Today the Court of Appeal (CoA) has unanimously dismissed
Motorola's application for permission to appeal on both of its
pleaded grounds, in which it claimed that the Competition and
Markets Authority (CMA) had made errors in assessing competition
in the relevant market and the profitability of the Airwave
Network in 2021.
In its original findings, the CMA said that Motorola was able to
make supernormal profits because it has a virtually unconstrained
monopoly in the market to supply communications network services
to the UK's emergency services. The CMA imposed a charge control
order capping the price Motorola could charge.
Motorola challenged the CMA's original findings in the
Competition Appeal Tribunal (CAT). The CAT unanimously dismissed
that challenge and Motorola sought permission to appeal to the
CoA. In a judgment handed down today, the Court endorsed the
CMA's reasoning as set out in its original findings.
The CMA's price cap ensures that the UK's emergency services pay
a fair price for Airwave's services, reducing the price by almost
£200 million per year.
Today's decision by the CoA brings this case to a close, as
Motorola cannot appeal the decision further.
George Lusty, Executive Director of Consumer Protection and
Markets, at the CMA, said:
The CMA's investigations and legal decisions are carefully
considered and evidence-led and we welcome today's decision by
the Court of Appeal which endorses our reasoning in this case.
Our investigation showed that Motorola had been charging
emergency services in the UK £200 million a year more than they
would if the market was working well. The Court's judgment today
means that our price cap remains in place, which limits how much
Motorola can charge emergency services for using its Airwave
Network.
Today's decision brings this matter to a close.
For more information, visit the Mobile radio network
services inquiry page.
Notes to Editors:
- In October 2021, the CMA opened an investigation into mobile
radio network services amid concerns that the market might not be
working well. The investigation – conducted by an independent
panel – confirmed these concerns, finding that UK emergency
services had no choice but to continue using Motorola's Airwave
Network, due to a lack of alternative providers. As such,
Motorola was able to earn supernormal profits from the prices it
charged the Home Office – which negotiates contracts on behalf of
emergency services – resulting in higher costs to the emergency
services which are ultimately footed by the taxpayers.
- To reduce these costs, the CMA imposed a charge control
order, by way of a price cap, in July 2023, which brought the
price down to the level that would be expected in a
well-functioning and competitive market – putting an end to the
estimated £200 million per year of over-charging.
- While protecting taxpayers, the price cap allows Motorola to
continue to invest in the Airwave Network and so ensure that
quality and safety are maintained.
- Motorola disagreed with the CMA's findings – specifically
that the price of the Airwave Network services was not limited by
competition and on the level of profit they make from the Airwave
Network – and so challenged them at the CAT. Following a hearing
in August 2023, the CAT unanimously dismissed both of Motorola's
grounds of challenge.
- Thereafter, Motorola sought permission to appeal that
judgment and today the CoA unanimously dismissed both grounds of
Motorola's application for permission to appeal the CAT decision,
which had upheld the CMA's findings.
- Supernormal profits mean profits over and above what would be
expected in a well-functioning market. The CMA's total estimate
of the supernormal profits Motorola will make over the 2020 to
2029 period is £1.27bn. That estimate reflects the net present
value of Motorola's expected returns at the start of that period.
This is equivalent, on an undiscounted basis, to revenues being
almost £200m per year above the level that would be required for
it and Airwave Solutions to earn a reasonable return.
