Airport operators accused of abusing dominant position

Posted: 31st January 2014

CoachA company that for over 30 years ran a lucrative coach service from Luton Airport to central London – but which lost its concession to a competitor following a tendering exercise – is mounting a multi-million-pound compensation bid, claiming that the airport’s operators abused their dominant position in the market place.

Arriva The Shires Limited for decades ran its ‘Green Line’ buses from the airport to Victoria Station, carrying over a million passengers each year. However, instead of rolling Arriva’s contract forward as it had done many times in the past, London Luton Airport Operations Limited decided in early 2013 to put the coach route out to tender.

Arriva’s trade rivals, National Express, were the successful bidders and the company was granted an exclusive right to run a coach service between the airport and much of central London. The contract was to last seven years and required National Express to pay the airport operators a concession fee calculated as a percentage of the revenue it earned from servicing the route.

Arriva argues that the airport operators hold a dominant position in the market for the grant of rights to use the airport land and infrastructure to operate bus services from the airport. In seeking substantial damages, Arriva claims that the airport operators abused that position contrary to Section 18 of the Competition Act 1998.

In a preliminary ruling, the High Court found that there was nothing so ‘seriously amiss’ with the tendering process as to amount to an abuse of a dominant position. Even had Arriva been treated as entirely on a par with other bidders, it was inevitable that it would lose the concession given the ‘much more lucrative offer’ submitted by National Express. Any defects in the tendering process had caused no loss to Arriva because its bid was ‘substantially less favourable’ to the airport operators than the other two tenders received.

On the assumption that the airport operators did hold the dominant position claimed, the Court found that the terms of the new concession agreement with National Express did amount to an abuse of that position. The seven-year exclusivity period granted to National Express, as well as a right of ‘first refusal’ on services to new destinations in London, had created a ‘serious distortion of competition’ between coach operators for which there was no objective justification.

The Court noted that it had yet to resolve further issues essential to the final resolution of the case – in particular as to whether the airport operators in fact held a dominant position. Further argument was also required in respect of possible injunctive relief and the quantification of any damages that might ultimately be held due to Arriva.