NEUTRAL CITATION: [2004] CAT 17 IN THE COMPETITION APPEAL TRIBUNAL Victoria House Bloomsbury Place London WC1A 2EB Case: 1021/1/1/03 1022/1/1/03 1 October 2004 Before: Sir Christopher Bellamy (President) Mr. Barry Colgate Mr. Richard Prosser OBE Sitting as a Tribunal in England and Wales BETWEEN JJB SPORTS PLC Appellant -and- OFFICE OF FAIR TRADING Respondent ALLSPORTS LIMITED Appellant -and- OFFICE OF FAIR TRADING Respondent Lord Grabiner QC and Mr. Mark Hoskins (instructed by Messrs. DLA) appeared for JJB Sports Plc Mr. Laurence West-Knights QC and Mr. George Peretz (instructed by Messrs. Addleshaw Goddard) appeared for Allsports Limited Mr. Stephen Morris QC, Mr. Jon Turner and Miss Anneli Howard (instructed by Director of Legal Services, Office of Fair Trading) appeared for the OFT Heard at Victoria House from 8 to 26 March 2004 JUDGMENT ON LIABILITY APPROVED BY THE TRIBUNAL FOR HANDING DOWN (SUBJECT TO EDITORIAL CORRECTIONS) Note: Annex I to this judgment is a separate document which contains a chronology of events for general reference purposes. In this judgment, transcript references relate to the transcripts of the main hearing as posted on the Tribunal’s website TABLE OF CONTENTS Paragraph I INTRODUCTION The decision 1 The appeals 7 The infringements found against JJB 12 The infringements found against Allsports 14 Replica kit 16 The undertakings and principal persons involved 21 - Umbro 21 - JJB 26 - Allsports 29 - Sports Soccer 32 - Blacks 36 - JD 37 - Sports Connection 38 - MU 39 - The FA 41 - Sportsetail 42 II THE ADMINISTRATIVE PROCEDURE 43 III THE CONTESTED DECISION 64 A. SOME BACKGROUND MATTERS 65 Selective distribution 65 The attitude of MU 66 Recommended retail prices, retail mark up and margins 68 Discounting in the period before and after the alleged infringements 75 B. THE ALLEGED AGREEMENTS AND CONCERTED PRACTICES 89 General 89 (1) The agreement between at least Umbro and Sports Soccer with respect 92 to major licensed replica shirts between April 2000 and August 2001 (2) The England Agreement 102 (3) The MU Agreement 104 (4) The Continuation Agreement relating to England and MU replica 106 shirts in 2000 and 2001 (5) The England Direct Agreement 108 i Paragraph IV THE PROCEDURE BEFORE THE TRIBUNAL 109 The Tribunal’s jurisdiction 110 The interlocutory proceedings 113 The witness evidence 143 Post-hearing submissions 148 V THE LAW ON AGREEMENTS AND CONCERTED PRACTICES 150 VI THE BURDEN AND STANDARD OF PROOF 164 The Napp judgment 165 The parties’ submissions 166 Recent cases on standard of proof 175 Other developments 186 Analysis 187 VII THE ENGLAND AND MU AGREEMENTS: 209 THE ARGUMENTS ON THE FACTS A. THE PLEADINGS 210 JJB’s notice of appeal 210 The OFT’s defence to JJB’s notice of appeal 214 Allsports’ notice of appeal 219 The OFT’s defence to Allsports’ notice of appeal 226 B. THE OPENING SKELETON ARGUMENTS 233 The OFT 233 JJB 236 Allsports 241 C. THE APPELLANTS’ CLOSING SUBMISSIONS ON THE FACTS 252 JJB’s closing submissions 252 - The witnesses 252 - Pressure and complaints 260 - The England Agreeement 263 - The MU Agreement 269 Allsports’ closing submissions 274 - General 274 - Pressure and Complaints 277 - The England Agreement 279 - The MU Agreement 281 - Pointers to the truth 282 ii Paragraph VIII THE EVIDENCE GENERALLY 284 A. NEW EVIDENCE BEFORE THE TRIBUNAL 284 B. THE EVIDENCE GENERALLY 286 C. PARTICULAR WITNESSES 295 Mr. Mike Ashley 296 Mr. Chris Ronnie 298 The circumstances in which Mr. Ronnie left Umbro 306 Other OFT witnesses 308 Mr. David Whelan 309 Mr. Colin Russell 311 Mr. David Hughes 312 Mr. Michael Guest 320 D. OVERLAP BETWEEN THE ENGLAND AND MU AGREEMENTS 321 IX THE RELATIONSHIP BETWEEN UMBRO AND SPORTS SOCCER 323 General 324 The Trading Arrangements 327 Pressure by Umbro on Sports Soccer 347 Mr. Ashley’s reluctance 358 Assurances about other retailers 361 The quid pro quo argument 362 Other pressures on Umbro 363 Sports Soccer’s launch prices 364 Conclusions 365 X THE ENGLAND AGREEMENT: THE BACKGROUND CONTEXT 367 The calculation of wholesale prices by reference to RRPs 368 A previous culture of resale price maintenance 369 The price war between JJB and Sports Soccer 373 Uncontested facts 380 Framework of the analysis 390 XI UMBRO AND JJB: PRESSURE AND COMPLAINTS 394 A. THE POSITION OF JJB IN 2000 394 B. THE ALLEGATIONS OF COMPLAINTS AND PRESSURE BY JJB 400 The Umbro evidence 401 JJB’s evidence 410 iii Paragraph Analysis 414 C. THE EFFECT OF JJB’s PRESSURE ON UMBRO 425 XII UMBRO AND ALLSPORTS: PRESSURE AND COMPLAINTS 430 A. THE POSITION OF ALLSPORTS IN 2000 430 B. THE ALLEGATIONS OF COMPLAINTS AND PRESSURE BY ALLSPORTS 443 (1) THE LETTER OF 20 APRIL 1999 445 (2) COMPLAINTS BY ALLSPORTS GENERALLY 452 Umbro’s evidence 452 Allsports’ evidence 458 Analysis 464 (3) SPECIFIC INCIDENTS OF PRESSURE BY ALLSPORTS 465 The Allsports Golf Day 465 Mr. Ronnie’s meeting with Mr. Guest on 31 May 2000 476 The meeting of 2 June 2000 between Mr. Ronnie and Mr. Hughes 479 Analysis of the meeting of 2 June 482 C. SUMMARY OF CONCLUSIONS ABOUT COMPLAINTS AND PRESSURE 498 FROM ALLSPORTS D. THE EFFECT OF ALLSPORTS’ PRESSURE ON UMBRO 499 XIII EVIDENCE ON THE ENGLAND AGREEMENT 503 A. MR. ASHLEY’S STATEMENTS TO THE OFT IN 2001 504 The meeting of 30 March 2001 504 The meeting of 13 August 2001 507 Analysis 510 B. THE RELEVANT DOCUMENTS 517 (1) Mr. Fellone’s fax to Debenhams dated 2 June 2000 518 (2) Mr. Marsh’s fax to MU dated 6 June 2000 522 (3) Umbro’s MMR for May 2000 527 C. THE TELEPHONE CONVERSATIONS 547 Mr. Ronnie’s evidence 548 Mr. Fellone’s evidence 575 Mr. Ashley’s evidence 577 JJB’s evidence 582 Mr. Hughes’ evidence 583 iv Paragraph Mr. Guest’s evidence 584 General conclusions on Mr. Ronnie’s evidence in the witness box 587 XIV THE ENGLAND AGREEMENT: FINDINGS AS REGARDS JJB 593 A. FINDINGS OF FACT 593 The position of JJB 593 The telephone conversations 598 The surrounding circumstances 600 Umbro’s MMR for May 2000 607 Mr. Ashley’s evidence to the OFT in 2001 610 Mr. Fellone’s evidence 612 Mr. Ashley’s contacts on 2 June 613 Mr. Fellone’s fax to Debenhams of 2 June 614 Umbro’s fax to MU of 6 June 2000 615 The notes of the meeting on 26 February 2002 616 Dates and times 618 Paragraph 27 of Ronnie IV 619 JJB’s argument that Umbro simply inferred what its price would be from JJB’s 624 previous practice Pricing post-August 2001 636 B. ANALYSIS 637 Conclusion as regards JJB 670 XV THE ENGLAND AGREEMENT: FINDINGS AS REGARDS 671 ALLSPORTS A. FINDINGS OF FACT 671 The position of Allsports 671 The telephone conversations 681 The surrounding circumstances 683 Umbro’s May MMR 690 Other elements 694 Did Mr. Ronnie inform Allsports of Sports Soccer’s agreement to go out at 698 £39.99? B. ANALYSIS 704 Conclusion as regards Allsports 727 XVI PROCEDURAL ISSUES 728 XVII THE MU AGREEMENT 746 v Paragraph A. UMBRO’S EFFORTS PRIOR TO THE BEGINNING OF JUNE 2000 TO 747 PREVENT DISCOUNTING ON THE MU SHIRT Umbro and JJB 747 Umbro and Allsports 755 B. ALLSPORTS, UMBRO AND MU 759 C. THE INITIATIVE TAKEN BY MR. HUGHES 762 Contacts between Mr. Hughes, Mr. Ronnie and Mr. Ashley 762 Mr. Hughes’ contacts with JJB 771 D. THE MEETING OF 8 JUNE: THE PRELIMINARIES 784 E. THE EVIDENCE AS TO THE DISCUSSION IN THE STUDY 792 Mr. Ashley’s evidence 793 Mr. Hughes’ evidence 797 Mr. Whelan’s evidence 803 F. EVIDENCE FOLLOWING THE MEETING OF 8 JUNE 809 Mr. Ashley’s meeting with Mr. Ronnie on 8 June 810 Mr. Hughes’ two memos of 9 June 811 Mr. Hughes’ conversation with Mr. Knight on 9 June 817 Mr. Hughes’ diary entries 818 Mr. Ronnie’s conversation with Mr. Sharpe on 9 June 819 Mr. Ronnie’s conversation with Mr. Bryan 820 Mr. Prothero’s letter of 13 July 2000 824 The JJB Board meeting 827 G. ANALYSIS 830 Findings on the evidence 830 Agreement or concerted practice 868 JJB’s Board meeting 881 Conclusion on the MU Agreement 885 XVIII THE CONTINUATION AGREEMENT 886 A. INTRODUCTION 886 The decision 886 JJB’s main arguments 888 The shirts concerned 894 B. THE LAUNCH OF THE NEW ENGLAND HOME SHIRT IN APRIL 2001 906 vi Analysis of matters relied on in the decision 906 Conclusions on JJB’s participation in an agreement relating to the launch of the 924 new England home shirt in April 2001 C. THE MU CENTENARY SHIRT 933 The decision 934 The parties’ submissions 938 The main events 940 The issues that arise 960 Does the cancellation of part of JJB’s order on the Centenary shirt show that 961 JJB participated in the alleged Continuation Agreement? Does JJB’s purchase of the remaining stocks of the MU home shirt show that 969 JJB participated in the alleged Continuation Agreement? Did JJB ask for and/ or receive an assurance from Umbro that Sports Soccer 975 would not discount the MU Centenary shirt at launch? Conclusion on the evidence 981 Agreement or concerted practice 984 Conclusion as to the Continuation Agreement 989 XIX THE ENGLAND DIRECT AGREEMENT/ SPORTSETAIL 990 Introduction 990 The main events 996 Mr. Russell’s evidence 1020 JJB’s submissions 1024 The OFT’s submissions 1027 Analysis and findings 1028 Conclusion on the England Direct Agreement 1053 XX CONCLUSIONS 1054 ANNEX I – CHRONOLOGY BASED ON DOCUMENTS vii I INTRODUCTION The decision 1. In decision no. CA 98/06/2003 dated 1 August 2003 (“the decision”) the OFT found that a number of undertakings had engaged in price fixing of replica football kits in 2000 and 2001, contrary to the Chapter I prohibition imposed by section 2 of the Competition Act 1998 (“the Act”).