The Court of Appeal (Civil Division) handed down judgment in the case of British Sky Broadcasting Group plc and Another v The Competition Commission and Another [2010] EWCA Civ 2 on 21st January 2010. The case concerned an appeal against a decision of the Competition Appeal Tribunal (‘the Tribunal’). The Tribunal upheld the decision of the Competition Commission (‘the Commission’), who upon application by the Secretary of State for Business Enterprise and Regulatory Reform, held that Sky’s acquisition of 696 million shares in ITV plc had created a relevant merger situation (RMS) leading to a substantial lessening of competition (SLC). Following the recommendation of the Competition Commission the Secretary of State required Sky to divest itself of enough shares to reduce its holding to below 7.5%.

Under section 120(1) of the Enterprise Act 2002 the Tribunal has to apply "the same principles as would be applied by a court on an application for judicial review", when considering an appeal from a decision of the Commission. Applying the case of Office of Fair Trading v IBA Health Ltd [2004] EWCA Civ 142 the court of appeal rejected Sky’s contention that the Act called for a greater intensity of review given the specialist nature of the inquiry. Although the court will apply their specialist knowledge to the case the nature of the task does not differ from the ordinary principles of review.

Taking objection to the way in which the Commission had applied the standard of proof to its findings that an RMS leading to SLC had been created by the acquisition, Sky contended that each element in the sequence of hypothetical events which formed part of the Commission’s counterfactual analysis should have been separately established on a balance of probabilities. Dismissing Sky’s appeal on the competition issues the court held that the question for the Commission was whether Sky would have had the opportunity following the merger to exert a material influence, giving rise to an SLC. In reaching their conclusion the Commission were entitled to adopt a ‘probabilistic test’ and were not under any obligation to make findings of fact. There had been no error of law as the standard of proof applies to the Commission’s conclusions, it was not necessary for them to isolate each step and apply a balance of probability test at every stage. In response to Sky’s argument that the Commission had failed to apply its counterfactual analysis consistently the court pointed out that this was an analytical tool rather than a statutory test. The Commission was not expected to identify a specific investment opportunity over which Sky would materially exert its influence; the question was whether Sky would have an opportunity to exert such influence.

Allowing the appeal on the issue of media plurality, the court upheld the conclusions of the Commission, that in ascertaining whether an RMS has resulted in a SLC with regard to a specific public interest consideration, the Commission’s role is to take a qualitative assessment of the effects of the merger. Even if section 58A(5) of the Act operates in such a way that ‘plurality’ refers to headcount of media enterprises only with regards to competition, the Commission is still required to regard the actual degree of control exercised by one enterprise over another when assessing whether as a result of the merger there is sufficient plurality of media enterprises under section 58(2C) of the Act.