HONG KONG TELECOMMUNICATIONS (HKT) LTD v. THE COMMUNICATIONS AUTHORITY

FAMV No. 25 of 2014

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 25 OF 2014 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL FROM CACV NO. 190 OF 2013)

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DETERMINATION

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Mr Justice Ribeiro PJ:

1. We refused the Authority leave to appeal for reasons to be given later.  These are our reasons.

2. Apple Inc launched its iPhone 5 in Hong Kong on 21 September 2012.  This led to a complaint dated 28 September 2012 by the respondent, HKT, to the Authority and OFCA[1] that the phone (and later iPhone 5 models and other Apple devices) were equipped with a SIM lock which denied users access to HKT’s 4G/LTE networks.  Such networks operated by other mobile network operators (“MNOs”), namely, Smartone and later CSL and Hutchision, were able to connect with iPhone 5 handsets.  HKT alleged that this was anti-competitive conduct by Apple and/or the MNOs in breach of certain provisions (“the competition provisions”) of section 7K of the Telecommunications Ordinance (“TO”)[2] and contrary to the Authority’s SIM Lock Statement issued in 1997.  HKT asked the Authority to issue an immediate interim direction under TO section 36B requiring action by Apple and Smartone to comply with the Ordinance.

3. After much correspondence, four months later, by letters dated 28 and 30 January 2013 respectively (“the January letters”), OFCA told HKT that the information HKT had provided was:

“... inadequate to enable us to assess whether the complaint raises a genuine competition issue [within] the scope of the competition provisions of the TO such that [OFCA] may consider it justified to conduct an initial enquiry of the matter, let alone to enable the [Authority] to consider any reasonable ground for suspecting a breach and any justification of enforcement action such as by way of issuing an immediate direction under section 36B of the TO that you have proposed.”

4. HKT’s reaction was to lodge an appeal to the Appeal Board against what it considered to be a decision by the Authority refusing to make the section 36B interim order sought.  That application was made under TO section 32N(1)(a)(i) which provides that:

“Any person aggrieved by ... [a] decision of the Authority relating to section 7K ... may appeal to the Appeal Board against the ... decision ... to the extent to which it relates to any such section ...”

5. The Authority argued that it had not made any decision but had, in the January letters, simply said that it lacked sufficient information to come to a decision and listed the information needed.  It followed, so the Authority argued, that there was no jurisdiction in the Appeal Board to entertain HKT’s appeal.

6. The Appeal Board, composed of Mr Neil Kaplan SC sitting alone, agreed that it lacked jurisdiction.  It held that the Authority had made a decision in the January letters, “namely, that as at 28 January 2013, OFCA was not prepared to make the order under section 36B as sought”,[3]  but that it was not appealable.  It was held that to be appealable, a decision had to be one which “truly engaged” the competition provisions, applying PCCW‑HKT Telephone Limited v Telecommunications Authority,[4] which the Authority’s decision did not.[5]

7. HKT brought an appeal by way of case stated against the Appeal Board’s decision.  Cheung CJHC[6] agreed that the January letters contained or evidenced a decision not to grant the interim direction sought, but reversed the Appeal Board, holding that it was a decision which “truly engaged” the competition provisions.  It went beyond a simple request for further information and amounted to a decision “that the appellant had, on the material it had presented thus far, failed to establish a case of breach or a prima facie case of breach justifying the grant of an interim direction – and thus no interim direction was granted.”[7] In other words, the Authority had decided that “the material presented was so poor and inadequate that they [HKT] failed even to raise ‘a genuine competition issue’”.[8]  The fact that OFCA had asked for more information did not alter this.[9]  It followed that the Appeal Board was wrong to hold that it lacked jurisdiction to hear the appeal.[10]  The case was therefore remitted to the Appeal Board to hold a substantive hearing to decide “the question of interim direction where appropriate” in the light of the Court of Appeal’s determination.[11]

8. On 21 March 2014, the Court of Appeal refused leave to appeal to this Court, and a freshly constituted Appeal Board[12] heard the remitter, having allowed Apple Asia Limited (“AAL”) to intervene.  The Appeal Board published its decision on 16 April 2014.[13]  It held that what the SIM Lock Statement identified as objectionable was a SIM lock function which would lock a handset into a network “such that if the customer wanted to access a different network he would have to buy a new handset”.  It was objectionable “if it tied a customer to a network other than for the purposes of avoiding fraud or ensuring payment by instalments for the equipment”.[14]

9. The Appeal Board held that on the evidence, the restriction on connectivity to HKT’s 4G/LTE network did not amount to such a SIM lock since iPhone 5 handsets could be used with the SIM cards of any local carrier, including HKT (on its 2G and 3G networks, albeit not on its 4G network).  It also held that the circumstances disclosed did not constitute the elements of section 7K(3) so that there was no reasonably arguable infringement.[15] It held accordingly, that HKT’s application for an interim direction had to be dismissed.[16]  The Board criticised OFCA for its dilatoriness and ordered the Authority to proceed diligently with its enquiries into HKT’s complaints and to decide whether or not to make a section 36B direction by 1 July 2014.[17]

10. In accordance with that direction, the Authority made a formal decision on 30 June 2014.  It recorded that the further information asked for  by OFCA was supplied by HKT only on 29 July 2013, that OFCA then started its initial inquiry in August 2013, but suspended it in February 2014 pending the second Appeal Board decision.  OFCA immediately resumed the inquiry on receiving the Appeal Board’s decision of 16 April 2014.[18] Noting that the Appeal Board had found that the SIM Lock Statement and section 7K(3) did not apply to the restriction, the focus of its decision was on whether any case was made out for infringement of sections 7K(1), 7K(2)(b), 7K(3)(c) and 7L involving conduct pertaining to the imposition of the restriction; the importation and distribution of Apple devices with the restriction and the making of any agreement regarding the restriction which might be attributable to AAL.[19]

11. The Authority held that only licensees (which included AAL and the three MNOs) were subject to enforcement action under the TO, but that Apple Inc was not a licensee and not accountable under the Ordinance.[20] The evidence showed that the restriction was made unilaterally by Apple Inc and that AAL and the MNOs were not implicated in any conduct prohibited by the competition provisions.[21]  The Authority therefore rejected HKT’s complaint.

12. It was against this background that the Authority’s application for leave to appeal came before the Appeal Committee on the footing that the following questions of the requisite importance arise on the proposed appeal:

Question 1

Whether letters written by OFCA (which assists the Authority and acts for it in relation to some aspects of the processing of complaints) can in law be construed or regarded for the purposes of section 32N(1) of the TO as disclosing an appealable “decision” of the Authority absent : -

(a) any delegation of relevant decision-making power by the Authority to the officers of OFCA pursuant to section 18(1) of the Communications Authority Ordinance, Cap 616 (“CAO”);

(b) any resolution of the Authority adopting or endorsing the alleged decision passed by a majority of the members present at a validly convened meeting or in writing in accordance with section 10 or 11 of the CAO; or

(c) any publication of the decision on the Authority’s website as required by paragraph 29 of OFCA’s guide to how competition complaints are handled.

Question 2

Whether (on a true and proper interpretation of the provision) an appeal may be brought under section 32N against a provisional decision of the Authority granting or refusing interim relief pending the outcome of an investigation into whether there has been an infringement of the Competition Provisions.

13. We can well see why the parties found themselves at odds as to whether the January letters constituted appealable decisions, given the unspecific language of the TO.  HKT’s substantive application was for the Authority to issue a section 36B direction requiring compliance with the Ordinance.  However, it appears that a threshold question arose since the Authority claimed to have insufficient information to proceed to a substantive decision, while HKT contended that, on a correct understanding of the law, sufficient information had been supplied.  It may have been arguable whether the position taken by the Authority in relation to this kind of threshold question could constitute an appealable decision; and whether the “truly engaged” test was the correct test to apply in such cases. 

14. In any event, the Court of Appeal (approaching it on a somewhat different basis) held that the January letters did constitute appealable decisions and since then, much water has flowed under the bridge. The second Appeal Board decision adopted the same view as to the January letters, ruled section 7K(3) inapplicable and directed the Authority to get on with determining the substantive application for a section 36B direction.  That, the Authority has now done.  It follows that however arguable the status of the January letters as “decisions” might have been, pursuing that argument would now be arid and pointless as between the parties, given that an undoubted substantive decision of the Authority now exists.  It would be a complete waste of time and costs to set the parties back to the time before the first Appeal Board ruling was made on the basis that the Authority had not then made an appealable decision.

15. We refused leave to appeal on the basis of Question 1 first, because it seeks to raise that pointless question.  Secondly, because it does so on an entirely new ground, namely, that the January letters cannot constitute appealable decisions of the Authority because there is no evidence that it delegated such decision-making to OFCA.  It therefore impermissibly seeks to raise a question raising evidential issues unexplored below and fails on well-known Flywin[22] principles.

16. With Question 2, the Authority is trying a new tack.  It had previously been argued that the January letters were not decisions at all, being merely requests for information or, alternatively, that they were not appealable decisions because they did not “truly engage” the competition provisions.  Question 2 now proceeds on the assumption that the January letters constituted “a provisional decision of the Authority granting or refusing interim relief” and seeks to argue that the TO gives no right of appeal against such a decision.  This is said to be an important question because to hold otherwise gives rise to a “significant risk of the Board deciding key questions of law and fact before the Authority and OFCA have completed their own investigative process”.

17. We refused leave on Question 2, because, like Question 1, it attempts to achieve the arid and pointless goal of setting aside the first Appeal Board ruling on the ground of the absence of an appealable decision, setting at nought all that has since happened, in particular the fact that there is now a substantive decision dated 30 June 2014 rejecting the section 7K complaint.  Since OFCA have completed their investigations, the concern about interference with such investigations does not arise in the present case. We would also mention, without deciding, that while we can see that there may be cases where certain acts of the Authority may not constitute “an opinion, determination, direction or decision” triggering a right of appeal, it is hard to detect from the language of section 32N, an intention to exclude as a class, so-called provisional decisions granting or refusing interim relief, from the right of appeal. 

18. For the aforesaid reasons, we dismissed the Authority’s application with costs.