5 February 2014
Practice Group(s):
Antitrust,
Competition and
Trade Regulation
Airport abuses dominant position through coach
operator concession
By Neil Baylis and Hannah Luqmani
On 28 January 2014 the High Court (‘the Court’) in London found that London Luton
Airport Operations Ltd (‘LLAO’) had abused its dominant position contrary to UK
competition law by entering into an exclusive concession agreement with National
Express (‘NE’). This finding followed an action brought by Arriva the Shires Ltd (‘ATS’)
claiming that LLAO had abused its dominant position by granting the concession.
Background
ATS had operated a coach service between Luton Airport and London Victoria Station for
30 years. In early 2013, as the expiration of ATS’s contract approached, LLAO held a
tender for the right to operate the service (rather than simply renewing ATS’s contract).
NE won the tender and was awarded a “New Concession” contract which gave NE the
exclusive right to operate the service and the right of first refusal over the operation of
other services on routes between Luton Airport and other London destinations. (An
easyBus service using smaller vehicles was allowed to continue to operate from the
Airport.)
Tender Process
The Court stated that “it is possible for a tender to be conducted by a dominant firm in
such an unfair manner that it amounts to an abuse of its dominant position.” However, in
this case there was nothing in the way LLAO conducted the tender that amounted to an
abuse of a dominant position.
In particular the Court considered that LLAO’s removal of a hyperlink connecting its
website with ATS’s merely expressed an intention by LLAO to change the manner in
which it conducted its commercial relations.
Furthermore, the Court considered that the issue was whether the alleged abuse caused
any loss to ATS, and held that because ATS’s bid was substantially less attractive to
LLAO than other bids, defects in the tender process had not caused ATS any loss.
New Concession
The Court considered that the grant of long term exclusivity to NE created a distortion of
competition because competitors could not compete with NE on the Luton Airport to
Victoria route.
The Court held that there were three factors materially increasing the anti-competitive
and distortive effects of the New Concession. Firstly, the period of exclusivity granted to
NE lasted for much longer than it would take to finish the planned extension of the bus
station, meaning that the exclusivity shielded NE from the competition of other bus
operators wanting to provide their services. Secondly, NE’s right of first refusal lacked
commercial justification because there was no real uncertainty about the level of
continuing demand for NE’s service or erosion of its customer base if a rival service was
introduced for an alternative route. Thirdly, the exception for easyBus (subject to it only
Airport abuses dominant position through coach operator concession
using vehicles with less than 19 seats) showed that it was treated differently from ATS
whilst ATS was placed at commercial disadvantage for no apparent reason.
No Objective Justification
LLAO raised the defence that there was an objective justification for the exclusivity
granted in the New Concession because congestion in the bus station meant there was
no room for an additional coach service and even if there was room, LLAO was entitled
to reserve the space for an alternative service rather than another service running to
Victoria. The Court did not agree: exclusivity (together with the right of first refusal) was
granted to NE so that it could maximise revenues, rather than to avoid congestion in the
bus station; and it was clear on the facts (in particular the right of first refusal) that LLAO
was not keeping space open for alternative services at the bus station.
LLAO’s Dominant Position
It was assumed that LLAO held a dominant position (without which abusive conduct will
not be unlawful) because it wholly owns the relevant market, being the bus station
facilities outside its terminal building. However, the Court stated that this assumption
(which was unchallenged by the parties) would be addressed in detail at a later date.
Implications
The case is a reminder of the need to consider competition laws when transport facility
owners tender or contract for exclusive service provision for a period of several years.
The exclusivity on its own is not the issue but when combined with a long term
agreement, it may have a significant effect on competition and be vulnerable to
challenge. Clearly where an existing provider is being replaced, such a challenge is
more likely to occur.
Authors:
Neil Baylis
Hannah Luqmani
Neil.baylis@klgates.com
+44.(0).20.7360.8140
Hannah.luqmani@klgates.com
+44.(0).20.7360.8121
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