Proving Damage in Abuse of Dominance Claims: “Less Loss” vs Lost Profits and the Limits of Presumptions – Commentary on Cabo Concepts Ltd & Anor v MGA Entertainment (UK) Ltd & Anor [2025] EWCA Civ 1652

Proving Damage in Abuse of Dominance Claims: “Less Loss” vs Lost Profits and the Limits of Presumptions – Commentary on Cabo Concepts Ltd & Anor v MGA Entertainment (UK) Ltd & Anor [2025] EWCA Civ 1652

1. Introduction

This Court of Appeal decision concerns an application for permission to appeal from a judgment of Bacon J, who had found an abuse of dominant position and unjustified threats of patent proceedings, but nevertheless dismissed the claimant’s damages claim entirely for failure to prove profitable trading in the counterfactual scenario.

The case raises important questions at the intersection of competition law damages and general tort principles:

  • What constitutes the “damage” necessary to complete a cause of action in an abuse of dominance claim? Must the claimant show it would have been profitable in the counterfactual, or is it sufficient to show it would simply have made a smaller loss (“less loss”)?
  • How does the requirement to prove “some damage” on the balance of probabilities interact with probabilistic or inferential assessment of loss at the quantification stage?
  • To what extent should courts draw presumptions in favour of claimants, under principles like Armory v Delamirie, when assessing hypothetical counterfactuals?
  • What is the effect of concessions recorded by the trial judge, and how far can parties later contest the existence or scope of such concessions on appeal?

Lord Justice Snowden and Lord Justice Zacaroli deliver a joint judgment that:

  • Adjourns Grounds 1 and 2 to a rolled‑up hearing (permission application plus, if granted, the substantive appeal) because they raise arguable points of law about the nature of recoverable loss and proof of damage.
  • Refuses permission on Ground 3, upholding Bacon J’s evaluative findings that Cabo would not have traded profitably, and rejecting an attempt to invoke a presumption in favour of the claimant when constructing the counterfactual.

Although this is a permission decision, it has significant ramifications for competition damages, particularly for start‑up or loss‑making claimants alleging foreclosure by a dominant undertaking.

2. Background and Procedural History

2.1 Parties and the Products

  • Claimants/Appellants (“Cabo”): Cabo Concepts Limited and The Licence World Limited, a small toy business that designed and manufactured a collectible toy called “Worldeez”.
  • Defendants/Respondents (“MGA”): MGA Entertainment (UK) Limited and MGA Entertainment Inc, a major toy company producing the well‑known collectible toy “L.O.L. Surprise!”

MGA considered Cabo’s “Worldeez” to be similar to its own “L.O.L. Surprise!” product. The dispute centred on MGA’s conduct vis‑à‑vis retailers and threats of patent proceedings.

2.2 The Claim at First Instance

Cabo’s case had two principal legal bases:

  1. Abuse of dominance:
    • Contrary to Chapter II of Part 1 of the Competition Act 1998; and/or
    • Contrary to Article 102 TFEU (relevant as to legal principles and background, though the post‑Brexit position is not explored in the judgment extract).
    The alleged abuse consisted of steps by MGA to dissuade retailers from stocking Worldeez – i.e. a foreclosure complaint – premised on the claim that Worldeez was too similar to L.O.L. Surprise!.
  2. Unjustified threats of patent proceedings:
    • Under section 70 of the Patents Act 1977, Cabo alleged that MGA made unjustified threats of patent infringement proceedings to retailers.

2.3 Findings of Bacon J

Crucially, Bacon J found in Cabo’s favour on liability:

  • MGA was dominant in the relevant market.
  • MGA had abused that dominant position.
  • MGA had made unjustified threats of patent infringement proceedings within section 70.

Despite this, she dismissed the damages claim entirely. Her reasoning (as summarised by the Court of Appeal) was that:

  • Cabo failed to prove that in the counterfactual world (without MGA’s abuse and threats) it would have traded profitably.
  • She treated the claim for “lost profits” as dependent on Cabo proving that, overall, it would have been a profitable business in the counterfactual scenario.
  • She regarded a claim that Cabo would merely have been “less loss‑making” as a different head of loss, neither pleaded nor properly advanced at trial.
  • Given the principle that a tort cause of action is not complete without proof of damage on the balance of probabilities, she held Cabo’s cause of action was incomplete absent proof that it would have been profitable in the counterfactual.

Thus Cabo “won” on liability but recovered nothing in damages.

2.4 Grounds of Appeal

Cabo sought permission to appeal on three grounds:

  1. Ground 1 – “Less loss” as recoverable damage
    Cabo argued that on the judge’s own findings, it would have suffered less loss in the counterfactual than it did in reality. It contended that the judge erred in law in holding that a pleaded claim for “loss of profits” could not extend to a situation where, in the counterfactual, Cabo would not actually become profitable but would instead suffer a smaller loss than occurred in fact.
  2. Ground 2 – Standard of proof of profitability
    Cabo submitted that the judge was wrong to require it to show, on the balance of probabilities, that it would have been profitable in the counterfactual as a condition of completing its cause of action.
  3. Ground 3 – Use of actual-world evidence and presumptions
    Cabo contended that:
    • The judge impermissibly relied on actual-world events (tainted by MGA’s unlawful conduct) to determine what would have happened in the counterfactual.
    • Where there is an absence of reliable evidence, the judge should have applied the principle in Armory v Delamirie, as endorsed in Morris-Gardner v One Step, by making presumptions in favour of the claimant.

3. Summary of the Court of Appeal’s Decision

The Court of Appeal’s resolution can be succinctly stated:

  • Grounds 1 and 2:
    • The Court accepts that these grounds raise arguable points of law with a real (more than fanciful) prospect of success.
    • However, the case is complicated by alleged concessions made by Cabo’s leading counsel at trial, and the fact those concessions were not challenged when the draft judgment was circulated.
    • Accordingly, the Court adjourns the application for permission and directs a rolled‑up hearing, at which:
      • Permission to appeal on Grounds 1 and 2 will be considered; and
      • If granted, the substantive appeal on those grounds will be heard immediately.
  • Ground 3:
    • The Court finds no arguable error of law with a real prospect of success.
    • It rejects Cabo’s invocation of Armory v Delamirie and Morris-Gardner v One Step in the context of a hypothetical counterfactual.
    • It upholds the trial judge’s use of actual-world evidence (properly filtered for taint) in constructing the counterfactual and her evaluative finding that Cabo would not have traded profitably.
    • Permission to appeal on Ground 3 is therefore refused.

The consequential effect is that Bacon J’s conclusion that Cabo would not have been profitable in the counterfactual – and thus would not have generated net profits – stands, subject only to the residual possibility (to be examined on Grounds 1 and 2) that Cabo may still recover damages on a “less loss” basis.

4. Detailed Analysis

4.1 Legal Framework in Outline

(a) Abuse of dominance and damages

Under Chapter II of the Competition Act 1998 and Article 102 TFEU, abuse of a dominant position is unlawful. A private law claimant may seek damages for such abuse. The competition infringement itself does not automatically lead to recovery: the claimant must prove:

  • An infringement (the abuse) – here found in Cabo’s favour; and
  • Causation and loss – that the infringement caused it to suffer compensable damage.

The case focuses not on whether there was an infringement, but rather on what counts as compensable loss and how it must be proved when the claimant’s business was not demonstrably profitable.

(b) Tort principle: damage as a necessary element

General tort law holds that a cause of action in negligence or other tort is not complete until the claimant has suffered “damage” that is more than minimal. This is the principle Bacon J applied in concluding that Cabo’s cause of action was incomplete unless it could prove, on the balance of probabilities, that it would have been profitable in the counterfactual.

The critical question on appeal is whether this principle:

  • Requires proof of profitability as such; or
  • Is satisfied if the claimant shows it would have been better off (even if still loss‑making overall) than in the actual tainted world.

(c) Threats of patent infringement under the Patents Act 1977

Although the judgment is primarily about competition damages, it is relevant that Bacon J also found unjustified threats under section 70 of the Patents Act 1977. Unjustified threats law permits a person aggrieved by groundless threats of patent infringement to seek remedies, including damages, if they can show that the threats caused loss (e.g. loss of trade).

Again, the underlying issue converges on proof and nature of loss associated with wrongful conduct.

4.2 Grounds 1 and 2: “Lost Profits” vs “Less Loss” and the Standard of Proof

(a) How the judge framed Cabo’s case

The Court of Appeal summarises four inter‑related conclusions of Bacon J (para 7):

  1. Cabo’s claim for lost profits was dependent on establishing profitability in the counterfactual.
  2. This was treated as a different head of loss from a claim that Cabo would simply have suffered less loss in the counterfactual.
  3. The case, as pleaded and evidenced, did not encompass the “less loss” claim.
  4. Given the principle that a tort cause of action is incomplete absent some damage proved on the balance of probabilities, Cabo had to prove, on that standard, that it would have been profitable in the counterfactual.

The judge thus linked:

  • the head of loss (“loss of profits”) to
  • a binary factual threshold (profitable vs not profitable), and
  • the completion of the cause of action to crossing that profitability threshold.

(b) Cabo’s appeal arguments on Grounds 1 and 2

Cabo contends that:

  • On the judge’s own findings, in a counterfactual world without MGA’s abuse, Cabo would have suffered less loss than it did in reality; it would have been “better off”.
  • A claim for “lost profits”, properly understood, is sufficiently broad to cover a situation where:
    • The business remains loss‑making in the counterfactual, but
    • The unlawful conduct has made the losses worse than they would otherwise have been.
  • In law, for the cause of action to be complete, it is sufficient to prove on the balance of probabilities that the claimant was worse off due to the infringement. That difference (larger vs smaller loss) is itself “damage”.
  • Once this threshold (“some damage”) is crossed, the quantification of that difference is undertaken on an inferential, evaluative basis, without needing to prove each item of loss on a balance of probabilities—consistent with the general approach to quantification described at §§456–457 of the trial judgment (referred to by the Court).

In essence, Cabo argues that the judge:

  • Mischaracterised the legal nature of a “loss of profits” claim.
  • Wrongly equated “damaged profitability” with “failure to reach profitability at all”.
  • Imposed too strict a threshold for completion of the cause of action by insisting on overall profitability as opposed to “relative betterment”.

(c) The Court of Appeal’s response: arguable points of law

The Court agrees (para 8) that Cabo’s arguments on Grounds 1 and 2 are arguable with a real prospect of success. The judges do not prejudge the outcome, but they acknowledge:

  • The legal issues raised are of sufficient substance and difficulty to merit full appellate scrutiny.
  • They concern core principles:
    • Whether tort “damage” may consist in being “less worse off” rather than positive profits; and
    • How the balance‑of‑probabilities test for causation operates at the boundary between liability and quantum.

Ordinarily, that would lead to straightforward grant of permission. However, this case contains a complicating feature: alleged concessions by Cabo at trial.

(d) The complication: concessions recorded by the judge

The judge recorded two key concessions in her judgment:

  1. At §467, that Cabo had accepted in closing that:
    “if a claim was made for lost profits caused by the defendant’s conduct, it would be necessary to prove on the balance of probabilities that there would have been profits in the counterfactual scenario.”
  2. At §499, that although a “less loss” case was mentioned at points during the trial:
    “no such claim was pleaded or ever particularised during the trial, and [Leading Counsel for Cabo] confirmed in her closing submissions that Cabo's claim was not brought on this basis.”

The Court notes that the judge, even after recording such concessions, went on to decide the substantive issues and found that MGA’s position was “clearly correct”. But for appellate purposes, the question becomes: did Cabo in fact abandon these lines of argument?

(e) Cabo’s position on the alleged concessions

On the permission application, Sir James Eadie KC (not counsel at first instance) argued that:

  • A close reading of the trial closing submissions, in light of all written and oral submissions, shows Cabo had not abandoned its “less loss” position.
  • Cabo had consistently argued:
    1. That it could recover damages even if the most that could be shown was that it would have made less of a loss in the counterfactual; and
    2. That to complete the cause of action it was sufficient to show on the balance of probabilities that it had suffered at least some loss on that basis, after which the court could engage in evaluative quantification.

In short, he contended that Cabo reaffirmed its “would have been profitable” case but did not exclude its “less loss” argument, and that the judge had misinterpreted or overstated the concession.

(f) MGA’s response and the Mohammed precedent

For MGA, Ms Wakefield KC maintained that:

  • The only tenable reading of the transcript is that Cabo did abandon its “less loss” argument and accepted the need to prove counterfactual profitability.
  • Even if Cabo now disputes that, it is “far too late” to do so. The appropriate moment was when the draft judgment was circulated.
  • Where a judge has misunderstood a concession, there is authority (specifically R (Mohammed) v Foreign Secretary (No 2) [2010] EWCA Civ 158; [2011] QB 218, at §4) that such a misunderstanding can be corrected as an “exceptional circumstance” at the draft judgment stage.
  • Cabo accepts it did not raise any such point when the draft judgment was provided; thus it should now be precluded from re‑opening the matter on appeal.

The reliance on Mohammed emphasises the procedural norm: parties must address substantive errors, including misrecorded concessions, as early as possible, ideally at the draft judgment stage.

(g) The Court’s conclusion on concessions and the procedural mechanism

The Court reaches a nuanced position (para 13):

  • It is not satisfied that Cabo “unarguably” made the concessions in the terms recorded by the judge.
  • It considers it arguable (with a more than fanciful prospect of success) that:
    • Cabo reiterated its main “profitable in the counterfactual” case and adduced evidence accordingly; but
    • It did not abandon the subsidiary “less loss” argument about what was needed to complete the cause of action.
  • It is also arguable that Cabo’s failure to raise the alleged misrecording of concessions in response to the draft judgment does not necessarily bar it from raising the point on appeal.

However, these are fact‑sensitive procedural questions, not suitable for determination on the papers. They require:

  • A fuller investigation of:
    • What was actually said at trial;
    • How the case was pleaded and argued; and
    • What factual findings (if any) could support a “less loss” claim, without remitting the matter to the trial judge.

Hence the decision at para 15:

  • A rolled‑up hearing is directed for Grounds 1 and 2.
  • The parties must be prepared to argue all identified points, including:
    • The existence and effect of any concessions;
    • The procedural effect of not challenging the draft judgment; and
    • The substantive legal issues about what constitutes “damage” and the role of “less loss”.

This structure allows:

  • Initial determination whether the procedural posture permits Cabo to advance the “less loss” case at all; and
  • If it does, full argument on the substantive legal principles concerning proof of damage in abuse of dominance and related tort claims.

4.3 Ground 3: Use of Actual-World Evidence, Armory v Delamirie, and Evaluative Findings

(a) Cabo’s challenge on Ground 3

Ground 3 attacked the judge’s evaluation of the counterfactual. Cabo argued:

  1. The judge impermissibly relied on what happened in the actual world, even though the actual world was “tainted” by MGA’s wrongful conduct.
  2. Given an alleged “absence of reliable evidence”, the judge ought to have applied the principle from Armory v Delamirie, as endorsed in Morris-Gardner v One Step, making presumptions in favour of the claimant.

Sir James Eadie KC acknowledged that challenging evaluative findings of this sort faces a “high hurdle” (para 16).

(b) The Armory v Delamirie principle and its modern restatement

Armory v Delamirie (1722) 1 Str. 505 is a classic case in which the court drew adverse inferences against a wrongdoer who had wrongfully deprived the claimant of evidence (here, a valuable jewel). The principle, as re‑articulated in modern law (notably in Morris-Gardner v One Step [2018] UKSC 20; [2019] AC 649 at §38), is that:

  • Where a defendant’s wrongful act has resulted in the destruction, loss, or unavailability of evidence that would otherwise have been available, the court may:
    • Draw adverse inferences against the defendant; and/or
    • Presume in favour of the claimant in assessing what the evidence would have shown, within reasonable bounds.

Cabo argued that this principle should apply to constructing the profit counterfactual in a case where MGA’s abuse allegedly “killed off” the Worldeez business and thus deprived Cabo of the ability to generate and collect evidence of what would have happened.

(c) The Court’s rejection of the Armory argument

The Court firmly rejects this application of Armory (paras 17–18). The key reasoning is:

  • The Armory line of cases concerns situations where there would have been actual evidence but for the defendant’s wrongful acts. The wrongdoer has effectively destroyed or obscured that evidence.
  • By contrast, a counterfactual scenario (what would have happened without the wrongful conduct) is inherently hypothetical:
    • There is, by definition, no actual evidence of it.
    • The court must always infer the counterfactual from the totality of existing evidence, including (where appropriate) events in the real world.
  • Therefore, this is not a case where evidence that would have existed has been destroyed; it is a case where evidence of the hypothetical could never exist apart from inference.

At para 17, the judge at first instance had put it clearly (quoted by the Court of Appeal):

“Where that analysis requires assumptions or inferences to be made, the court will make those assumptions on the basis of a consideration of what is reasonable and realistic. There is no principle that requires that approach to be overridden by a default presumption in favour of the claimant, simply because the exercise is being carried out is the assessment of a hypothetical counterfactual scenario which did not occur as a result of the defendant's conduct.”

The Court of Appeal (para 18) finds no arguable error in this conclusion. It explicitly distinguishes the Armory situation from the present case and confirms that:

  • Courts must assess counterfactuals based on the totality of the available evidence, making reasonable inferences without any special presumption in favour of claimants.
  • There is no doctrinal basis for a default pro‑claimant presumption in competition damages simply because the exercise is hypothetical.

(d) Use of actual-world evidence in constructing the counterfactual

Cabo did not argue that all actual-world evidence is inadmissible in building the counterfactual (para 19). Rather, it identified three concrete examples of what it said were improper uses of tainted actual-world events:

  1. Sales performance at B&M Retail Limited:
    • Cabo needed weekly sales of 15,000–19,000 units to meet its targets, but its best actual performance at B&M was around 4,500 units per week.
    • Cabo claimed this comparison was flawed because B&M is a discount retailer, whereas the critical counterfactual depended on successful listings and sales at the main specialist toy retailers (Toys “R” Us, The Entertainer, Smyths) from which Worldeez had been foreclosed by MGA’s conduct.
  2. Singleton Trading Limited’s reluctance to fund US expansion:
    • Singleton was a funder of Cabo.
    • In August 2017, it was reluctant to fund a US launch.
    • Cabo argued this evidence was tainted because this reluctance arose months after MGA’s threats had “killed off” the UK business.
  3. The 2017 profitability focus:
    • Cabo complained that the judge focused excessively on whether Worldeez would be profitable by the end of 2017, allegedly driven by actual-world timings rather than a free‑standing counterfactual assessment.

(e) The Court’s evaluation of these criticisms

The Court finds these criticisms insufficient to establish a real prospect of challenging Bacon J’s evaluative conclusions (paras 24–29). Key points:

  • The Court is “in no doubt” that Bacon J was fully aware of the risk of taint when using actual-world evidence and took proper care to make adjustments where needed.
  • Specifically regarding B&M sales (paras 20–21, 24, 27):
    • The judge recognised that B&M is not the same as the main specialist toy retailers.
    • She nevertheless found, at §579(i), that there was no evidence supporting the claim that Cabo could have achieved more than triple B&M’s sales just by also being present in the three main retailers.
    • In §591, she relied in particular on the pattern of sales at B&M—strong initial take‑up followed by a rapid drop‑off after August 2017—as indicative of limited enduring consumer appeal, a factor which is independent of MGA’s wrongful conduct.
    • Moreover, it was Cabo itself that had emphasised the B&M sales as “really strong,” inviting judicial reliance on them (para 27).
  • Regarding Singleton’s funding decisions (para 28):
    • The judge also considered evidence that problems in the relationship with Singleton pre‑dated MGA’s abuse.
    • Thus Singleton’s reluctance to fund a US expansion was not simply a reaction to MGA’s misconduct, but part of a broader, pre‑existing risk profile.
  • Overall, at §591 (summarised in para 25), the judge’s conclusion that Cabo would not have traded profitably was based on multiple factors:
    • Product quality issues;
    • Insufficient marketing budget;
    • Lack of a formal business plan;
    • Implausible financial projections;
    • Singleton’s unilateral right to withdraw funding;
    • Expert evidence on the low likelihood of achieving sufficient sales.
    Many of these are wholly independent of MGA’s wrongful conduct.

(f) Weight of expert evidence and lack of challenge

A particularly important factor was the unchallenged expert evidence. At §572 (referred to in para 26), MGA’s expert Mr Harper had estimated that:

  • Cabo’s chances of achieving sufficient first‑year UK sales to secure year‑two listings were well below 10%, likely as low as 1–3%.
  • Even in that low‑probability success case, the business was likely to incur a “significant loss”.

The judge noted, and the Court of Appeal emphasises, that:

  • Mr Harper was not challenged on those core points in cross‑examination.
  • Cabo’s own expert did not address profitability at all.

This severely undermined any realistic prospect of a successful appeal on Ground 3, given the weight courts attach to unchallenged expert evidence.

(g) High threshold for appellate interference

Sir James Eadie accepted the “high hurdle” involved in challenging evaluative findings (para 16). The Court reaffirms standard appellate restraint:

  • Where a trial judge has weighed multiple strands of evidence and reached a reasoned evaluative conclusion, the Court of Appeal will not intervene unless there is a clear error of law or principle, or a perverse finding.
  • No such error was identified here. On the contrary, the judge’s approach appeared orthodox:
    • Using actual-world evidence with suitable caution;
    • Considering product, funding, and market factors holistically; and
    • Relying on unchallenged expert evidence.

Accordingly, the Court is “satisfied” that the trial judge did not impermissibly rely on actual-world matters or misapply any presumption. Permission to appeal on Ground 3 is therefore refused.

4.4 Precedents Cited and Their Role

(a) R (Mohammed) v Foreign Secretary (No 2) [2010] EWCA Civ 158; [2011] QB 218

This public law case is cited for the proposition that:

  • Where a judge circulates a draft judgment, parties are generally only invited to suggest corrections of typographical or similar errors.
  • However, in “exceptional circumstances”, such as where the judge has misunderstood a concession or mischaracterised a party’s case, a party may request substantive reconsideration at that stage.

In Cabo, MGA invoked Mohammed to argue that:

  • If Cabo believed the trial judge had wrongly recorded its concessions, it should have raised the matter when the draft judgment was provided.
  • Its failure to do so should preclude it from revisiting the issue on appeal.

The Court of Appeal recognises the force of this submission but stops short of accepting that Cabo is necessarily precluded. Rather, it holds that the point is arguable and should be determined at the rolled‑up hearing.

(b) Armory v Delamirie (1722) 1 Str. 505 and Morris-Gardner v One Step [2018] UKSC 20; [2019] AC 649

As discussed above, these authorities are invoked by Cabo to argue for a presumption in its favour in the absence of clear evidence concerning the hypothetical profits it would have made.

  • Armory establishes that where a defendant wrongfully destroys or withholds evidence, the court may draw adverse inferences about the content of that evidence.
  • Morris-Gardner re‑affirms the availability of inferential reasoning and presumptions in favour of claimants in situations where defendants’ acts have made precise quantification difficult.

The Court of Appeal’s key contribution here is to limit the scope of this principle:

  • It clarifies that Armory presumption applies where evidence that would otherwise have existed has been destroyed or withheld.
  • It does not apply to the hypothetical case of what “would have happened” absent the wrongful act, where there is by definition no such evidence.

This is an important clarification for all cases involving counterfactual damages assessments (not only competition law).

5. Complex Concepts Simplified

5.1 “Abuse of Dominant Position”

A firm is “dominant” in a market when it has substantial market power, often being able to act largely independently of competitors and customers. “Abuse” occurs when such a firm uses that power in ways that distort competition, such as:

  • Exclusionary behaviour (foreclosing rivals from key routes to market);
  • Exploitative behaviour (excessive pricing, unfair conditions).

Here, MGA was found dominant and to have abused that dominance by dissuading retailers from stocking Cabo’s rival product, Worldeez.

5.2 “Counterfactual”

The “counterfactual” is a hypothetical world in which the wrongful conduct did not occur. To assess damages, courts ask:

  • What actually happened? (the factual world, including the wrong)
  • What would probably have happened without the wrong? (the counterfactual world)

The claimant’s loss is usually the difference between its position in the actual world and its likely position in the counterfactual world.

5.3 “Lost profits” vs “less loss”

  • Lost profits normally refers to profits the claimant would have made but for the wrongful conduct, compared with the actual outcome.
  • In many commercial cases, the relevant difference is between:
    • Positive profits in the counterfactual; and
    • Zero or reduced profits in reality.
  • “Less loss” refers to situations where:
    • The claimant’s business would have been loss‑making in any event, but
    • The wrongful conduct made the losses larger than they would otherwise have been.

The core legal question in Cabo is whether “less loss” can constitute the requisite “damage” for a cause of action in tort/competition law, and whether a claim framed as “lost profits” encompasses such “less loss” damage.

5.4 “Cause of action not complete without damage”

In tort, a claimant must establish, on the balance of probabilities:

  1. A duty (or relevant legal obligation – here, statutory standards under competition/patent law);
  2. A breach or wrongful act (here, the abuse of dominance and unjustified threats); and
  3. Resulting damage (some harm caused by the breach).

Bacon J held that unless Cabo proved it would have been profitable in the counterfactual, it had not proved any damage at all. Cabo contends that proving it would have made a smaller loss is equally valid proof of damage.

5.5 “Rolled‑up hearing”

A “rolled‑up hearing” is a procedural device used by the Court of Appeal (and sometimes in judicial review) where:

  • The application for permission to appeal and the substantive appeal are heard together in one hearing.

The court typically:

  • First decides whether to grant permission; and, if it does,
  • Immediately proceeds (often in the same hearing) to determine the appeal on the merits.

This is efficient where:

  • The issues are tightly interwoven; and
  • There is at least an arguable case but unresolved procedural or factual complexity.

5.6 Standard of appellate review for evaluative findings

Where a first‑instance judge has:

  • Heard witnesses and experts;
  • Assessed credibility and reliability; and
  • Weighed competing pieces of evidence;

the Court of Appeal shows restraint, particularly in relation to “evaluative” findings (judgments of degree, probability, and commercial reality). The Court will only intervene if:

  • There is a clear error of law or principle; or
  • The conclusion is outside the range of reasonable decisions open on the evidence.

In Cabo, this standard underpins the refusal of permission on Ground 3.

6. Impact and Broader Significance

6.1 Potential re‑shaping of competition damages for start‑ups and loss‑making businesses

The most significant potential precedent emerging from this case (subject to the rolled‑up hearing) concerns the nature of recoverable damage:

  • If the Court ultimately holds that “less loss” is an acceptable basis of damage – even where the business remains loss‑making – then:
    • Start‑ups and high‑growth ventures, which commonly incur losses in early years, could still recover damages where an abuse of dominance has worsened those losses.
    • Claimants would not be forced to show that they would have reached net profitability in the counterfactual, which is often a highly speculative and demanding burden.
  • Conversely, if the Court endorses Bacon J’s approach, the bar for recovery could be quite high for nascent businesses:
    • They might need to establish, on the balance of probabilities, that they would have transitioned into profitability but for the abuse.
    • This could significantly constrain the availability of damages in foreclosure cases against dominant incumbents.

Even at the permission stage, the Court’s recognition that these are arguable and serious points of law signals their systemic importance for competition litigation.

6.2 Clarification of the limits of Armory v Delamirie in counterfactual analysis

By rejecting the application of Armory presumptions to purely hypothetical counterfactuals, the Court provides a clear steer for all damages claims involving “what would have happened” scenarios:

  • There is no automatic pro‑claimant presumption just because the defendant’s wrongdoing has made the counterfactual necessary.
  • Causation and loss remain governed by:
    • Ordinary principles of inference from available evidence; and
    • Fair, rational evaluation of probabilities.

This is relevant not only in competition law, but also in:

  • Professional negligence (what a client would have done but for negligent advice);
  • Contractual loss‑of‑chance claims; and
  • Intellectual property cases (what sales would have been absent infringement).

6.3 Procedural discipline on concessions and draft judgments

The case underscores two procedural lessons:

  • Clarity and care in making concessions:
    • Concessions by leading counsel, especially in closings, may profoundly shape the legal and factual framework.
    • They can limit what may be argued later on appeal.
  • Prompt engagement with draft judgments:
    • If counsel believes the judge has mischaracterised or overstated a concession, this should, in principle, be raised at the draft judgment stage, relying on Mohammed where necessary.
    • Failure to do so risks being treated as acquiescence, although Cabo indicates this will not always be an absolute bar.

The rolled‑up hearing structure allows the Court to consider, in a disciplined way, whether and to what extent Cabo can escape the consequences of any concessions recorded below.

6.4 Affirmation of the evaluative latitude of first‑instance judges

On Ground 3, the Court’s refusal of permission reaffirms that:

  • Trial judges are permitted, and indeed required, to rely on actual-world evidence—subject to careful scrutiny—to construct counterfactuals.
  • They may place weight on:
    • Patterns of sales;
    • Funding arrangements and investor attitudes;
    • Product features and marketing efforts;
    • Expert assessments of market prospects.
  • Where such an evaluative assessment is comprehensively reasoned and based on unchallenged expert evidence, appellate courts will be very slow to intervene.

7. Conclusion: Key Takeaways

The Court of Appeal’s judgment in Cabo Concepts Ltd & Anor v MGA Entertainment (UK) Ltd & Anor [2025] EWCA Civ 1652 is procedurally limited but doctrinally rich. Its main implications can be summarised as follows:

  1. Nature of damage in competition/tort claims:
    • There is a live, arguable question whether “lost profits” claims and the requirement of damage can be satisfied by proving that the claimant would have made a smaller loss (“less loss”) in the counterfactual, even if never actually profitable.
    • The Court has recognised the importance and arguability of this issue by ordering a rolled‑up hearing on Grounds 1 and 2.
  2. No special presumption for counterfactual profit claims:
    • The Court confirms that Armory v Delamirie does not create a general presumption in favour of claimants when courts construct hypothetical counterfactuals.
    • Counterfactual analysis remains an exercise in reasonable inference from the totality of available evidence, without a default tilt toward the claimant.
  3. Use of actual-world evidence is permissible, with care:
    • Judges may rely on actual-world events (including sales through non‑foreclosed channels and investor behaviour) to inform the counterfactual, provided they make due allowance for any taint from the wrongful conduct.
    • The Court of Appeal endorsed Bacon J’s careful approach and refused to disturb her evaluative findings.
  4. Procedural lessons on concessions and draft judgments:
    • Concessions recorded in a first‑instance judgment can have major consequences on appeal; disputing them should normally be done when the draft judgment is circulated.
    • However, where there is a plausible argument that the judge misunderstood the concession, the Court may still allow the issue to be ventilated on appeal, as in this case.
  5. High threshold for overturning evaluative findings:
    • The Court’s refusal of permission on Ground 3 reinforces that appeals will rarely succeed where they challenge a trial judge’s multi‑factorial, evidence‑based evaluation, especially when supported by unchallenged expert testimony.

The outcome of the forthcoming rolled‑up hearing will be crucial. If Cabo is ultimately allowed to and does succeed on a “less loss” theory, the case may significantly expand the practical scope of damages in abuse of dominance and analogous tort claims, particularly for nascent and loss‑making businesses. Even at this preliminary stage, however, the decision provides helpful clarification on the limits of claimant‑friendly presumptions and on how courts should responsibly use actual-world evidence in constructing counterfactual scenarios.

Case Details

Year: 2025
Court: England and Wales Court of Appeal (Civil Division)

Comments