Tiscali v BT: ISPs Competing for Customers and Unlawful Means

December 18, 2008

An interesting judgment in Tiscali UK Ltd v British Telecommunications Plc [2008] EWHC 3129 (QB) sheds some startling light on what standards may be expected of ISPs when competing for customers.

Tiscali and BT are in dispute over approaches made by BT to Tiscali customers. In his second judgment concerning the case, Mr Justice Eady has allowed an amendment to the particulars of claim that recognises that a breach of the Consumer Protection from Unfair Trading Regulations 2008 (2008/1277) and the Business Protection from Misleading Marketing Regulations 2008 (2008/1276) might constitute unlawful means and that the limitations which apply on the enforcement of those regulations (essentially reserved to Trading Standards and the like) is not an impediment to that.

The claim arises out of a letter sent out by BT, to the Tiscali’s customers in July 2008 with a view to encouraging them to change to the BT broadband service. BT referred in that letter to the effect that Tiscalis broadband service was, or was about to be, put in jeopardy by the prospect of a takeover.

The central point of Tiscali’s case was that there simply were no grounds for suggesting that the talk earlier in the year of a takeover, or the possibility of its coming to fruition in the medium term, provided any grounds for thinking that the broadband service would no longer be available to customers. The letter did not actually say that there was, what it did was ‘to sow the seeds of doubt – with a view to coaxing the Claimant’s existing customers to come over to the Defendant’s service as being more secure’.

The original claim had been based in part on defamation. The letter’s characterisation of the statement of the Tiscali Chief Executive that he did not see many opportunities for Tiscali to buy rivals, and therefore it was more likely that the company’s UK and Italian broadband operations would be sold as ‘Tiscali chief plots sell-off’ was not however deemed to be defamatory (or least not of Tiscali – their chief executive was not joined in the action).

As a result of the first judgment of Eady J rejecting the defamation claim, Tiscali sought to amend their statement of claim and the ruling on unlawful means is limited to that issue and makes no judgment on the merits.

The Judgment
Mr Justice Eady’s ruling speaks for itself:

5. There is no reason to suppose that if the Claimant succeeds in establishing an infringement of these new regulations, aimed at the protection of consumers and businesses, this could not serve as “unlawful means” for the purpose of establishing that tort.

6. It is interesting to see that the relatively unfamiliar concepts of “honest market practice” and “the general principle of good faith”, which are both relevant to the concept of “professional diligence” in Regulation 3(3) of the Consumer Protection Regulations, are construed in such a way that a breach may be found even in the absence of dishonesty as it is traditionally understood in domestic jurisprudence. That is why [counsel for Tiscali] observed at the earlier hearing that infringement of the regulations would be easier for his client to prove than the ingredients of the tort of injurious falsehood (which do include the need to establish dishonesty).

7. This broad interpretation is borne out by the remarks of Jacob LJ in Boehringer Ingelheim Ltd v Vetplus Ltd [2007] FSR 29 at [27]-[29]:

“27. … I think a man who makes a damaging statement involving use of another’s mark which he reasonably believes to be true at the time but which later turns out to be untrue would not be acting in accordance with an honest practice if he were not prepared to compensate the owner of the damaged mark. He can express his honestly held opinion, but unless that is on the basis that he will compensate his trade rival if it is proved to be wrong, he is not acting in accordance with an honest practice and will be adjudged to infringe.

29. Indeed the Comparative Advertising Directive (97/55/EC) rather confirms the position. It is not in dispute that a comparative advertiser will be acting in accordance with ‘honest practices’ provided he does so in accordance with the conditions of Art 3a of the Misleading Advertising Directive (84/450/EC). One of those conditions is that the advertising must not be misleading. If an advertisement is in fact misleading, however honestly the advertiser believed what he said at the time, he would be outside the Directive.”

8. It is a relatively new concept in English law that there is an “objective” test of dishonesty; that is to say, in this context it is not necessary to demonstrate that at the time the offending statement was made its maker knew it to be false or had no honest belief in its truth: see also Cable & Wireless Plc v British Telecommunications Plc [1998] FSR 383, 391, per Jacob J (as he then was).

9. The grounds of objection to these amendments are quite narrow. It is naturally disputed that the July letter contained any false statement. I cannot at this stage, however, conclude that there is no realistic prospect, or only a “fanciful” prospect, of establishing (a) that the letter conveyed the notions to reasonable recipients that there was a risk that the Claimant’s broadband service would shortly cease to be available, or (b) that this was false and/or unsupported by evidence.

10. Secondly, it is argued that it would, even for the purpose of showing a breach of any of the regulations cited above, be necessary to show that relevant persons within the Defendant’s organisation had actually been dishonest or indifferent to the truth of the letter’s contents at the time of publication. Yet, as I have indicated, that does not appear to be sound in law: I shall, therefore, allow these novel amendments.

11. There was also before the court an application to augment the claim for special damages. Specifically, it is sought to plead reliance on a significant “spike” for the month of July showing a much larger departure of customers compared to the statistics available for other months. It is alleged that the statistics show that nearly 12,000 more customers than average left the Claimant in that month. The loss for each customer is estimated at the moment to be of the order of £306. There may be considerable difficulty and expense involved in bringing those consumers’ decisions home to the Defendant’s letter. But I cannot at this stage exclude such a claim and I give permission to add it.

The full judgment is available on Bailii at http://www.bailii.org/ew/cases/EWHC/QB/2008/3129.html. The defamation case can be read here: http://www.bailii.org/ew/cases/EWHC/QB/2008/2927.html.