On 21 December 2009, the UK Competition Appeal Tribunal (the CAT) handed down its judgment upholding part of BAA’s appeal against the report prepared by the UK Competition Commission (the CC) in its market investigation into BAA airports. The CC’s report had imposed a number of remedies on BAA, including requiring it to divest Gatwick, Stansted and one of Edinburgh or Glasgow airports (see attached), but the legal status of the report is now in serious doubt, creating significant embarrassment for the CC, and opening the possibility of BAA retaining Stansted and both of its Scottish airports.
BAA had appealed against the report on two grounds. First, BAA claimed that the participation of Professor Peter Moizer as a member of the CC investigating group infringed the principle of apparent bias. The apparent bias claim related to the fact that Professor Moizer is a part-time investment adviser to the Greater Manchester Pension Fund (the Fund) which is part of Greater Manchester’s local authorities. These local authorities own Manchester Airport Group plc (MAG), which was involved in the CC investigation, and which was part of a consortium which was an unsuccessful bidder for Gatwick. Despite the remoteness of this connection - and the relatively insignificant income Professor Moizer drew from his advisory position - this was sufficient for the apparent bias claim to be upheld.
The second ground of appeal was that the timetable set by the CC for BAA to divest the airports was disproportionate, in that the CC had failed to take account fully of the impact of the divestiture on BAA by demanding a relatively quick sale during the economic downturn when prices were likely to be less favourable. The details of the timetable were kept confidential by the CC, but the overall deadline for divesting the three airports was two years. The CAT dismissed BAA’s appeal on this ground.
In order to reach a conclusion on the first ground of appeal (apparent bias in the CC investigation), the CAT considered three specific questions. First, the CAT asked whether any apparent bias arose (making clear that there was no question in this case of any actual bias); second, if such apparent bias arose, whether BAA had waived its right to object to it; and third, whether other members of the CC investigation group (and therefore the CC’s overall findings) were tainted by the apparent bias.
On the first question of whether apparent bias arose, the CAT referred to the principle that it is of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done. The test the CAT applied to identify apparent bias in this case was whether a fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the decision-maker was biased. In applying this test to the facts of the case, the CAT identified as a key point submissions made by MAG to the CC in October 2007, to the effect that MAG would take part in the investigation and was interested in buying airports which might have to be sold by BAA as a result of the CC’s findings. In fact, MAG formed part of a consortium that bid for Gatwick airport. Given Professor Moizer’s role as an adviser to the Fund related to MAG, the CAT found that until Professor Moizer stood down from the investigation, there was apparent bias affecting the investigation, although the CAT emphasised that it did not find in any way that Professor Moizer was actually biased.
On the second question, the CC argued that, because of certain statements already on its website declaring Professor Moizer’s role in advising the Fund, BAA should be taken to have known of the situation and to have waived its rights to object. The CAT found, however, that the full situation was not something “that jumps out at one” from the information available to BAA early in the investigation. The issue only became obvious right at the end of the investigation, and given those circumstances BAA could not be taken to have waived its right to object.
Finally, the CC argued that, since Professor Moizer was only one of a group of six conducting the investigation, he could not have exerted undue influence over the decisions of the whole group. The CAT dismissed this argument, referring in particular to Professor Moizer’s relevant experience and role as an active, and in all probability influential, member of the Group.
The CAT, in reaching “with the greatest reluctance” the conclusion that there had been apparent bias, asked the parties to make further arguments on the appropriate next steps unless they could agree a way forward between themselves. The best way forward is far from clear in this case. The most obvious response is to set aside the CC’s decision and start again, but the prospect of another two year exhaustive and expensive investigation that is likely to lead to basically the same outcome may not in fact be very attractive to either of the parties. However, it is difficult to identify a partial solution that would cure the problem of apparent bias. It may be that a pragmatic compromise is the most realistic option, but it also appears that, if BAA is not prepared to compromise, there is a good chance that the CC’s report would lack legal validity in its entirety. In that case, BAA would need to weigh the cost and prolonged uncertainty of another investigation against the cost of being forced to sell now and thereby forego the possibility of achieving a higher sale price in a couple of years’ time, assuming economic conditions improve.
For the CC, the judgment represents a potentially worrying trend in that it is the third time in 2009 that the CC’s conclusions have been overturned by the CAT (the two others being Tesco’s appeal in the Groceries investigation and Barclays Bank’s appeal in the PPI investigation). While the CC may take some comfort from the fact that its substantive conclusions and competition analysis in the BAA investigation have not been criticised, it will be seen as embarrassing that the entire investigation has been prejudiced by this oversight.