Exploitative Abuse and “Black Box” Royalties: A Realistic Counterfactual is Essential
1. Introduction
In Rowntree v Performing Right Society Ltd & Anor [2026] EWCA Civ 814, the Court of Appeal (Civil Division) (Miles LJ giving the leading judgment, with whom Nugee LJ and Zacaroli LJ agreed) dismissed an appeal from the Competition Appeal Tribunal ([2025] CAT 49).
The appellant, a songwriter member of the first respondent (a UK collective management organisation) and proposed class representative, sought to bring opt-out collective proceedings under section 47B of the Competition Act 1998. The proposed class comprised songwriter members during the relevant period. The claim alleged an exploitative abuse of dominance contrary to the Chapter II prohibition (section 18) arising from the respondents’ policy of distributing “black box” (unmatched/unidentified) royalties pro rata between writers and publishers by reference to matched royalty distributions.
The core complaint was that unmatched royalties are (in aggregate) more likely to be attributable to writers than publishers, such that a pro rata approach “overpays” publishers and “underpays” writers as a class. The claim sought damages and forward-looking injunctive relief requiring a non-infringing distribution policy.
2. Summary of the Judgment
The Court of Appeal held that the pleaded Chapter II claim had no reasonable prospect of success and upheld the Tribunal’s strike-out/reverse summary judgment. The appeal failed primarily because:
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An allegation of unfairness in distributing unidentified royalties requires a realistic non-infringing comparator (counterfactual distribution rule), not a comparison with a hypothetical “true distribution” that is unknown and unknowable given the information deficit that creates black box royalties.
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The appellant had not pleaded (or even described in broad terms) any plausible counterfactual distribution rule; absent that, the claim amounted to no more than an assertion that a different distribution might be preferable.
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The statistical premise (assumed true at this stage) that writers are, on average, more affected by data failures did not establish that pro rata distribution is inherently unfair or abusive.
Having rejected the substantive Chapter II case, the Court considered it unnecessary to determine the certification issues (including class definition/commonality and damages methodology).
3. Analysis
3.1 Precedents Cited
(a) London & South Eastern Railway Ltd v Gutmann [2022] EWCA Civ 1077, [2022] ECC 26
The Court relied on this authority (by reference to the summaries at [93]–[102] in that case) as an accepted statement of the principles governing “unfair trading conditions” as an exploitative abuse. It anchored the Court’s insistence that “unfairness” is not a free-standing moral standard: it must be assessed by reference to legally cognisable benchmarks and structured analysis, not a generalised sense that the dominant undertaking could have done better.
(b) Gutmann v First MTR South Western Trains Ltd [2025] CAT 64, [2025] Bus LR
The Court endorsed the Tribunal’s observations (quoted at [65] of the judgment on appeal) stressing:
- Abuse is broad but not unlimited;
- Competition law is not general consumer protection;
- Systemic conduct is not abusive merely because it could be improved in a way that benefits consumers.
This framing was central to rejecting the attempt to convert a contested internal redistribution choice into a Chapter II abuse.
(c) Napp Pharmaceutical Holdings Ltd v DGFT [2002] CAT 1
Cited for the proposition that “strong and compelling evidence” is required to establish abuse (reflecting the quasi-criminal character of competition law sanctions). Although this was an interlocutory strike-out/summary judgment context, the citation reinforced judicial caution against expanding abuse doctrine into broad fairness review.
(d) Begum v Maran (UK) Ltd [2021] EWCA Civ 326, [2022] 1 ALL ER (Comm) 940
Relied upon by the appellant for the general proposition that novel/developing legal issues are often unsuitable for summary disposal. The Court distinguished the position: it was not persuaded that any genuinely novel or developing principle of Chapter II law was engaged; rather, the claim failed due to the absence of an essential pleaded comparator and the mismatch between alleged unfairness and a workable legal test.
Raised in the respondents’ notice as an additional reason to refuse opt-out certification (weakness of claim, “class suing itself”, alternative dispute mechanisms). The Court did not need to decide that point because it dismissed the appeal on the substantive Chapter II issue. Nevertheless, the inclusion of Evans signals the increasing weight placed on proportionality, alternatives to collective litigation, and the strength of the case at the certification stage—issues the Tribunal had addressed extensively.
3.2 Legal Reasoning
(a) The “black box” problem is an information deficit, not a concealed entitlement
The Court emphasised that black box royalties arise from “conditions of ignorance”: missing or inadequate information prevents matching receipts to works and share pictures. As a result, none of the unidentified royalties can meaningfully be said to be “owned by”, “belonging to”, or “owed to” any specific member (or group) in any actionable sense (even if one can theorise a perfect-information “true distribution”). This undermined the claim’s rhetoric that the royalties “belong” to writers as a class.
(b) Unfairness must be assessed relatively: a counterfactual is indispensable
A central holding is that alleged unfairness in the allocation of unidentified royalties cannot be assessed “in the abstract”. Because the collective manager must adopt some rule to distribute funds that cannot be matched, the fairness of its chosen rule can only be tested against a realistic alternative non-infringing rule—a counterfactual distribution policy.
The appellant’s pleaded comparison was, in substance, between pro rata distribution and the hypothetical “true distribution” that would exist if the missing information were available. The Court found that comparator illegitimate: if the missing data existed, there would be no black box; the royalties would be matched and distributed to those entitled. “True distribution” is therefore not a workable yardstick because it is unknowable and unattainable in the conditions that generate black box royalties.
(c) The absence of a pleaded counterfactual was not a curable pleading nicety
The Court rejected the submission that certification should be allowed so the appellant could later formulate a lawful counterfactual (including through disclosure). It held that the appellant had ample opportunity to identify at least a broad alternative rule, yet did not do so. The Court’s reasoning was practical: the same information deficit that creates black box royalties makes it inherently difficult to devise an alternative rule that is demonstrably “closer” to a true entitlement-based distribution.
(d) Statistical disparity does not establish unfair trading conditions
Even assuming (as the respondents accepted for summary disposal purposes) that writers are more affected by data failures in the aggregate, the Court held that this does not show pro rata distribution is unfair or biased:
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Probability is not entitlement: a writer may still be better off than many publishers under pro rata distribution; writers are not a homogenous group.
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PRS distributions are work-by-work and share-based, not class-based; the pleaded class framing was a conceptual mismatch.
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If statistical differences were enough, innumerable sub-classes (genres, eras, popularity levels) could claim systemic disadvantage—showing the insufficiency of “class-based” statistical framing without a principled comparator.
(e) The claim resembled discrimination without being pleaded as such
The Court noted the appellant’s repeated language of “bias” and “unequal treatment”, but observed that the claim was not pleaded under section 18(2)(c) (dissimilar conditions to equivalent transactions). This reinforced the view that the claim was, at root, an attempt to challenge a distribution policy as “unfair” without fitting it into a coherent established abuse category with proper analytical structure.
(f) Governance context and reasonableness of matching efforts (not determinative, but telling)
While not treating them as conclusive, the Court found it relevant that:
- There was no pleaded challenge to the respondents’ matching efforts or the cost/accuracy balance they struck.
- The distribution decision was taken within a governance structure with writer and publisher representation, and with an express role in weighing cost-efficiency and accuracy.
This background made the claim “far removed” from paradigmatic exploitative abuse scenarios where a dominant firm imposes unjustifiable conditions due to lack of competitive constraint.
3.3 Impact
(a) A clear pleading threshold for “unfair trading conditions” claims about redistribution mechanisms
The decision crystallises a practical rule: where a claimant challenges the fairness of a dominant undertaking’s allocation mechanism (especially one forced by uncertainty), it must identify a realistic counterfactual allocation rule. Without that, allegations of “unfairness” risk collapsing into non-justiciable disagreement over policy or governance choices.
(b) Limits on using competition law to litigate intra-scheme distribution disputes
For collective management organisations and other mutual/non-profit distribution schemes, the judgment signals judicial reluctance to treat contested redistribution of inherently unallocable sums as an exploitative abuse—particularly where the claimant does not challenge operational matching standards and the dispute resembles an internal distributive choice.
(c) Collective proceedings: substance first, certification second
Although the Court did not decide certification issues, the route it took is itself impactful: weak or incoherent substantive competition claims may be eliminated at the outset, preventing collective proceedings from becoming a vehicle for speculative reformulation of the cause of action after certification.
4. Complex Concepts Simplified
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Chapter II prohibition (Competition Act 1998, s.18): bans abuse by a dominant undertaking. “Exploitative abuse” includes imposing unfair prices or unfair trading conditions.
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Unfair trading conditions: not a general fairness jurisdiction; the court looks for structured indicators of unlawfulness, typically requiring comparison to a relevant benchmark.
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Counterfactual: a legally acceptable “what would have happened instead” scenario used to test infringement and quantify loss. Here: a plausible alternative distribution rule that would be non-abusive.
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“Black box” / unidentified royalties: royalties received but not matched to the correct work or rights-holder shares due to missing/inaccurate data. The “problem” is that no one can say who should receive what.
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Strike out / summary judgment: mechanisms to end a claim early where it discloses no legally viable case or has no real prospect of success.
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Collective proceedings order (CPO): Tribunal permission to run claims on behalf of a class (opt-out here). But collective procedure does not create a cause of action; class members must have viable underlying claims.
5. Conclusion
Rowntree v Performing Right Society Ltd & Anor confirms that allegations of exploitative abuse by “unfair trading conditions” require more than showing (even if assumed) that a policy has statistically adverse aggregate effects for a subgroup. Where the challenged conduct is a necessary response to missing information—unmatched royalties—the claimant must articulate a plausible counterfactual distribution rule against which unfairness can be assessed. Without such a yardstick, competition law will not be used as a general corrective for contested distributive outcomes within a rights-management scheme.