Phones 4U court case: EE boss recorded clandestine lunch with Telefonica chief

Private meeting may have breached competition law – Barrister 

The lunch, at the Landmark Hotel on September 19, 2012, was arranged by Dunne and could have infringed competition law the court was told.

Phones 4U barrister Kenneth MacLean put it to Swantee that he recorded the Landmark lunch because he realised that this was the sort of conversation he should be having with a competitor.

Swantee replied: “I was nervous because I wasn’t sure about what he wanted.”

Mr MacLean then said: “Despite all the regular training on competition law you had had, and despite feeling nervous and uncomfortable, you didn’t interrupt Mr Dunne’s flow of thought and say, ‘I don’t think we should be having this type of discussion, Ronan’ did you?

“Mr Dunne had already said something troubling enough to prompt you to activate the iPad”.

Swantee said the iPad recording app was activated after Dunne started talking about the pricing”

Details of the lunch meeting emerged in the ongoing civil case brought by Phones4U In Administration against EE, Vodafone, and Telefonica over allegations they colluded to destroy Phones4U by all agreeing to terminate their contracts with the retailer.

Swantee said that at the lunch Dunne raised concerns about the pricing strategy behind 4G and wanted to establish a pricing structure that recognised 4G’s enhanced value. He was concerned other networks discounting 3G could lead to the market being devalued and a 4G premium not being viable.

Swantee explained in his evidence there was a discussion in which Dunne was seeking to persuade EE not to set its 4G prices independently but to coordinate its approach with the other MNOs.

Swantee was questioned for nearly two days by Phones 4U barrister Kenneth MacLean. Much of the questioning concerned the Landmark lunch.

Swantee explained EE had a Standstill Agreement whereby the networks would give EE a month to obtain regulatory approval to launch its 4G services without trying to stop the launch through litigation EE needed to receive the approval from the regulatory authorities to have a change in its licence to use its 1800 MHz for 4G services.

“Some of the activities you see in my meetings were all about trying to avoid the others from delaying us, by litigating against the decision from Ofcom. We knew that was an enormous risk that they would do that, and we would lose our competitive advantage.

“We would not be able to launch our new brand, our new stores and new services.

Telefonica was stopped from litigation only through an intervention of the central government. Then we agreed to a compromise which was a “standstill agreement”. We said we will delay our launch for four weeks. We were allowed to make a marketing announcement or something like that”, Swantee told the Court.

Said Mr MacLean:“According to your evidence, Mr Dunne had started talking about 4G pricing that had made you nervous and uncomfortable. While he was away from the table you activated the iPad. The reason that you activated the iPad was that you were concerned that what Mr Dunne wanted to discuss was inappropriate?”

Swantee replied: “I was concerned about what he said about pricing”.

He agreed there was a risk this was not a topic which should properly be discussed between competitive CEOs.

Mr MacLean continued: “And so in the knowledge of that existence of that risk, when he returned to the table, you could have simply said, ‘Look, Ronan, I have been thinking about what you just said, I don’t think we should pursue that further. You could have done that, couldn’t you? But you didn’t do that, did you?”

Said Swantee: “Well, he was trying to convince EE, I guess, to come out in the market with a premium on 4G pricing, yes?”

Mr MacLean continued: “Your evidence is that you were careful not to engage.  Now, if you simply sat there while Mr Dunne rambled on about 4G pricing and reducing volume in the indirect channel, you must have appreciated, that if you said nothing it was a risk that he might have got the impression from your silence that you were receptive to this approach”.

Swantee replied that “Mr Dunne was quite wordy. He was talking a lot. It’s not always exactly clear what he said.

MacLean told him: “EE’s plan was to gradually reduce its reliance on sales through indirect retailers whilst building up its own direct channel. That’s right, isn’t it”?

The case continues.