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.
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.)
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.
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 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.
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.