Factual and Procedural Background
The Appellant, a firm of funeral directors ("Burgess"), appealed against a decision of the Office of Fair Trading ("OFT") dated 29 June 2004, which found that another firm of funeral directors and crematorium operator ("Austins/Harwood Park") had not abused a dominant position contrary to section 18 of the Competition Act 1998 ("the Act"). Austins owns and operates Harwood Park Crematorium in the Stevenage/Knebworth area.
Burgess had been a regular user of Harwood Park until Austins wrote on 16 January 2002 refusing Burgess access to the crematorium from 18 January 2002. Burgess complained to the OFT alleging abuse of dominance. The OFT initially rejected the complaint but later withdrew that decision and investigated further.
Between January 2002 and March 2004, Burgess obtained access indirectly through a third party funeral director ("Nethercotts"). On 22 March 2004, Austins stopped all use by Burgess of Harwood Park, whether direct or indirect. Burgess made three applications for interim measures to the OFT, all rejected, and appealed the rejection of the third application to the Tribunal.
The OFT adopted its substantive decision on 29 June 2004 rejecting Burgess' complaint. The Tribunal stayed the interim measures appeal and granted limited interim access to Burgess. Burgess then lodged the present appeal against the OFT's substantive decision.
The Tribunal found that the OFT's analysis of the relevant geographic market and abuse was inadequately supported by evidence and contained errors of fact and law. The Tribunal proposed to set aside the OFT's decision and take its own decision on dominance and abuse, finding that Austins/Harwood Park held a dominant position in the Stevenage/Knebworth area and had abused that position by restricting Burgess' access to Harwood Park.
The Tribunal noted that since the hearing, unrestricted access to Harwood Park had been agreed between the parties, encouraging a constructive commercial relationship going forward.
Legal Issues Presented
- What is the relevant geographic market for crematoria services and funeral directing services in the Stevenage/Knebworth area?
- Does Austins/Harwood Park hold a dominant position in these relevant markets?
- Did Austins/Harwood Park abuse any such dominant position by refusing or restricting Burgess' access to Harwood Park?
- Is the refusal to supply or discrimination objectively justified?
- Does the abuse extend to Burgess' branches in Welwyn Garden City and Hatfield?
- Are there procedural flaws in the OFT's decision-making process?
Arguments of the Parties
Appellant's Arguments
- Burgess argued that the relevant geographic market for crematoria services is limited to the area where Harwood Park is the nearest crematorium, primarily Stevenage and Knebworth, and that the OFT's broader 30 km market definition was incorrect.
- They submitted that Austins/Harwood Park is dominant in both crematoria services and funeral directing services in the Stevenage/Knebworth area.
- Burgess contended that Austins/Harwood Park abused its dominant position by refusing and restricting access to Harwood Park, thereby harming competition and consumer choice.
- They denied any objective justification for the refusal, dismissing the alleged commercial dispute as a sham.
- Burgess also argued that the refusal constituted discriminatory conduct contrary to the Chapter II prohibition.
- They urged the Tribunal to take its own decision rather than remit the matter to the OFT, due to regulatory delay and the sufficiency of the evidence.
Office of Fair Trading's Arguments
- The OFT contended that the relevant geographic market for crematoria services was wider than Stevenage/Knebworth, encompassing all crematoria within a 30 km radius.
- It argued that Austins was not dominant in the crematoria market but likely dominant in funeral directing services in Stevenage/Knebworth.
- The OFT maintained that refusal to supply by a dominant undertaking is abusive only if it risks eliminating all competition or causes substantial harm to competition.
- It submitted that Austins' refusal to supply was due to a breakdown in the relationship and was not competition-related, and that Burgess had credible alternatives to Harwood Park.
- The OFT emphasized the need to respect the commercial freedom of firms who have invested in facilities and rejected the notion of a per se abuse for refusal to supply.
- It recommended remitting the matter to the OFT for further investigation if the Tribunal disagreed on abuse.
Austins' Arguments
- Austins supported the OFT's position on market definition, dominance, and abuse.
- They asserted that the refusal to supply was not abusive and arose from a commercial dispute and breakdown in professional relations.
- Austins contended that the exclusion was not intended to be permanent and that their business had declined, undermining claims of anti-competitive intent.
- They denied that the refusal strengthened their dominant position in funeral directing services.
Consumers' Association's Arguments
- The Consumers' Association criticized the OFT's market definition as flawed and ignoring consumer preferences and vulnerability.
- They argued that the OFT's approach allowed Austins to pick winners by excluding competitors, harming competition and consumer choice.
- The Consumers' Association supported Burgess and highlighted the importance of protecting effective competition in sensitive markets.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Commercial Solvents v Commission [1974] ECR 223 |
Refusal to supply by a dominant undertaking may be abusive if it eliminates all competition in a related market. |
Applied to find that Austins' refusal to supply Harwood Park services to Burgess was abusive as it risked eliminating competition in funeral directing services. |
| Centre belge d'etudes de marche Télémarketing (CBEM) and Information Publicité Benelux (IPB) [1985] ECR 3261 |
Refusal to supply by a dominant firm reserving ancillary activities to itself can be abusive if it eliminates competition. |
Supported the conclusion that Austins' refusal to supply could be abusive by restricting access to a facility intended to be open to competitors. |
| United Brands v Commission [1978] ECR 207 |
Dominant firms have a special responsibility not to impair genuine competition; refusal to supply long-standing customers without objective justification can be abusive. |
Used to establish that Austins' refusal to supply an existing customer (Burgess) was abusive absent objective justification. |
| Oscar Bronner GmbH & Co. KG v Mediaprint [1998] ECR I-7791 |
Refusal to supply may not be abusive absent elimination of all competition and where access is not indispensable. |
Distinguished on facts; Tribunal found refusal in this case abusive due to elimination of competition and indispensability of access. |
| Tetra Pak v Commission [1994] ECR II-755 |
Abuse in one market can occur due to conduct in an associated market where close links exist. |
Supported analysis that Austins could abuse dominance in funeral directing services via conduct in crematoria services market. |
| Freeserve v Director General of Telecommunications [2003] CAT 5 |
Tribunal may substitute its own decision if it has all necessary material and procedural fairness is respected. |
Supported Tribunal's decision to set aside OFT's decision and take its own decision due to delay and sufficiency of evidence. |
| Genzyme v OFT [2004] CAT 4 |
Definition of dominance and relevant market; dominant firms have special responsibilities not to distort competition. |
Guided Tribunal's market and dominance analysis in relation to Austins/Harwood Park. |
| Michelin v Commission [1983] ECR 3461 |
Dominance entails special responsibility not to impair genuine competition. |
Reinforced principle that Austins had a duty not to abuse its dominant position. |
| RTE and ITP v Commission (Magill) [1995] ECR I-743 |
Refusal to supply can be abusive if it eliminates all competition and there is no substitute for the facility. |
Referenced in discussion of refusal to supply and indispensability of facilities. |
| Télémarketing v CLT [1985] ECR 3261 |
Refusal to supply ancillary services to competitors can be abusive if it eliminates competition. |
Supported the principle that Austins' refusal to allow Burgess access to Harwood Park may be abusive. |
Court's Reasoning and Analysis
The Tribunal began by defining the relevant geographic markets, distinguishing between crematoria services and funeral directing services. It found the Stevenage/Knebworth area to be a discrete local market for both services, supported by evidence of consumer preferences, local patterns of funeral arrangements, and planning inspector reports emphasizing local need for the crematorium.
The Tribunal rejected the OFT's broader 30 km market definition, noting the absence of evidence supporting consumer willingness to switch crematoria over such distances, especially given the distressing nature of funeral arrangements and the importance of proximity.
It found Austins/Harwood Park dominant in crematoria services within Stevenage/Knebworth, based on market share exceeding 90%, barriers to entry, and the ability to raise prices without losing volume. Austins was also found dominant in funeral directing services in the same area, holding over 75% market share.
Regarding abuse, the Tribunal applied established case law principles: refusal to supply by a dominant firm is abusive if it eliminates or substantially harms competition without objective justification. Austins/Harwood Park's refusal to allow Burgess access, both directly and indirectly via Nethercotts, was found to be such abuse, as it threatened Burgess' viability in the local funeral directing market and reduced consumer choice.
The Tribunal rejected Austins' claims of objective justification, finding that the original dispute was partly competition-related and that the refusal was disproportionate to any grievances. It also found that the temporary arrangements through Nethercotts did not negate the abusive nature of the conduct.
The Tribunal extended its analysis to the Welwyn/Welwyn Garden City area, finding indications of Harwood Park's dominance and Austins' strong position, and concluded that the abuse in Stevenage/Knebworth had detrimental effects on competition in that area as well. The question of Hatfield was left open due to lack of evidence and the resolution of access issues.
Procedurally, the Tribunal noted the OFT's failure to give Burgess an opportunity to comment before adopting its decision, which would have warranted setting aside the decision on procedural grounds if necessary.
Holding and Implications
The Tribunal SET ASIDE the OFT's decision of 29 June 2004.
It held that Austins and Harwood Park infringed the Chapter II prohibition from 18 January 2002 to 22 March 2004 by denying Burgess direct access to Harwood Park, except through an intermediary, and from 22 March 2004 by refusing all access to Burgess for cremations by its Stevenage/Knebworth and Welwyn Garden City branches.
The appeal was ALLOWED to that extent.
The decision has the direct effect of confirming that vertically integrated undertakings operating in local markets must not abuse their dominant position by restricting access to essential facilities to competitors, especially where such conduct harms competition and consumer choice. The Tribunal emphasized the importance of timely enforcement in markets serving vulnerable consumers and encouraged constructive commercial relations following the resolution of access issues.