Factual and Procedural Background
The claimants are Chester City Council ("the Council") and Chester City Transport Limited ("CCT"), a Council-owned bus company operating in and around the City of Chester. The defendants are Arriva plc and its subsidiaries ("Arriva"). The claimants allege that Arriva breached section 18 of the Competition Act 1998 by abusing a dominant position in the bus market through predatory conduct aimed at driving CCT out of business.
The dispute arose following the Council's August 2006 decision to sell CCT via a tender process. Arriva wished to participate but refused to comply with the tender terms. On 10 September 2006, Arriva registered duplicate bus services matching all of CCT's commercial routes, proposing to operate them from 7 January 2007. The next day, Arriva made a written offer to acquire CCT's assets and undertaking, which the Council declined to consider due to non-compliance with the tender process. The Council viewed Arriva's route duplication as predatory and damaging to the sale process and CCT's viability.
Proceedings were issued on 10 October 2006 seeking declarations, injunctions, and damages. Interim relief was granted restraining Arriva from operating the registered services, pending trial. Arriva gave undertakings not to operate the services until the trial.
Central factual issues included Arriva's true intentions regarding the September registrations: Arriva asserted it never intended to compete directly but to operate only if it acquired CCT or if CCT ceased trading by insolvency. The claimants contended Arriva intended to compete aggressively from 7 January 2007, as the registrations indicated. Legal issues also arose as to Arriva's dominance in the relevant market and whether its conduct constituted abuse.
The expedited trial was adjourned in December 2006 following Arriva's deregistration of most services and revision to compete only on three of CCT's most profitable routes. The trial resumed over 12 days in February and March 2007, focusing on Arriva's intentions and the predatory nature of the revised registrations.
Legal Issues Presented
- Whether Arriva holds a dominant position in the relevant bus market around Chester.
- Whether Arriva's conduct in registering duplicate bus services constitutes an abuse of a dominant position under section 18 of the Competition Act 1998.
- Whether Arriva's actions amount to predatory behaviour aimed at driving CCT out of business.
- The appropriate definition of the relevant product and geographic market for assessing dominance.
- The validity and extent of the claimants' damages claim resulting from Arriva's alleged abusive conduct.
Arguments of the Parties
Claimants' Arguments
- Arriva is dominant in the relevant local bus market around Chester, with a market share sufficient to raise a presumption of dominance.
- Arriva abused its dominant position by threatening to flood CCT's routes with buses and sell below cost, intending to drive CCT out of business.
- The original and revised registrations evidence Arriva's predatory intent to compete directly with CCT from 7 January 2007.
- Arriva's conduct threatens to undermine the sale process and the future viability of CCT, justifying injunctive relief and damages.
- The claimants rely on expert evidence, including from their transport industry consultant, to establish market definition, dominance, and predatory intent.
Defendants' Arguments
- Arriva denies holding a dominant position in the relevant market; thus, no abuse arises.
- Arriva asserts that it never intended to compete directly with CCT on all routes from January 2007 but only to operate services following acquisition or CCT's insolvency.
- The registrations were a legitimate commercial step to preserve options and were not predatory.
- Market entry barriers are low, making the local bus market contestable and precluding dominance.
- Arriva contends the claimants seek protection from healthy competition to the detriment of consumers.
- Arriva asserts its revised registrations on three routes are profitable and not below cost, denying predatory intent.
- Arriva challenges the claimants’ expert evidence on market definition and dominance.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Re H and Others [1996] AC 563 |
Standard of proof in serious allegations; more serious allegations require stronger evidence. |
The court applied this principle to require strong and compelling evidence for the serious allegation of predatory intent by Arriva. |
| R (on the application of AN) v. Mental Health Review Tribunal (Northern Region) [2005] EWCA Civ 1605 |
Standard of proof linked to seriousness of consequences; stronger evidence needed for serious consequences. |
Supported the court's approach to assessing the evidence in a case with potentially severe financial penalties. |
| Ineos Vinyls Limited and Others v. Huntsman Petrochemicals (UK) Limited [2006] EWHC 1241 |
Application of high evidential standard in competition cases alleging abuse of dominance. |
Court followed this approach in requiring strong evidence to prove abuse under the Competition Act 1998. |
| Napp Pharmaceutical Holdings Ltd v. Director General of Fair Trading [2002] CAT |
Burden shifts to dominant undertaking to disprove predatory intent when pricing below average variable cost. |
Cited in relation to the claimants’ assertion that Arriva’s pricing below cost indicates predatory intent. |
| Akzo Chemie BV v. Commission of the European Communities, Case C-62/86 [1991] ECR 1-3359 |
Predation defined as pricing below average variable cost with intent to eliminate competitor. |
Cited to support the presumption of predatory intent if pricing below average variable cost is established. |
| Hoffmann-La Roche & Co AG v. Commission of the European Communities, Case 85/76 [1979] ECR 461 |
Definition of dominance as economic strength enabling independent behaviour from competitors and customers. |
Used to clarify the legal test for dominance in the relevant market. |
| Toth v. Jarman [2006] EWCA Civ 1028 |
Conflict of interest in expert witnesses may lead to court declining to act on evidence. |
Referenced in argument regarding the impartiality of the claimants’ expert witness. |
Court's Reasoning and Analysis
The court undertook a detailed factual and legal analysis of Arriva's intentions and the market context. It found that Arriva's registrations in September 2006 did constitute a threat to compete directly with CCT from 7 January 2007, and that Arriva knew this would be perceived as aggressive and predatory. The claim that Arriva intended only to operate following acquisition or insolvency was rejected as untrue and unsupported by contemporaneous evidence.
The court examined the applicable legal framework under the Competition Act 1998, particularly section 18 prohibiting abuse of dominant position, and the burden and standard of proof. It emphasized the need for strong and compelling evidence given the seriousness of the allegations.
Regarding market definition, the court considered expert evidence on the relevant product and geographic market. It found the product market was not proven to be exclusively local bus services, as there was some substitutability with other transport modes. The geographic market was better defined by the defendant’s expert using a 30-minute dead run driving time isochrone around Chester, excluding certain depots such as Birkenhead due to economic infeasibility.
The court rejected the claimants' broader geographic market defined by administrative districts as arbitrary and unprincipled. It also rejected the claimants’ use of bus hours as a proxy for market share, preferring capacity (fleet size) as the appropriate metric in a supply-side market definition.
On the basis of the accepted geographic market and capacity metric, Arriva’s market share was found to be no more than 31%, insufficient to raise a presumption of dominance. Even if the claimants’ larger market share estimate was accepted, the court found Arriva was not dominant due to the contestability of the market, low entry barriers, and ease of entry and exit by competitors.
Consequently, the court held that no question of abuse of dominance arose.
The court also critically examined the claimants’ damages claim for wasted legal and consultancy costs, finding the evidence insufficient and the claim unproven.
Regarding expert evidence, the court accepted the claimants’ expert as qualified and credible, despite the defendant’s challenge to his impartiality and expertise, but noted the need to assess the weight of his evidence carefully.
Holding and Implications
The court’s final decision is DISMISSED.
The claimants’ case that Arriva abused a dominant position by predatory conduct was not established, primarily because Arriva was not proven to be dominant in the relevant market. The market was found to be contestable with low barriers to entry, limiting any operator’s ability to behave independently. The court rejected the claimants’ broader market definition and proxy metrics for market share.
The damages claim for wasted expenditure was not proven.
There is no indication that this decision sets new precedent; rather, it applies established principles of market definition, dominance, and abuse under the Competition Act 1998 to the facts of this case. The direct effect is that Arriva is not restrained from competing in the Chester bus market on the basis alleged.