EircelL did not have a dominant position in the marketplace, a High Court judge found yesterday. However, he ruled that Eircell did breach the terms of the agreement supplying air time to rival service Imagine.

Mr Justice O'Higgins said Eircell's behaviour towards Meridian, Imagine's parent company, was, in one respect, "obstructive, obdurate and arrogant".

Following the decision, Eircell said it would terminate "forthwith" the volume discount agreement contract with Meridian and its wholly-owned subsidiary Cellular 3, which operates Imagine. A volume discount agreement allows companies to buy air time off network operators at discounts of up to 40 per cent.

The court had decided last year that Meridian and Cellular 3 had no right to renewal of the agreement which Eircell undertook to continue pending the outcome of what have been lengthy legal proceedings between the parties. Meridian is considering appealing the finding that Eircell does not have a dominant position to the Supreme Court. The company is also expected to seek damages arising from the findings of breaches of contract.

Mr Justice O'Higgins yesterday handed down a 158-page judgment on legal proceedings - believed to be the longest-running commercial litigation - taken by Meridian and Cellular 3 against Eircell which date back to June 1999.

Meridian and Cellular 3 sought damages from Eircell over Eircell's termination of its agreement with the companies. Meridian claimed Eircell had a dominant position in the mobile phone market and was seeking to put it out of business in order to maintain that position. Eircell denied those claims.

In August 1999, the High Court refused to grant an interlocutory order restraining Eircell from terminating the agreement. Meridian's Supreme Court appeal against that refusal was adjourned in October 1999 after Eircell undertook to continue operating the contract pending the outcome of the main proceedings. These began in January 2000 and ran for 94 days.

In earlier decisions on aspects of the main proceedings, Mr Justice O'Higgins held Meridian did not require a licence to engage in its business. He also held Meridian was not entitled to renew the agreement under the terms of the contract and that Eircell was not stopped from renewing the agreement.

In his final judgment on the action yesterday, Mr Justice O'Higgins said the initial agreement between the sides ran from August 1997 to August 1998 and was continued after that without being formally renewed. After November 1998, Meridian began to expand its operations significantly.

When Eircell saw the Meridian business beginning to expand, it was apparent it was unhappy with the use to which Meridian was putting the volume discount agreement. It considered Meridian was using the agreement to undercut Eircell's prices.

In January 1999, Eircell ordered transfers of air time to Meridian be stopped. Eircell indicated it would not renew the agreement, a decision the judge said Eircell was entitled to make.

In April 1999, Eircell sent out a "process letter" to Meridian customers who wished to transfer from Eircell to Meridian and avail of the cheaper prices Meridian was offering as a result of having the VDA in an unrestricted form.

This letter became a cause of serious dispute and apparently was the event which triggered off the litigation, the judge said.

He said his judgment was concerned with whether Eircell was dominant in the marketplace and, if it were, whether it was guilty of abuse of that dominant position. The judgment also dealt with allegations that Eircell had committed a number of breaches of contract.

He found Meridian had failed to establish that Eircell had a dominant position in the relevant market - the market for mobile telephony services within the State. All claims made by Meridian based on abuse of dominance therefore failed.

Dealing with claims of breaches of contract and/or tort, the judge found the suspension of transfers of air time from Eircell to Meridian for a short time in June 1999 did constitute a breach of the agreement - which required transfers to be effected as soon as possible - and was not justified.

He held the process letter of April 1999 did not constitute inducement or procurement of a breach of contract and was not a breach of confidence or an injurious falsehood.

The judge held delays caused by Eircell's sending of the "process letter" to Meridian customers were unnecessary and avoidable. He accepted Eircell's conduct breached an implied term of the agreement.

He further held there was a failure by Eircell to process transfer requests as soon as possible in the cases where a process letter was sent.

He found Eircell's failure to supply transfer books as required to Meridian led to the latter's inability to expand. Eircell's behaviour in that regard was unjustified and was "obstructive, obdurate and arrogant".

The judge adjourned the matter to April 24th to allow the parties consider his judgment.