- Bookmark
- Share
- CaseIQ
Arriva the Shires Ltd v London Luton Airport Operations Ltd
Factual and Procedural Background
The Plaintiff, a well-known bus and coach operator trading under the name 'Green Line', operated a coach service (the 757 service) between the Airport and London Victoria under a concession agreement with the Defendant, which operates the Airport under a concession from the local council. This service ran for 30 years with the contract rolling forward periodically. In early 2013, instead of renewing the contract with the Plaintiff, the Defendant invited bids for the route. The Plaintiff submitted a proposal but lost the contract to a competitor, Company B, who now operates the route under a new seven-year exclusive concession agreement (the New Concession).
The Plaintiff alleges that the Defendant holds a dominant position in the market for granting rights to use Airport land and infrastructure to operate bus services and has abused this position contrary to section 18 of the Competition Act 1998. The Defendant denies abuse, contending the tender was fair and the exclusivity justified by capacity constraints at the Bus Station.
The trial focused on liability, with the parties agreeing that the Defendant is dominant in the relevant market and reserving quantum and other issues for later proceedings. The Plaintiff challenges both the tender process and the terms of the New Concession, including exclusivity, the grant of a right of first refusal, and discriminatory treatment favoring a third operator, easyBus.
Legal Issues Presented
- Whether the Defendant abused its dominant position in the way it conducted the tender process for the New Concession.
- Whether the terms of the New Concession, including the grant of exclusivity, right of first refusal, and discrimination in favor of easyBus, constitute an abuse of dominant position under section 18 of the Competition Act 1998.
- Whether the Defendant can objectively justify the exclusivity and related terms in the New Concession.
Arguments of the Parties
Plaintiff's Arguments
- The tender process was unfair and discriminatory, with the Defendant having predetermined not to renew the contract with the Plaintiff.
- The exclusivity granted in the New Concession for seven years is abusive as it forecloses competition on the downstream market.
- The exception allowing easyBus to operate competing services and the right of first refusal granted to Company B unfairly discriminate against the Plaintiff.
- The Defendant's claim of congestion at the Bus Station as justification for exclusivity is unfounded, as there is sufficient capacity.
Defendant's Arguments
- The tender was conducted fairly, and Company B won due to a superior financial offer.
- Exclusivity is justified by limited capacity at the Bus Station and the need to manage space efficiently.
- The Defendant has no obligation to allocate space for duplicate services and can reserve space for new routes.
- The exception for easyBus is due to an existing valid concession, and the right of first refusal protects legitimate commercial interests.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Hoffmann-La Roche v Commission [1979] ECR 461 | Exclusive agreements by dominant undertakings are abusive when they foreclose competition. | Used to explain the nature of abusive exclusivity, distinguishing buyer exclusivity from the Defendant's grant of exclusivity to a downstream customer. |
| Tomra Systems ASA v Commission (C-549/10P) (2012) | Exclusive agreements and foreclosure of downstream markets by dominant undertakings. | Confirmed that exclusivity can be abusive even if accepted by the customer; relevant to assessing the New Concession's exclusivity. |
| Clearstream Banking AG and Clearstream International v European Commission (T-301/04) [2009] ECR II-3155 | Abuse of dominance is an objective concept; no need to prove intention to harm competitors. | Supported the principle that refusal to supply or discriminatory conduct by a dominant undertaking can be abusive regardless of intent. |
| British Airways plc v Commission (C-95/04P) [2007] ECR I-2331 | Discrimination by a dominant undertaking that distorts competition among trading partners is abusive. | Applied to assess whether the Defendant's differential treatment of easyBus and the Plaintiff was abusive. |
| Aéroports de Paris v Commission (T-128/98) [2000] ECR II-3929 | Abuse can occur even if the dominant undertaking has no interest in distorting downstream competition. | Used to reject Defendant's argument that absence of downstream commercial interest negates abuse. |
| SEL-Imperial Ltd v The British Standards Institution [2010] EWHC 854 (Ch) | Unclear if commercial gain is necessary for abuse; dominant undertakings have special responsibilities. | Considered in context of Defendant's argument about no commercial benefit from exclusivity. |
| Joint selling of the media rights to the FA Premier League (Case 38173) (FAPL) (2006) | Long-term exclusive rights can foreclose downstream markets and distort competition. | Analogous to the grant of exclusivity in the New Concession, illustrating distortive effects on downstream competition. |
| Flughafen Frankfurt/Main AG (34.801) (1998) | Objective justification requires a high degree of necessity; alternative solutions must be considered. | Applied in assessing Defendant's congestion justification for exclusivity. |
| Purple Parking & Ors v Heathrow Airport Ltd [2011] EWHC 987 (Ch) | Objective justification requires overriding need; motivation to suppress competition is relevant. | Used to frame the standard of proof and test for objective justification of Defendant's conduct. |
| British Midland v. Aer Lingus (IV/33.544) (1992) | Refusal to interline by a dominant firm can be abusive even if the competitor survives. | Supported the finding that the Defendant's exclusivity distorts competition despite Plaintiff's continued operation from alternative locations. |
Court's Reasoning and Analysis
The Court began by acknowledging the Defendant's dominant position in the relevant market. It then examined the Plaintiff's allegations of abuse in two main areas: the tender process and the terms of the New Concession.
Regarding the tender process, the Court found that although there was some adverse feeling towards the Plaintiff due to prior disputes over revenue reporting and commercial relations, the Defendant genuinely invited the Plaintiff to bid. The Plaintiff’s bid was significantly less financially attractive than Company B’s, and the Defendant’s process, though informal, did not cause the Plaintiff loss because the outcome would have been the same even with a perfectly fair process. The Court rejected the claim that the Plaintiff was unfairly disadvantaged in preparing or submitting its bid.
On the New Concession’s terms, the Court focused on the grant of exclusivity for seven years, the right of first refusal, and the carve-out favoring easyBus. It applied established case law on abuse of dominance, emphasizing that exclusivity granted by a dominant undertaking that forecloses competition in a downstream market constitutes abuse, regardless of whether the dominant undertaking itself operates downstream.
The Court rejected the Defendant's argument that competition from rail services or the Plaintiff’s continued operation from a less convenient location eliminated distortion. It found the exclusivity and related terms seriously distort competition by foreclosing other coach operators from direct access to the Bus Station for London Victoria services.
Regarding objective justification, the Defendant asserted that congestion at the Bus Station justified exclusivity. The Court analyzed extensive expert evidence, including a survey of Bus Station usage, and found that the Bus Station was not congested to a degree justifying exclusivity. Inefficient use of space and lack of enforcement of timetables contributed to perceived congestion. The Court also rejected health and safety arguments against the Plaintiff’s use of certain bays.
The Court found no evidence that the exclusivity was granted to manage congestion or safety concerns. Instead, the exclusivity was motivated by the Defendant's aim to maximize revenue from the concession fee. The grant of a right of first refusal and the exception favoring easyBus were held to be discriminatory and unjustified, further distorting competition.
The Court also considered whether the Defendant had an obligation to make additional space available but held that it was not required to disrupt existing services or facilities to accommodate the Plaintiff.
Holding and Implications
The Court's final decision is as follows:
1. The Defendant did not abuse its dominant position in the conduct of the tender process for the New Concession.
2. The Defendant did abuse its dominant position by entering into the New Concession with Company B on terms that grant a seven-year exclusivity, a right of first refusal on new London services, and discriminatory treatment favoring easyBus, all of which seriously distort competition among coach operators.
The Court found no objective justification for these abusive terms. This decision means the Plaintiff's claim on abuse related to the New Concession succeeds on liability grounds, but issues such as the Defendant’s actual dominance, remedies including injunctions, and damages remain to be determined in further proceedings. No new legal precedent is established beyond the application of existing competition law principles to the facts.
Alert