London commuters have often ruefully commented that one can wait a long time for the morning bus to come only to find that when it arrives a second one is right behind it. Recently, the UK Competition Appeal Tribunal (CAT) handed down the single most comprehensive treatment regarding the availability of compensatory and punitive damages for loss caused by illegal anticompetitive activity to date, under English/Welsh law, in a decision being referred to as the Cardiff Bus case. The big question now being asked by interested observers is - when are we going to see the next "bus"? Encouraging victims of anti-competitive conduct to seek redress before the courts is fast becoming the "holy grail" of UK policy in this area. The CAT has now tried to do its part by setting out in clear terms what plaintiffs need to do to succeed in accordance with current English/Welsh law.
This Article explores the key features of the CAT's judgment, and then considers what the future may hold for civil remedies in a competition law context going forward.
The Cardiff Bus decision
This case demonstrates graphically that you do not have to be "Global Inc." to be considered to be in a "dominant" and/or "monopoly" position and, as a result, need to learn how to behave correctly as such an enterprise. Cardiff City Transport Services Ltd. ("Cardiff Bus") was owned by the local city authority, but was operated as a commercial enterprise at arm's length. As its name suggests, it provides bus services in the Cardiff area. In April 2004, a local rival, 2 Travel Group Plc ("2 Travel"), launched a new "no frills" service, using buses and crews primarily contracted to schools for the transport of pupils, to make runs into Cardiff city center - known as an "in-fill" service - during the school-day to minimize down-time between school runs and maximize efficiencies. These 2 Travel buses ran on some of the same routes used by Cardiff Bus, but charged significantly less. To combat 2 Travel, Cardiff Bus launched its own "white service" (i.e., plain white buses as opposed to its standard liveried vehicles). It timed the departure of those buses so that they left just before the new 2 Travel in-fill buses, but at slightly lower fares than the 2 Travel fares. 2 Travel abandoned the routes in December 2004, only seven months after launch, and Cardiff Bus followed suit in February 2005. 2 Travel went into liquidation in May 2005.
Called upon to investigate the activities of Cardiff Bus, the UK's principal competition enforcement body, the Office of Fair Trading (OFT) found, in November 2008, that Cardiff Bus was guilty of a serious competition law infringement in that it had abused its dominant position contrary to Section 18 of the UK Competition Act 1998 ("CA '98"). Cardiff Bus avoided a financial penalty simply as a result of its size, i.e., it benefited from an exemption, contained in Section 40 of the CA '98, because its annual turnover was less than £50 million (approximately $75 million).
Using a statutory mechanism that allows those harmed by anti-competitive conduct to seek damages on the back of a "final" infringement decision (i.e., not subject to any outstanding appeal), the liquidators of 2 Travel brought what is referred to as a "follow on" action before the CAT in January 2011. Such claims only need to demonstrate causation (i.e., a link between the illegal conduct and the loss suffered) and quantum (i.e., the appropriate level of compensatory damages). In this case, 2 Travel asked for over £20 million (approximately $30 million) in both compensatory and exemplary/punitive damages, plus interest.
In a thorough decision handed down July 5, 2012, the CAT, in the end, awarded 2 Travel only £33,818.79 (approximately $50,000) in compensation, and a further £60,000 (approximately $90,000) in exemplary damages. While both numbers may seem small compared to the sums associated with the fines meted out by competition authorities in antitrust cases around the world, and the levels of treble damages awarded in the U.S., they are among the very first of their kind in England/Wales and, therefore, deserving of full attention.
As regards compensation, the CAT applied a "but for" test (i.e., what would 2 Travel have earned "but for" the anti-competitive conduct). This gave the CAT the opportunity to test the slightly more ambitious claims of 2 Travel regarding the Cardiff Bus role in its demise. Importantly, the CAT found that 2 Travel, for the most part, was the instigator of its own doom, describing 2 Travel as being "exceptionally badly managed." It concluded that the predatory conduct had resulted in a diversion of customers which had negatively impacted on 2 Travels' load factors. This loss of revenue amounted to £33,818.97 (approximately $50,000).
For obvious public policy reasons, the CAT's consideration of the availability of exemplary damages is more complex and extensive. The test it applied in this particular case was to examine whether Cardiff Bus could be said to have been guilty of "the knowing disregard of an appreciated and unacceptable risk of causing an injurious result or a deliberate closing of the mind to such risk" - in other words had Cardiff Bus acted "recklessly" or "outrageously." The CAT took into account the fact that it is often difficult for businesses to predict whether their conduct might amount to an abuse and thereby an infringement of the CA '98. Nevertheless, in this case, the CAT had no difficulty in finding Cardiff Bus sufficiently knowing for its conduct to fall within the definitions.
The CAT also had to grapple with a "double jeopardy" issue. Under English/Welsh law, jurisprudence states that in circumstances where a defendant has already either been fined by a competition authority, or would have been fined if it had not benefited from immunity as a whistle-blower, then it should not be "punished" again through an award of exemplary damages. Here, the CAT rejected the notion that the small company exemption applied by the OFT to Cardiff Bus was functionally equivalent to the whistle-blower scenario, and decided that an award of exemplary damages was appropriate in this case because the level of compensatory damages was not enough to teach "[Cardiff Bus] that tort does not pay." In settling on a figure of £60,000 (approximately $90,000), the CAT took account of: the fact that the measure should bear some relation to the amount of compensation awarded; that Cardiff Bus was a relatively small company; and a belief that Cardiff Bus was likely to have learned its lesson.
Small case though it might appear to the casual observer, the CAT's Cardiff Bus decision is likely to have a significant and long-lasting impact. As the "specialist" antitrust tribunal in the UK, the CAT's views on competition law are imbued with greater jurisprudential authority than its first instance status might suggest. This case was an exceptional opportunity for the CAT to lay down some important markers. While it is true to say that each case will have its own "quirks," Cardiff Bus is now quite clearly the leading precedent/authority in this relatively underserved, but increasingly important, area.
Sometimes accused of being an "activist" court, the CAT resisted the temptation to create "new" law. Instead, it has attempted to explain as thoroughly as it could how current law applies to competition cases. It is, therefore, a road map for future plaintiffs. A number of questions, however, remain unanswered. For example, does the "double jeopardy" rule preclude multiple plaintiffs from obtaining exemplary damages and, if so, how can one avoid an unseemly rush to judgment in such situations?
Although important, this case does appear set to encourage the next "bus" to come unnaturally early. There is a long-standing abuse case in the water supply sector that is currently before the CAT and is due down the ramp next. Even though the Cardiff Bus decision does not appear to offer plaintiffs "easy" money, it at least may explain, in quite some detail, how a private plaintiff can travel the road to compensation in a competition suit. And getting you to your destination, after all, is what buses are meant to do.