by each of O2, Vodafone UK and , but that EE continued to determine its conduct on the market independently.”

2

The Weakness Of The Case Against DT

8. In whichever way it is put, P4U’s case against DT faces very significant difficulties.

9. First, as to the contention that DT itself made “commitments” or “disclosures” to other MNOs, this allegation (made at PoC, para 140(a) [A1/2/061]) is entirely unparticularised. As discussed further below (see Section II), P4U has been unable to give any basis for this allegation, and DT submits that the Court should conclude that there is none.

10. Second, as to the contention that EE (or DT) could only have decided against the renewal of the EE Agreement through anti-competitive collusion:

a) It is trite that a manufacturer or operator may decide to retail products directly itself, obtain some indirect assistance from an intermediary, or adopt some mixture of the two. For example, whilst retail intermediaries were a prominent feature of the UK mobile market, this was not universally the case in some other EU countries. Accordingly, the fact that an undertaking would enter into such essentially vertical relationships and/or terminate them is unremarkable. It is notable for example that P4U had a distribution agreement with another MNO, Three, which was terminated in April 2012, but P4U does not suggest that this termination was unlawful. Similarly, as noted above, in early 2013 O2 ended part of its agreement with P4U so that P4U could no longer serve existing customers (only new customers). P4U’s case thus starts from an unreal position that the MNOs not keeping P4U as an intermediary in perpetuity is, somehow, suspect. This is akin to a presumption under competition law that vertical integration, or altering distribution arrangements, calls for particular justification so as not to be unlawful. There is no basis for this.

b) As an intermediary, P4U by definition depended on being able to contract with the MNOs. The reality is that, over time, P4U significantly lost attraction for DT’s joint venture EE. Three, as noted, terminated its relationship with P4U in 2012. O2 had scaled back P4U’s involvement to new customers only in early 2013, which was public knowledge. In early 2014 the Carphone Warehouse/Dixons merger was announced, which dramatically expanded the combined entity’s retail footprint – thus increasing the attractiveness of Carphone Warehouse as an intermediary for the MNOs – and also reduced that of P4U (which was at the time in many Dixons’ stores). Even before these

3

developments, P4U itself had candidly anticipated that risks of this kind could imperil its very survival. Phosphorus Holdco plc's Offering Memorandum of 18 September 2013 in relation to P4U noted as the first specific “risk factor”:

“These arrangements [i.e. the agreements with EE, O2 and Vodafone UK] have an original duration of 2 to 3.5 years and are due to expire in 2014 and 2015. The termination of any of these arrangements or any material variation of their terms, whether through the change in distribution strategy of the mobile network operators, changes to commission values, changes to payment structures or otherwise, could seriously impact the revenues generated by our business. Suitable alternative products or services from mobile network operators may not be available on commercially reasonable terms or may not be available at all.”

The simple reality of this case therefore is that P4U’s business failed for obvious commercial reasons unrelated to collusion, which included the extraction of very substantial dividends by its owners that made P4U’s position precarious.1 Its administrators are seeking to recover something akin to the full value of P4U as a going concern through the spurious allegations raised in these proceedings.

c) As respects DT (and similarly EE), the prosaic fact is that EE undertook a detailed business review in late 2013 until summer 2014 in which it considered the various options for the marketing and sale of its connections, and concluded that the most favourable impact on EE’s earnings was one in which: (i) a rival to P4U, Carphone Warehouse, would become the largest indirect distribution partner; (ii) EE would invest significantly in its own direct retail sales channels; and (iii) EE would continue to work with P4U, at least until expiry of the EE Agreement at the end of September 2015: see DT Defence, paras 2(f)-2(j) [A1/4/151]. In short, the market, and EE’s own unilateral strategy, had changed materially, to P4U’s adverse effect.

d) EE presented and recommended this option to its shareholders in mid-2014. Far from foisting its objectives on the subsidiary, or exercising “decisive influence” DT (via its representatives on the EE board) accepted the recommendation presented to it. The financial figures in the business assessment conducted by EE spoke for themselves. EE did not seek DT’s

1 See EE Defence, paragraph 6(c): “In Autumn 2013, one of P4U's indirect parent companies, Phosphorus Holdco plc offered £205m of Payment-in-Kind Toggle Notes in order to pay a dividend in the region of £223m to shareholders including funds advised by BC Partners (which indirectly owned c. 91 %) and management (who collectively indirectly owned c. 9%) including Messrs Whiting and Dobson (who collectively indirectly owned c. 3.8%). As a result, the P4U group weakened its balance sheet and increased its ratio of debt to earnings before interest, tax, deductions and amortization, giving it less commercial flexibility.” [A1/3/078] 4

approval to extend the EE Agreement, and DT accordingly, and contrary to what P4U appears to understand, did not withhold any such approval.

11. P4U also contends that DT (with Orange) induced EE to breach its contract with P4U, and that the three companies were parties to a conspiracy. These allegations add nothing of substance to the claim for alleged breaches of competition law. The claim of conspiracy, moreover, is at odds with P4U’s case that EE, DT and Orange comprised a single undertaking.

12. In short, P4U’s pleaded case against DT is diaphanously thin. Its main case alleging infringements of competition rules is put on two alternative bases:

a) An imputed liability case by virtue of its having been at one point a co-parent of EE. This does not purport to depend on any allegedly infringing acts committed by DT, but merely on its indirect liability, as one of two major former shareholders, for EE’s conduct.

b) A case based on DT’s purported direct participation in an infringement. But P4U’s pleaded case lacks a single pleaded particular of what DT’s infringing conduct was, never mind which persons are alleged to have carried it out and when. Such are the deficiencies in this regard that DT was compelled to issue an Application Notice seeking further information under Part 18 on P4U’s case [D1/7/037].

13. The vista that DT should be dragged into a long trial involving multi-million pound costs on this basis is truly appalling to DT (for perspective, D1 alone currently estimates its total costs at £17 million [C2/492]). At this stage, DT respectfully submits that, as an overarching matter, the extreme thinness of P4U’s case against DT is material to several aspects of the directions that the Court is invited to make at this CMC.

14. This skeleton argument addresses below the directions and applications arising for determination.

II. DT’S REQUEST FOR FURTHER INFORMATION

Background to the Application

15. On 26 February 2020 DT issued an application for P4U to provide further information under CPR Part 18 regarding the following allegation at para 140(a) of the PoC [A1/2/061]:

5

“The anti-competitive commitments and/or disclosures, of which Mr Dunne informed Mr Whiting, were made and received, and/or it is reasonably to be inferred were made and received, at the level of the parent companies of the Defendant MNOs (i.e. Deutsche and/or Orange for EE, Vodafone Group for Vodafone and Telefonica for O2).”

16. This Application arises out of Request 6 of DT’s 22 November 2019 Request for Information, which stated in respect of the above pleading: “Does P4U allege that DT itself made anti-competitive commitments or disclosures? If so, please provide full particulars.” [A2/14/439]

17. P4U purported to provide a response in January 2020 [A2/16/450] and DT and P4U have since then engaged in further correspondence on this matter. This correspondence led to P4U providing a further explanation of the pleading quoted above in its letter of 17 February 2020 [C3/662]. That letter argues that P4U’s case is “clear” from the pleadings. It makes the following points:

a) It states that pending disclosure, P4U is not in a position to identify which individual persons participated in the alleged collusive conduct: para 3.1. This of course is a non-response.

b) It states that P4U does indeed contend that DT itself made anti-competitive disclosures and/or commitments: see para 3.2. In terms of particulars, para 3.2 then cross-refers to paragraph 54 of the PoC [A1/2/024]. Paragraph 54 sets out an allegation that Mr Dunne (of O2) had stated that commitments had been made at the parent company level of Vodafone and O2. This obviously contains no allegation that DT made such commitments.

c) Para 3.3 refers to paras 140(c) and 68 of the PoC [A1/2/061&030]. Those paragraphs set out P4U’s case that EE had agreed in principle to enter a renewal of the EE Agreement. They do not refer to any commitments made by DT to other undertakings.

d) Para 3.3 also refers to a statement made by Mr Pellissier, of Orange. This is not therefore a statement attributed to DT.

e) Para 4 cross-refers to paragraph 2 P4U’s response to a Part 18 request made by Orange: see [A2/17/458]. That response refers to P4U’s case that EE, DT and Orange formed a single undertaking, and that each “participated in the alleged collusion.” It cross-refers back to para 140 PoC (among other paragraphs). It also refers to P4U’s case that the decision not to extend the EE Agreement was in substance taken by DT and/or Orange, or was the result of

6

them exercising decisive influence. But this point goes to the case of indirect liability of DT, not the case of direct liability with which the RFI was concerned.

f) Para 5 states that P4U is not able to specify the timing of any alleged disclosures and/or commitments. Again, this is an admission that P4U has provided no particulars.

18. In short, while this letter contains a number of propositions and cross-references, none of them in fact indicates the basis on which P4U contends in para 140(a) of the PoC that DT made anti-competitive disclosures and/or commitments, or provides any particulars. The cross-references are to those sections of the pleadings which set out a different case against DT: namely, that it was part of a single undertaking with EE, and/or that it took the decision not to extend the EE Agreement or exercised decisive influence to that effect. Those allegations are substantially different from an allegation that DT itself made commitments or disclosures to other undertakings.

19. These matters have been set out in a further letter sent by DT to P4U on 21 February 2020 [C3/722]. P4U provided a further response on 26 February 2020 (shortly before the application was issued) [C4/832]. That response provides no further information responsive to DT’s request and its contents underscore the problematic nature of P4U’s case. Taking the relevant paragraphs of that letter in turn:

a) Para 5 affirms that P4U does mean to allege that DT “participated” in the collusion, and that it is liable for this in addition to any liability as part of an undertaking with EE.

b) Para 6 appears to make an argument in two parts. First, it is alleged that as between Vodafone and O2, it is said to be “known” that the alleged collusion between those undertakings occurred at the level of the parent companies (citing paras 54 and 131 of the PoC [A1/2/024&057]). Second, it is noted that P4U contends that the decision not to renew the EE Agreement was taken in substance by DT and/or Orange. These two facts are said to support an inference that “natural persons” acting for DT and Orange gave and/or received commitments. These two matters do not logically support any inference of that kind at all. The first point concerns alleged collusion between two different undertakings; the second point is part of P4U’s case that DT “foisted” its objectives on EE. Neither has anything to do with DT making commitments or disclosures to other undertakings.

7

c) Remarkably, para 7 contends that DT has “concerned itself overly” with the issue of commitments. It notes that para 140(a) of the PoC alleges not only that DT made commitments, but also that it made disclosures of information as to future intentions. It then provides cross-references to paras 131(b) and 137- 138 of the PoC [A1/2/057&059-060]. None of those paragraphs, however, sheds any light on or provides any support for the contention that DT made any such disclosures. Para 131(b) concerns O2 and Vodafone. Paras 137-138 are allegations concerning EE. They include (at para 137(g)) an allegation that DT received information via EE, but contain no suggestion that DT made any disclosures.

d) Para 8 then repeats the argument that P4U is not in a position to give further information regarding the alleged collusion.

20. P4U has thus been repeatedly asked to explain and particularise its case in this regard and has not done so. It could fairly be inferred that P4U has no sufficient basis at all for making this allegation. Not long before this skeleton argument was filed, P4U indicated that it would provide certain further information on its case verified by a Statement of Truth. However, DT has not yet seen any proposed amendments or clarifications of its case. It will of course carefully consider them if and when provided, and will update the Court at the CMC.

Submissions

21. DT applies for an order that P4U now provides particulars of the allegation, or, if it is unable to do so, confirms that this allegation is not pursued against DT.

22. The power under CPR 18.1(1) is to order a party to “(a) clarify any matter which is in dispute in the proceedings or (b) give additional information in relation to any such matter, whether or not the matter is contained or referred to in a statement of case”. In exercising that power, the Court may be guided by the overriding objective and also by paragraph 1.2 of PD18 which requires requests to be confined to matters which are “reasonably necessary and proportionate to enable the [requesting party] to prepare his own case or to understand the case he has to meet”.

23. It is submitted that it is plainly necessary for P4U to clarify the position so that DT understands the case that it has to meet, if in fact the case is pursued:

8 a) It is trite that allegations of the seriousness involved in competition law claims must be properly pleaded. This applies a fortiori in the context of a standalone competition law claim which does not involve any pre-existing regulatory decision establishing liability for an infringement of competition law. Standalone competition law claims necessarily involve allegations of serious and deliberate wrongdoing that require articulation of a proper and particular basis for the allegations concerned, in much the same way as would be required of a claimant in, say, a fraud case. As Roth J held in Sel-Imperial [2010] EWHC 854 (Ch) – which was also a standalone competition law claim – [17]-[18]:

“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]: ‘These are notoriously burdensome allegations, frequently leading to extensive evidence, including expert reports from economists and accountants. The recent history of cases in which such allegations have been raised illustrate that they can lead to lengthy and expensive trials.’ Subsequent experience only reinforces the accuracy of that observation. 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.” b) No indication has been provided by P4U of the timing, content or form of any alleged anti-competitive commitment or disclosure said to have been made by DT, of the particular undertakings to which it was made, or as to the persons who made them. Even allowing for the latitude sometimes afforded to claimants where information is asymmetric, at least some basic information should be required. c) DT is therefore also unable to prepare its case, search for relevant documentary evidence, or interview potential witnesses. d) An allegation of an anti-competitive commitment or disclosure being made is very serious and should only be made where there is sufficient material to provide a basis for such an allegation.

9

24. DT therefore seeks an order in terms of the draft included with its application [D1/8/040].

III. DISCLOSURE

P4U’s disclosure

25. P4U has voluntarily agreed to provide standard disclosure and has made some proposals as to how this will take place [C2/449]. Following a meeting between the parties, DT provided detailed comments on those proposals on 18 February 2020 [C3/666], and the other Defendants have also made comments on P4U’s proposed disclosure: see e.g., O2’s letter of 19 February 2020 [C3/687]. P4U responded to some of those comments on 26 February 2020 [C4/828], and in a further letter sent in the evening of 27 February 2020. Its proposals remain preliminary in certain respects.

26. Date range. P4U has proposed a global date range for disclosure of the Claimant’s documents beginning in 2006, through to 31 October 2014 (QE letters of 9 January 2020, para 8 [C2/450], and 26 February 2020, para 4(b) [C4/829]).

27. DT anticipates that the majority of relevant contemporaneous documents are likely to have been created in the period 2012–2014. It has no objection to P4U voluntarily searching for documents from 2006 onwards. DT also considers that P4U or its administrators will also hold relevant documents dating from November 2018 onwards, for which searches should be made. P4U resists this. However, P4U’s pleadings indicate that Mr Paul Copley was appointed with effect from 23 November 2018 to “investigate the facts and circumstances leading to the administration of P4U” (PoC, para 12 [A1/2/013]. The date range should therefore include the period from November 2018 onwards.

28. Custodians. P4U has identified some 11 individuals whom it considers would be appropriate custodians: letter of 9 January 2020, para 15 [C2/452]. DT sought clarification as to the role that these individuals played [C3/667]; some information was provided in P4U’s letter of 26 February 2020. DT is considering the position in light of this further information. DT’s position is also that P4U’s disclosure may need to include (see letter of 18 February 2020, paras 5-6 [C3/667]):

a) Individuals within P4U who liaised with BC Partners (P4U’s owner) or with those working on the administration (including at PwC);

10

b) The individuals appointed as administrators, or other individuals who have worked on the administration.

29. As to the individuals involved in the administration, DT has proposed that Mr Green, Mr Moran and Mr Hunt of PwC (being the joint administrators) and Mr Copley (the concurrent administrator) should be added as custodians. They are likely to hold documents relevant to P4U’s financial position at the time of its administration, and the reasons for its insolvency. P4U has confirmed that the joint administrators (Mr Green, Mr Moran and Mr Hunt of PwC) will now be added as custodians (letter of 27 February 2020, para 9). It is submitted that Mr Copley ought to also be treated as a custodian.

30. P4U has not identified the individuals who liaised with BC Partners, the administrators or PwC. It simply maintains that the individuals at P4U that it has identified as custodians were those involved in the “issues arising on the pleadings”: letter of 26 February 2020, para 5(d) [C4/829]. A particular point of relevance concerning BC Partners, the administrators and PwC is as to the value extracted from P4U by its owners prior to its collapse. It is not clear whether individuals whose documents may have a bearing on this issue of causation (and quantum) have in fact been identified, or whether P4U has only focussed on individuals who had a role in the contracts with MNOs. As P4U has declined to identify the individuals who liaised with these third parties, the position remains opaque.

31. DT also sought confirmation that documents held by third parties (such as accounting advisers) but within P4U’s control would be reviewed. P4U’s position appears to be that they do not propose to request or review such documents (letter of 26 February 2020, para 5(d)) on the basis that any “advice” provided by third parties would be held by internal P4U custodians. This is insufficient: a key issue is whether and to what extent P4U’s collapse was a consequence of its own mismanagement and by the extraction of dividends. External advisers such as accountants would likely hold substantial documentation on those questions, which may well not have been shared (or shared in full) with P4U’s custodians. P4U should therefore be directed to request documents within its control held by third parties, such as its accounting, valuation and financial advisers.

32. Scope of disclosure. P4U has identified several categories of documents for disclosure (letter of 9 January 2020, para 18 [C2/453]). DT has sought confirmation from P4U that the disclosure review will cover documents held by the administrator, including into the investigation into P4U’s administration, documents concerning the

11

acquisition of P4U by BC Partners and the dividend paid out to BC Partners and its financial impact, and documents relation to P4U’s financial performance: letter of 18 February 2020, para 8 [C3/668]. P4U has now agreed in broad terms to this request, while indicating that some documents within these categories may not be disclosable [C4/830].

33. Search terms. In its preliminary proposals on disclosure, P4U suggested no search terms that it would propose to use: see letter of 9 January 2020, paras 22-23 [C2/455]. The Defendants requested that P4U sets out its proposals: see DT’s letter of 18 February 2020 [C3/668]; O2’s letter of 19 February 2020, para 13 [C3/689]. P4U’s letter of 26 February 2020 still provided no search terms, which were only provided by P4U in the evening of 27 February 2020. DT will consider P4U’s proposed search terms. A preliminary observation, however, is that P4U does not propose to search for emails between P4U and DT (while, at the same time, insisting that DT searches for emails between DT and P4U). This, DT submits, is reflective of P4U’s contradictory approach to disclosure.

34. Conclusion. P4U’s proposals for its disclosure remain inchoate and inadequate. It may not be possible for the Court to give comprehensive directions on P4U’s disclosure at this CMC. If so, it is submitted that a further hearing on disclosure may be necessary, but that a period for further discussion to take place between the parties should be ordered.

DT’s Disclosure

35. DT set out specific proposals for its disclosure in its letter of 27 January 2020 [C2/488]. P4U provided some “initial observations” on those proposals by its letter of 5 February 2020 [C3/578].

36. After a long hiatus, P4U at lunchtime on 25 February 2020 sent a lengthy letter addressing some (but still not all) of DT’s proposals for its disclosure [C3/785]. P4U then sent a further letter in the evening of 27 February 2020, in which it sought to reformulate DT’s disclosure proposals, apparently on the basis that DT has “refused to engage” on DT’s own disclosure proposals. These observations come very late and present real issues for DT, and the Court, in dealing with the DT disclosure issues at this CMC.

37. The proposals that DT has made are responsive and proportionate to the pleaded case against it and, it is submitted, should be adopted, certainly at this stage. The order for

12

standard disclosure sought by P4U against DT is excessive. DT’s disclosure should be assessed in light of the very limited and secondary role that DT is said to have had. P4U’s claim against DT is based on speculation and (as set out above) is unparticularised insofar as it alleges actual participation in collusion by DT, and is otherwise based on EE being the primary party to the alleged collusion, with P4U being liable as a shareholder or on a vicarious basis.

38. The consequence is that the vast bulk of any relevant documentation would be disclosable by the other MNOs, particularly of course EE. It is therefore appropriate that DT’s disclosure (certainly at this stage) should focus on the particular part of the narrative (to the extent that that narrative is properly pleaded) on which other parties are not in a position to give disclosure. That part is the role played by DT in the management of EE, which is said to give rise to its liability as part of a common undertaking or on a vicarious basis. DT’s proposals seek to provide disclosure relevant to DT’s particular part in the story.

39. Date range. DT proposes to cover the period September 2012-October 2014. This period covers the time of the key events arising in the claim, insofar as they concern DT. The proposed period begins one month before the adoption of the EE Agreement, and ends just over 1 month after P4U’s entry into administration.

40. By contrast, P4U contends that DT should adopt 1 January 2012 as the start of the relevant period. The basis given for this is that Three terminated its contract with P4U in April 2012, and that this is an event that features in its pleadings, to which DT responded: see letter of 25 February 2020, para 4 [C3/786], and Schedule to that letter, para (f) [C3/791].

41. DT submits that the termination by Three of its contract with P4U in April 2012 does not provide any proper basis for extending the date range in this way. It was a manifestly lawful termination of a P4U agreement by a non-party to the proceedings. P4U’s apparent suggestion that DT would have documents concerning or analysing Three’s activities is entirely speculative and does not justify extending the date range in the way proposed. This is particularly so given that in September 2012, EE (with the approval of DT’s members of the EE board) entered into a new agreement with P4U (which was then amended in December 2012 to increase the volumes of EE connections that P4U was entitled to sell). Extending the date range would therefore serve no useful purpose, and would simply increase cost and be disproportionate.

13

42. DT Custodians. DT proposes to treat as custodians all DT members of the EE board during the period from 1 September 2012 until 31 October 2014. Four such members of the board (who sat on the board at different times) have been identified. The basis of this proposal was that, as the key DT representatives in EE, documents and information concerning the issues in dispute would ultimately be channelled through these individuals, and it would be disproportionate to broaden out the custodians further than this.

43. P4U has suggested that “it is unlikely that all key decision-makers at your client during the relevant period were also members of the EE Board and therefore included as custodians in Deutsche’s Disclosure Proposal” (letter of 25 February 2020, para 17 [C3/789]). As to this:

a) No basis is provided for this assertion, and P4U is also entirely non-specific as to who these additional custodians might be. Broadening the pool of custodians is therefore simply speculative and fishing.

b) Insofar as P4U’s case is that DT is liable through its role as a shareholder and/or through exercising decisive influence, the four custodians identified by DT represented DT in the EE board. Their documents are therefore highly likely to capture any documents relevant to P4U’s case in this regard.

44. Electronic documents: searches, filters and categories of documents. DT would propose to search the emails and other non-email data pertaining to the four custodians. As regards emails, DT also proposes to apply filters to search for emails: (i) between DT custodians, and (ii) between the DT custodians and any Orange or EE email address. The search terms that DT proposes for both email and non-email data are variations on “EE” and “P4U”.

45. DT criticises the proposed filters and search terms:

a) As to the filters, P4U contends that these would exclude communications between: (i) DT and P4U, (ii) between DT and either of O2 and Vodafone, or (iii) between DT and Carphone Warehouse.

i. The basis on which communications between DT and P4U are said to have occurred, or would be relevant, is unclear. There is no pleaded case as to DT’s direct communications with P4U. In any case, any such communications would obviously be available to P4U itself.

14

ii. The suggestion that DT had any relevant direct communications with O2 and/or Vodafone is (as set out above) unpleaded and entirely speculative.

iii. Similarly, the suggestion that DT ever had any relevant direct communications with Carphone Warehouse is unpleaded and entirely speculative.

b) As to search terms, P4U suggests that the proposed terms are too narrow. P4U only provided the search terms that it suggests DT should apply in its letter of 27 February 2020. DT will consider P4U’s proposed such terms, but would note, however, that DT’s proposed terms are extremely broad and are apt to capture documents relevant to the claim. They should therefore be accepted in the first instance and the position could, if necessary and proportionate, be revisited at a later stage.

46. P4U’s letter of 25 February 2020 further sets out dozens of categories of documents that it is said “should” fall within the scope of standard disclosure by DT [C3/791]. This proposal comes very late and is unfocussed. It includes several categories of documents that will be disclosable by other parties in any event or have nothing to do with DT, for example:

a) Documents recording Orange’s or EE’s assessment of P4U’s attractiveness as an intermediary (Schedule, para (b));

b) EE’s review of its indirect retail strategy (see Schedule, para (c)(iii));

c) Documents relating to EE’s negotiations with P4U (Schedule, para (h));

d) Documents relating to EE’s negotiations with Carphone Warehouse (Schedule, para (i)); and

e) Letters sent by EE to P4U (Schedule, para (w)).

47. Other categories of documents (such as those concerning DT’s role in the management of EE: paras (j)-(l)) would most likely be captured by the searches that DT has proposed.

48. DT submits that the proper approach is for the email filters and search terms it has proposed to be applied. To the extent that P4U contends, following receipt of the

15

disclosure, that further documents should be disclosed, it may then be open to it to seek specific disclosure. It is premature to front-load such a process now on a purely speculative basis.

49. Other types of records. DT would also propose to search potential hard copy documents in its head office in Bonn, Germany, or that were in the hands of its custodians.

50. P4U’s letter of 25 February 2020 states that DT should also search for relevant documents from a range of sources, including personal email addresses and personal mobile phones [C3/787]. DT submits that the proper course is that P4U should first review the output of DT’s generous disclosure proposal before any decision is made on whether further disclosure is necessary and proportionate.

IV. P4U’S APPLICATION TO ADDUCE EXPERT EVIDENCE

51. By its application issued on 25 February 2020, P4U seeks permission to rely on expert evidence in relation to the following question (1st Greeno, para 28 [D1/014]):

“Whether, having regard to the relevant economic context, a in the position of each of the First, Fourth and Sixth Defendants would, acting rationally and in its independent commercial interests and without collusion (including by the exchange or receipt of information concerning any other Defendant’s commercial intentions), have considered it economically and/or commercially irrational and/or intolerably risky to cease trading with the Claimant.”

Principles

52. The permission of the Court is required to rely on expert evidence (CPR, rule 35.4) and the Court has a duty to restrict the use of expert evidence (CPR, rule 35.1): “Expert evidence shall be restricted to that which is reasonably required to resolve the proceedings.”

53. The Court should exercise its power to control the admission of expert evidence in light of the overriding objective: Gumpo v Church of Scientology Religious Education College [200] CP Rep, 38. Hildyard J in RBS Rights Issue Litigation [2015] EWHC 3433 (Ch) held that the party seeking to adduce expert evidence bears the burden of showing that the evidence is both admissible and reasonably required, i.e., “not just potentially useful” (para 18). The evidence must “genuinely assist” the judge in determining the matters that are in issue: JP Morgan Chase v Springwell Navigation [2007] 1 All ER (Comm) 549, at para 19.

16

54. In the context of competition law cases in particular, senior competition law judges have criticised attempts to use expert evidence to opine on what are quintessentially matters of fact. Mr Justice Marcus Smith was quoted at a public conference in 2018 saying that “We need to ensure that disputes on fact are firstly distinct from disputes on opinion…I fear that in competition cases we have lost sight of the critical distinction between fact and opinion.”2

55. For these reasons, the implications by P4U that it was unreasonable for the defendants to query P4U’s proposed expert evidence, or that it is a purely inter partes matter that does not touch upon the Court’s power to manage the proceedings, is misplaced. It is of the utmost importance that the Court should be satisfied that expert evidence is appropriate in all cases, even in circumstances where the parties agree.

Submissions

56. DT opposes this application. The expert evidence that P4U seeks to admit is not necessary for the Court to resolve the issues before it, and would be of peripheral relevance. It would quite likely involve millions of pounds in total additional costs, to no apparent end.

57. The grounds given by P4U for the application are set out at para 27 of 1st Greeno [D1/3/014]. It is said that:

a) The expert evidence is “necessary to resolve important issues” as to whether the MNO Defendants had a rational basis for ceasing to supply P4U; and

b) The expert evidence will be “helpful at trial” because the Court’s assessment of the rationality of the MNO Defendants’ conduct will assist in considering the “credibility” of the account given by the MNO Defendants. P4U also anticipates challenging the factual witnesses with the expert evidence.

58. Neither of these reasons provides a sufficient basis for the admission of the evidence here.

59. First, the contention that the evidence is “necessary” is incorrect. P4U’s case is that as a matter of fact, the MNO Defendants engaged in actual collusion. It must establish that case on the facts. Whether or not the course of conduct that was adopted by various MNOs at various points in time vis-à-vis P4U would otherwise have been

2 Global Competition Review, 10th Annual Competition Litigation Conference, 2018. 17

economically irrational has no logical bearing on the question of whether the MNOs did in fact actually engage in the alleged collusion. The issue for the Court is whether in fact there was a concerted practice or agreement and, if so, what was its content. An economic model cannot logically answer these questions.

60. This is also clear from the pleaded cases. P4U’s case, in essence, is that, on or before 27 January 2014, (1) Telefonica/O2 gave “commitments” to Vodafone to prevent O2 extending its agreement with P4U and (2) one or more of Telefonica/O2 and Vodafone discussed their future intentions as regards the use of retail intermediaries in the UK with EE, which did not “distance” itself from the collusion between Telefonica/O2 and Vodafone.3 These are quintessentially questions of fact. EE’s (and DT’s) defence to these matters also involves questions of fact par excellence.

61. EE’s defence, in essence, is that the decision taken not to renew the EE Agreement is explained by two main factual elements:

a) Scenario modelling undertaken by EE in May 2014 which showed that not renewing the agreement with P4U beyond its expiry at the end of September 2015, and seeking to spread the sales volume between Carphone Warehouse and strengthened EE direct sales channels produced, longer term, the highest EBITDA by a significant margin over the other options.4 The EE Board approved the proposal of the EE senior management team to pursue this scenario.5

b) Following Vodafone’s termination of its agreement with P4U – which P4U informed EE of on 29 August 2014 (EE was previously unaware of the Vodafone termination)6 – P4U no longer had any other MNO supplier and its viability was at clear risk. In these circumstances, EE decided on 12 September 2014 not to renew its agreement with P4U,7 due to expire on 30 September 2015. EE sent a further letter to P4U on 17 September 2014 exercising its right to terminate the EE Agreement, as P4U’s entry into administration was an automatic breach of that agreement.8

3 Agreed Case Summary, para 8 [B/1/001]. 4 DT Defence, para 54 [A1/4/169]. 5 Agreed Case Summary, para 9 [B/1/001]. 6 EE Defence, para 24 [A1/3/083]. 7 DT Defence, para 2(o) [A1/4/154]. 8 DT Defence, para 2(o) [A1/4/154]. 18

These basic factual points are either right or wrong. An economic model cannot determine this question.

62. Second, the suggestion will be “helpful at trial” because the Court’s assessment of the economic rationality of the MNO Defendants’ conduct will assist in considering the “credibility” of the account given by the MNO Defendants is misconceived. The Court is well-positioned to form a view on the facts, and witness credibility, as it does in any other case. Furthermore, the suggestion that an expert economist can materially assist on the matters P4U indicates ignores the fact that it is the factual witnesses who are the best-placed to explain the market’s operation and what they did and why. An expert economist is not an expert in these market facts, or in MNO business decision- making, and would render his or her opinion on the basis of a theoretical model. The Competition Appeal Tribunal noted these kinds of problems in the Sainsbury’s v MasterCard case ([2016] CAT 11, [36]-[41]), and deprecated them:

“Both Mr von Hinten-Reed and Dr Niels were, as we have said, expert economists. Neither of them is an expert in the field of payment systems, whether generally or specifically in relation to the MasterCard Scheme. Inevitably, they were very dependent upon an accurate account of the factual basis and context within which these complex and sophisticated systems operate.

In other words, in contrast with the position normally encountered by an expert witness, their expertise was engaged at one remove: it could only be deployed in relation to substantial and complex factual material about which they were not expert.

In these circumstances, it was incumbent upon the parties to ensure that the experts gave their opinions based upon a common – and if possible, agreed – factual base. That did not occur in this case: Mr von Hinten-Reed was confronted, in the course of his cross-examination, with material (albeit in the public domain) which he had never seen before; Dr Niels, similarly, was confronted with material which – buried in the 60 plus trial bundles – he had not considered. We consider that neither expert can sensibly be criticised for not being aware of this material: it was payment system specific and – as we have said – this was not the expertise of these witnesses. Their expertise involved considering certain material, and providing their economic analysis in relation to it. To the extent that this material was incomplete, or referred to them late, their analysis was liable to be undermined.

…

40. The upshot is that we were rather less assisted by the economic evidence than we might have been. For the reasons we have given, this was neither the fault of Mr von Hinten-Reed nor Dr Niels, but the consequence is that we have placed considerably more weight on the contemporary factual material and the evidence of the witnesses of fact than we have on the experts, mainly because this material was insufficiently considered by them.

19

41. For the future, in cases where significant economic evidence is being adduced by economic experts who lack specific expertise in the particular factual field under consideration, we consider that the parties need to be especially assiduous in ensuring that the economic experts are:

(1) Clearly instructed on the legal principles they are to apply, and in particular any assumptions they are being required to make.

(2) Absolutely clear as to the factual material on which their reports are to be based.”

63. To provide any support for the inference that P4U intends to invite the Court to draw at trial, the evidence would need to assess “rationality” from the perspective of each of the MNOs, in light of the information available to them at the time, and within the constraints of their own particular commercial policies and strategies. Such an exercise would require very significant disclosure from each of the Defendants. The expert analysis would also of necessity need to draw on the factual evidence and recollections of the individuals concerned on the Defendants’ sides as to the factors they would have taken into account. From a practical point of view, it is in fact very difficult to see how an expert could begin to reconstruct the perspective of the MNOs at the time. In all likelihood, the conclusions an expert could draw could only be relatively abstract, and would therefore be of no real assistance to the trial judge. In short, it would be a largely pointless and highly expensive diversion.

64. At the very least, P4U’s application is premature. The proportionate and practical solution would be first to undertake disclosure (and possibly factual witness evidence), and assess then whether expert evidence serves any useful purpose at all.

65. In sum, it is difficult to see how the Court would be materially assisted by the proposed expert evidence or how the cost and work involved could be justified. DT accordingly submits that the Court should refuse P4U’s application to adduce expert evidence on the ‘rationality’ issue.

V. EXPERT EVIDENCE ON QUANTUM

66. DT has indicated that that expert evidence on the quantum (and possibility issues of causation) of P4U’s claim may be required: Directions Questionnaire [B/5/30]. DT reserved its position regarding clarification of P4U’s case on its loss and on its position. P4U’s case on its loss remains less than clear but it has indicated that it will seek permission to adduce expert evidence in the field of finance and/or accountancy on quantum issues.

20

67. DT submits that permission should be given to each party to adduce evidence from an expert in the field of finance and/or accountancy to address the causes of and other factors contributing to P4U’s insolvency, and to assess quantum. In particular, by the time EE decided on 12 September 2014 not to renew or replace the EE Agreement, P4U was already in financial free-fall, in large part, DT contends, due to financial mismanagement and the excessive levels of dividends and other payments stripped by investors from the company.9

VI. SPLIT TRIAL

68. DT’s draft directions propose that the proceedings are case managed on the basis that there will be a split trial in one of two forms, either: first, a trial of issues of liability for infringements of competition law, breach of contract, and conspiracy/inducing breach of contract; or second, a trial of those issues, and in addition questions of causation: see draft directions, para 1 [B/11/61].

69. On this particular issue, it may be that DT is in a different, or perhaps even unique, position. DT has long divested its interest in EE and has no direct interest in the UK retail mobile market at all now. The main case against DT is not based on anything done by DT but on the imputation of liability as a former co-parent of a joint venture, EE. The secondary basis on which a case of direct participation in an infringement by DT is so gossamer-like as to have forced DT to issue a Part 18 request for information. Not a single particular is provided of what act(s) of direct participation DT is said to have committed, still less any indication of which individuals with DT are alleged to have done so and when. DT is extremely concerned at the vista of a being dragged into a long composite trial on all issues – with some suggestions of a total trial length of as much as 16 weeks having been bandied around by certain parties – on such a specious and non-specific basis.

70. From DT’s perspective, the questions of fact and law arising on P4U’s case against DT are discrete and could be determined at a trial on issues of liability alone:

9 As the EE Defence, paragraph 6(c) pleads: “In Autumn 2013, one of P4U's indirect parent companies, Phosphorus Holdco plc offered £205m of Payment-in-Kind Toggle Notes in order to pay a dividend in the region of £223m to shareholders including funds advised by BC Partners (which indirectly owned c. 91 %) and management (who collectively indirectly owned c. 9%) including Messrs Whiting and Dobson (who collectively indirectly owned c. 3.8%). As a result, the P4U group weakened its balance sheet and increased its ratio of debt to earnings before income, tax, deductions and amortization, giving it less commercial flexibility.” [A1/3/079] 21

a) The major premise of P4U’s case is that the non-renewal of the EE Agreement was the result of collusion. P4U’s primary case against DT is then that DT exercised decisive influence and/or is otherwise liable on the basis of its position as a shareholder in a single undertaking with EE and Orange.

b) EE, DT and Orange all maintain, however, that there was no collusion and that the non-renewal arose from a detailed internal assessment by EE of the most favourable distribution options, conducted on a commercial basis. In addition, EE maintains that it distanced itself from the alleged approaches.

c) P4U also contends DT itself participated in the alleged collusion (an allegation which is the subject of DT’s application for P4U to provide information under Part 18).

71. An efficient and proportionate means of managing the proceedings, at least insofar as they relate to DT, would therefore be to determine these questions at a first stage, without also requiring the parties to incur the very significant cost of dealing with issues of quantum (and potentially causation) which may well prove to be unnecessary.

VII. OTHER DIRECTIONS

Security for costs

72. DT (and the other Defendants) have been in correspondence with P4U as to the provision of security for costs. DT and P4U have reached agreement in principle for P4U to provide security for costs up to this first CMC. As to the form of the security, P4U stated that (letter of 20 February 2020 [C3/699]:

“Our firm is prepared to offer security in the form of transferring any agreed sum to our firm [to] be held in a designated account and for our firm to undertake not to disburse that money until 28 days after the final determination of all costs liabilities in the Proceedings, subject to any further order of the Court or to any agreement in writing between our respective clients.”

73. DT is content in principle with the proposal for P4U’s solicitors to give an undertaking, on the basis that this undertaking is recorded in a Court order. P4U, however, has informed one of the other Defendants that it would propose to provide the undertaking in correspondence only: letter to Norton Rose Fulbright of 26 February 2020 [C4/842]. DT’s position is that the undertaking should be provided in an Order, given its importance. Indeed, it would be concerning if P4U were in principle willing to give security but would balk at recording it in an Order of the Court. In the event it cannot

22

be resolved through agreement, DT may invite the Court to make an order to this effect at the CMC.

74. DT also notes that, since the bulk of the costs in these proceedings are as yet not incurred, security for forthcoming phases of the proceedings is likely to be a relevant issue at future CMCs.

Confidentiality

75. A Confidentiality Ring is in place pursuant to the order of Master Kaye made by consent on 19 August 2019: [A2/29/482]. P4U contends that the Confidentiality Ring is not necessary or practicable (letters of 5 February 2020 [C3/584] and 27 February 2020) and it has suggested that the Defendants must justify the continued operation of the order.

76. DT’s position is that it is for P4U to explain why the order should no longer apply. In this regard, two points bear mention. First, such orders are routine in competition law cases, particularly where, as here, there are competing retail mobile operators. Second, it is a curious complaint, given the allegations it makes, for P4U to insist that competing undertakings should share more information, not less. The fact is that P4U has sought to demand information (prior to disclosure) as to types and numbers of documents that may require confidential treatment; it is obviously not productive to provide that kind of detailed information before the documents themselves have been identified. Rather, it is prudent to maintain a structure in place to facilitate the handling of such material, which experience confirms is very likely to arise.

ROBERT O’DONOGHUE QC HUGO LEITH

Brick Court Chambers 28 February 2020

23