Hong Kong Telecommunications (Hkt) Ltd v. The Communications Authority
Read the full judgment text of CACV 144/2014 on BabelCite. This Court of Appeal judgment was delivered on 7 August 2015.
1. There are two appeals before this Court, CACV 144/2014 and CACV 147/2014. They both arose out of the Decision and Ruling of the Telecommunications (Competition Provisions) Appeal Board (“the Appeal Board”) in Appeal No 31 dated 16 April 2014 (“the Decision”).
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CACV 144/2014 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO 144 OF 2014 (ON APPEAL FROM NO 31 IN THE TELECOMMUNICATIONS (COMPETITION PROVISIONS) APPEAL BOARD) _______________
_______________ CACV 147/2014
_______________ CACV 147/2014 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO 147 OF 2014 (ON APPEAL FROM NO 31 IN THE TELECOMMUNICATIONS (COMPETITION PROVISIONS) APPEAL BOARD) _______________
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________________ JUDGMENT Hon Poon J (giving the Judgment of the Court) : A. INTRODUCTION 1.There are two appeals before this Court, CACV 144/2014 and CACV 147/2014. They both arose out of the Decision and Ruling of the Telecommunications (Competition Provisions) Appeal Board (“the Appeal Board”) in Appeal No 31 dated 16 April 2014 (“the Decision”). 2.CACV 144/2014 is an appeal by way of case stated dated 14July 2014 under section 32R of the Telecommunications Ordinance (“TO”)[1] for the opinion of the Court of Appeal on four questions of law. The first three questions were raised at the request of Hong Kong Telecommunications (HKT) Ltd (“HKT”).[2] By consent, this part of the appeal concerning those three questions was dismissed on 3 July 2015. The 4th question was raised by the Telecommunications Authority (“the Authority”). It reads :
3.CACV 147/2014 is by way of a notice of motion for statement of case dated 17 July 2014 brought by the Authority under Order 61, rule 2, of the Rules of the High Court.[3] The Authority sought an order that the Appeal Board be required to state a case to the Court of Appeal on the following question :
4.The background facts leading to the appeals can be summarized as follows. B. FACTS B1. The launch of iPhone 5 in Hong Kong 5.On or about 21 September 2011, Apple Asia Limited (“Apple Asia”),[5] a subsidiary of Apple Inc, launched iPhone 5 in Hong Kong. 6.iPhone 5 supports fourth generation (“4G”) wireless broadband technology (in particular Long Term Evolution (LTE) services utilizing the 1800 MHz frequency band) on top of second generation (2G) and third generation (3G) wireless technologies. Insofar as the deployment of 4G technology in Hong Kong is concerned, SmarTone Mobile Communications Ltd (“SmarTone”) is a mobile network operator operating 1800 MHz LTE network, whereas HKT and the other three Hong Kong mobile network operators at the time initially preferred to develop LTE networks that use the 2.6 GHz spectrum. All four mobile network operators in Hong Kong now operate 1800 MHz LTE networks. 7.Like other smart phones, iPhone 5 used SIM[6] cards for its operation. A SIM card is a uniquely numbered “smart card” containing subscriber specific information which has to be inserted into certain mobile devices to allow them to operate on a mobile network. Its main purpose is to identify the subscriber to the mobile network operator which provided the SIM card for tariff and billing purposes. In practice, the “SIM lock function” in handsets enables them to be “locked” into a particular mobile network by preventing them from being used with a SIM card issued by any other mobile network operator. There are legitimate uses for such a function, such as for protection from theft and fraud and the enforcement of the rental or instalment service contracts. However, in Hong Kong, SIM locking for preventing customers from switching to other mobile network operators is regarded as anti-competitive. According to guidance issued by the Authority, SIM locking is prohibited without the Authority’s prior written approval. 8.On the date when iPhone 5 was launched, representatives of HKT inserted one of their SIM cards into an iPhone 5 and discovered that 4G connectivity was not obtained. In fact, the only Hong Kong mobile network operator whose SIM card was then able to achieve 4G connectivity on an iPhone 5 was SmarTone. 9.In late September and early October 2012, SmarTone commenced an advertising campaign describing itself as the only mobile network operator in Hong Kong able to provide 4G connectivity for iPhone 5. HKT, through its solicitors, engaged in an exchange of correspondence with SmarTone requesting information as to how it was that only SmarTone SIM cards recognised Apple’s functionality of 4G. SmarTone refused to engage in any discussion on the subject and refused to provide any further information to HKT. 10.In the meantime, HKT complained to the Authority. B2. HKT’s complaints 11.By letters dated 28 September and 19 October 2012, HKT complained to the Office of the Communications Authority (“OFCA”) that Apple Asia had SIM-locked iPhone 5 so that it could be used only with SmarTone’s 4G network. It demanded that immediate action be taken against Apple Asia and SmarTone pursuant to section 36B of the TO to prevent SIM-locked iPhone 5 handsets from being distributed in the Hong Kong market. Initially, HKT called for the Authority to issue an immediate direction under section 36B of the TO. However, by 19 October 2012, HKT was requesting an interim direction pending completion of a full investigation into its complaint. 12.Shortly thereafter, two more mobile carriers, CSL Limited (“CSL”) and Hutchison Telephone Company Limited (“Hutchison”), announced that their 1800 MHz LTE networks would be supported by iPhone 5. On 9 November 2012, HKT extended its complaint to also accuse CSL and Hutchison of being involved in anti-competitive SIM-locking. 13.While OFCA was looking into HKT’s complaint, HKT’s solicitors wrote to OFCA on 16 January 2013 setting a deadline for the Authority to confirm its intention to take immediate action on HKT’s request for an interim direction and for OFCA to provide copies of the minute of meetings at which OFCA, the Telecommunications Affairs Committee or the Authority had discussed HKT’s complaint as well as details of its correspondence with Apple Asia and other licensees regarding HKT’s complaint. The letter also stated that if it did not receive a satisfactory response by 5pm on 28 January 2013, HKT would take legal action against the Authority. 14.On 28 January 2013, OFCA replied by asking HKT to provide a more detailed and well-reasoned submission to support its complaint that Apple Asia, SmarTone, CSL and Hutchison, individually or collectively, were engaged in conduct that was seriously harming competition. In particular, OFCA stated that:
15.HKT did not comply with OFCA’s request for further information. Instead, it filed a notice of appeal to the Appeal Board on 14 February 2013, complaining that there was “no or no sufficient basis upon which the Authority could find that it had insufficient information to deal with [HKT’s] request for an interim direction”. B3. Jurisdictional issue 16.A preliminary issue arose before the Appeal Board as to whether it had jurisdiction to hear HKT’s appeal. 17.By a decision dated 4 June 2013, the then Chairman of the Appeal Board[7] ruled that it did not have such jurisdiction. On appeal by HKT, the Court of Appeal ruled on 17 December 2013 that the Appeal Board did have jurisdiction to hear HKT’s appeal.[8] The Court of Appeal then ordered the case to be remitted to the Appeal Board for a substantive hearing on HKT’s complaint, as regards the adequacy or otherwise of the material presented to the Authority to enable it to decide whether to make an interim direction. B4. Substantive hearing 18.The Appeal Board, now under different chairmanship,[9] heard substantive arguments from HKT, the Authority, and Apple Asia (as intervener) on 10 March 2014. 19.On 16 April 2014, the Appeal Board handed down the Decision. C. THE DECISION C1. Restriction on connectivity to HKT’s 4G network 20.As identified by the Appeal Board, HKT’s essential complaint concerned the restriction on connectivity to HKT’s 4G network by iPhone 5.[10] Apple Asia’s case was that 4G functionality had not been enabled for HKT’s network because that network had not been tested for compatibility nor optimized for operation with iPhone 5 handsets.[11] But it was pointed out by HKT :[12]
21.For the reasons that it gave,[13] the Appeal Board found that the denial of connectivity to HKT’s 4G network by HKT’s customers using a HKT SIM in an iPhone 5, iPhone 5C or iPhone 5S was not justified by any genuine concern on the part of Apple Asia or Apple Inc’s regarding the performance of HKT’s network, nor by any professed need to test and enable that network.[14] C2. SIM lock and the 1997 SIM Lock Statement 22.The Appeal Board then considered if Apple Asia/Apple Inc’s SIM lock was a breach of the Authority’s 1997 SIM Lock Statement[15] and found that it was not.[16] However, the Appeal Board urged the Authority to update the Statement in light of the rapidly evolving technology at the earliest possible opportunity.[17] C3. Section 7K(3) 23.The Appeal Board next considered HKT’s complaint that Apple Inc and/or Apple Asia had engaged in anti-competitive practices contrary to section 7K of the TO. 24.Section 7K relevantly provides :
25.The Appeal Board identified section 7K(3)(b) as the focus of the appeal.[18] The Appeal Board said :[19]
26.HKT contended that the operation of the SIM lock on HKT’s 4G network implemented by Apple Asia operated in breach of section7K(3)(b).[20] 27.Mr Mok SC (together with Mr Abraham Chan) for the Authority relied on the definition of “customer equipment” in section 2 of the TO :
28.He argued that Apple Asia had no network and therefore the provision of Apple Asia’s customer equipment, whatever restriction that equipment might impose, was not intended or capable or being conditional upon the purchaser acquiring a network connection from Apple Asia. Section 7K(3)(b) did not apply.[21] 29.Mr Yu SC for HKT urged the Appeal Board to adopt a boarder reading of “customer equipment” and suggested that the purpose of section 7K(3)(b) was to “broadly prohibit anti-competitive conduct (whether at the wholesale or retail level) including unauthorized bundling. He further urged on the Appeal Board an interpretation of the TO in its social setting, having regard to its long title, history of the telephone and earlier consultation paper discussions.[22] 30.The Appeal Board rejected Mr Yu’s submissions :[23]
31.The Appeal Board went on to say :
C4. Section 7K(1) 32.The Appeal Board had this to say on HKT’s complaint based on section 7K(1) :
C5. Orders 33.Accordingly, the Appeal Board made the following orders :
34.We now turn to Question 1. D. QUESTION 1 35.The Appeal Board’s imposition of the deadline on investigations to be carried out by the Authority upon remittance of the case is premised on the proposition that it has the jurisdiction to impose time limits on investigations, and on the making of decisions following such investigations by the Authority under section 32O(4) of the TO as part of its jurisdiction to make such “consequential orders as may be necessary”.[24] Whether that proposition is correct requires a closer examination of those provisions in the TO which are relevant to the Appeal Board’s jurisdiction in hearing appeals relating to section 7K. They are to be found in Part 5C of the TO :
36.Thus in the context of section 7K, the statutory scheme operates in this way.
37.In other words, upon a proper construction of the relevant provisions, absent any order upholding, varying or quashing the appeal subject matter, the Appeal Board cannot make any consequential orders as such under section 32O(4). 38.Here, the Appeal Board, in [78] of the Decision, upheld HKT’s appeal to the limited extent that section 7K was truly engaged in the sense contemplated by Cheung CJHC in CACV 190/2013 :
39.Although it refused to issue or to direct the Authority to issue any form of interim relief under section 36B of the TO, the Appeal Board directed the Authority to do two things. 40.First, the Appeal Board directed the Authority to carry out the investigations into HKT’s complaints diligently and expeditiously. It appears to us that as an order consequential upon allowing HKT’s appeal to the limited extent as explained, this direction falls within the Appeal Board’s jurisdiction under section 32O(4). Mr Mok has not submitted to the contrary. 41.Second, the Appeal Board directed the Authority to arrive at a decision following upon its investigations by a specified deadline, that is, 1 July 2014. 42.Mr Mok submitted that the Appeal Board has no jurisdiction to do so. He argued that nowhere does the TO – the sole source of the Appeal’s Board’s jurisdiction – provide for any express power on the part of the Authority to impose time limits or other such directions in respect of the Authority’s conduct of investigations. Nor can any such power be implied as a matter of law because the established purpose of the Appeal Board is only to uphold, vary or quash decisions of the Authority which truly engage, among other sections concerning competition in the TO, section 7K as required at law under the test explained by Ma CJHC (as the Chief Justice then was) in PCCW-HKT Telephone Ltd v Telecommunications Authority.[25] In short, Mr Mok contended, as a general proposition, that the Appeal Tribunal only has jurisdiction to deal with the substantive merits of the “appeal subject matter” under appeal but it has no supervisory jurisdiction over the conduct of the Authority, which is a matter for the court in judicial review. He place particular reliance on Floe Telecom Ltd v Office of Communications and other.[26] 43.We can see considerable force in Mr Mok’s argument. However, bearing in mind the fact that only the Authority appears before us in these appeals, HKT having been excused from appearance and Apple Asia only having instructed Mr Lam of counsel to hold a watching brief, we do not have the benefit of full arguments on what we consider to be quite an important point about the Appeal Board’s jurisdiction on appeal from the Authority. So as tempting as it may be, we decline to determine Question 1 on the basis of the general proposition as advanced by Mr Mok. We think it is better for us to approach Question 1 as it is now formulated and based on the specific facts before us. We understand that Mr Mok is also content with such an approach. 44.As a matter of law, we do not think the Authority is entitled to impose the deadline. There is no such express enabling provision in the TO. Further, as a matter of general principle, once the Appeal Board directs the Authority to carry out further investigations, it is then a matter to be dealt with by the Authority in accordance with its own statutory duties and functions.[27] In doing so, the Authority will have regard to a host of factors, including the urgency and complexity of the subject matter, the technical commercial and economic issues involved,[28] the relative priority of that subject matter as compared with other cases at hand, and the competing demands on its limited resources at the time. All these considerations would inevitably have an impact on the time required to conduct and finish the investigations. Most, if not all, of these considerations fall within the exclusive purview of the Authority. So subject to the court’s supervision by way of judicial review, the Authority is the only body who can set a reasonable and realistic deadline to complete the further investigations as directed by the Appeal Board. Thus analyzed, it is plain that the Appeal Board cannot, as it did here, impose a specific deadline on the Authority investigations as an order on its own or a consequential order under section 32O(4). 45.What we have said above is sufficient to dispose of Question1. For completeness, we note that according to Mr Mok the Appeal Board had not alluded to the possibility of imposing a deadline before it did so in the Decision. So the Authority had not been given an opportunity to address the Appeal Board on this matter. If that were the case, the Appeal Board would have acted in breach of natural justice. 46.For the above reasons, we answer Question 1 in the negative. E. QUESTION 2 47.Question 2 can be disposed of shortly. 48.As the matter now stands, the Appeal Board has yet to state a case for Question 2 to be placed before the Court of Appeal for determination. For that to be done, a direction from this Court is necessary. However, at the hearing before us, Mr Mok submitted that as it would not be in the interest to all the parties concerned to drag on any further, he would not press on with the notice of motion in CACV147/2014. He would be content if we were to state in our judgment, as we now do, that this Court in CACV 190/2014 (differently constituted) had already determined that section 7K was engaged. 49.Other than what we have said, we deal no further with Question 2 or the notice of motion in CACV 147/2014 and make no order in relation to them. F. COSTS 50.The parties agree that there shall be no order as to costs. We therefore make no order as to costs for both CACV 144/2014 and CACV 147/2014.
Clifford Chance, for the applicant, attendance be excused Mr Johnny Mok SC and Mr Abraham Chan, instructed by Bird & Bird, for the respondent Mu Julian Lam, instructed by Morrison & Foerster, for the intervener (watching brief) [1] Cap 106. [2] They concerned the definition of “customer equipment” in section 2 of the TO as applied in the context of the facts before the Appeal Board : see Part C3 below. [3] Cap 4A. [4] The Authority had requested to include this question in the case stated in CACV 144/2014. However, the Appeal Board refused to do so. The Authority therefore sought to put this question before the Court of Appeal for substantive determination by way of CACV117/2014. [5] Apple Asia is licensed to import and export radio communications transmitting apparatus, including iPhone 5, in the course of trade pursuant to sections 7 and 9 of the TO. [6] “SIM” stands for Subscriber Identity Module. [7] Mr Neil Kaplan, SBS, SC, CBE. [8] CACV 190/2013, unreported, 17 December 2013, Cheung CJHC, Kwan and Barma JJA. [9] Mr John Scott, SC. Members were Professor Suen Wing-chuen and Professor Mark Williams. [10] [43] to [47] of the Decision. [11] [49] of the Decision. [12] [48] of the Decision. [13] At [51] to [53] of the Decision. [14] [54] of the Decision. [15] [55] to [60] of the Decision. [16] [61] of the Decision. [17] [62] of the Decision. [18] [66] of the Decision. [19] [67] of the Decision. [20] Ibid. [21] See [68] to [73] of the Decision. A similar argument was also advanced by Mr Coleman SC, for Apple Asia. [22] [74] of the Decision. [23] [75] of the Decision. [24] See [13] of the case stated in CACV 144/2014. [25] CACV 274/2003, unreported, 8 July 2004, at [37]. [26] [2009] Bus LR 1116. [27] Cf Floe Telecom Ltd v Office of Communications and other, at [34]. [28] As recognized by the Appeal Board : see [81] of the Decision. |
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