The Cat found Ofcom’s core competition concerns are "unfounded" and said the evidence does not support Ofcom’s central finding that Sky was unwilling to "engage constructively" in negotiating the wholesale supply of the premium sports channels.
Sky had challenged whether Ofcom had the jurisdiction to rule on the way Sky Sports 1 and 2 are sold but although the Cat decided Ofcom did have the right to make a decision, it judged that the broadcasting regulator had made the wrong one.
Ofcom attributed responsibility for the failure to reach agreement largely to Sky’s failure to engage constructively with its competitors but the Cat found Sky did, "on the whole", engage constructively.
The precise timeline is unclear but given that the CAT has ruled there are no competition concerns in the way Sky wholesales its channels it could lead to the restrictions on cost of Sky Sports 1 and 2 being lifted.
However, BT, Virgin Media and Top Up TV could still appeal the decision. It is thought that any appeal would be handled by the Court of Appeal and then, ultimately, in Europe.
Ofcom reacted to the ruling with this statement: "We are very surprised and disappointed with today’s decision by the Competition Appeal Tribunal, which we believe is contrary to the evidence and not in the interests of consumers.
"In a separate investigation, the Competition Commission also very recently concluded that competition in the pay TV market is not effective. We will therefore immediately consider what further steps we should take to ensure there is effective competition in the pay TV sector, in line with our duties."
The Cat has only published a non-confidential extract from the judgment this afternoon and the full judgement will be made available in due course.
A spokesman for Sky said: "We welcome the CAT’s confirmation that Ofcom’s competition concerns in relation to the wholesale supply of Sky Sports are unfounded and that, contrary to Ofcom’s analysis, the evidence shows that Sky has engaged constructively with other distributors over the supply of its premium channels.
"This finding supports the argument that Sky has been making consistently over the last five years."
Sky also welcomed the Cat's finding that the existing commercial terms of supply, particularly in relation to Sky’s wholesale rate card, do not obstruct fair and effective competition in the retailing of Sky Sports across platforms.
The case stretches back to March 2010 when Ofcom ruled Sky must slash the price it charges competitors for the premium sports channels Sky Sports 1 and Sky Sports 2 by 23.4%.following a long-running investigation.
Following the ruling BT and Top Up TV decided the economics allowed them to offer Sky Sports to their customers for the first time and started retailing Sky Sports 1 and 1 in time for the 2010/11 football season.
Sky, Virgin Media and BT all appealed the judgement; with Sky claiming that Ofcom did not have the power to force it to sell its channels to its competitors and its rivals claiming the price of Sky Sports was still too high.
In April 2010 Virgin Media, Top Up TV and BT agreed a compromise with Sky which enabled them to offer the channels while the appeal was ongoing and then, separately, Virgin Media agreed a deal to broadcast all Sky’s sports channels.
The Ofcom investigation began in March 2007 when BT, defunct broadcaster Setanta, Top Up TV and Virgin Media asked the regulator to look at the way BSkyB sells its premium content to its competitors.
The pay-TV sports market could change significantly next year as BT has won the rights to broadcast coverage of two of the seven TV packages for the Barclays Premier League from the 2013/14 season.