CC criticises BAA’s common ownership of airports
BAA Limited is the successor of the State-operated British Airports Authority, which was privatised in 1987. BAA owns and operates four airports which account for 90% of airport passengers in southeast England (Heathrow, Gatwick, Stansted and Southampton). It also owns and operates three airports which account for 84% of airport passengers in Scotland (Edinburgh, Glasgow and Aberdeen). In July 2006, a consortium led by the Spanish building group Ferrovial acquired BA for £10.1 billion.
In June 2006, the Office of Fair Trading (“OFT ”) launched a market study of UK airports. The study was triggered by complaints made both by airlines and by passenger groups. In March 2007, after finding that the lack of competition between BAA ’s airport could lead to higher charges and higher costs, the OFT made a market investigation reference to the CC under the Enterprise Act 2002. The CC ’s remit in the context of a market investigation is very The UK’s Competition Commission (“CC”) found that BAA’s common ownership of seven British airports impeded competition. The CC ordered BAA to divest Gatwick, Stansted, and one of its airports in Scotland (either Edinburgh or Glasgow). The remedies are particularly severe given that BAA was not found guilty of any specific antitrust violation. broad: the CC may impose remedies, including divestitures, if it considers that certain market features prevent, restrict or distort competition in the UK . The CC ’s inquiry focuses on the structure of the market rather than on specific anti-competitive practices, such as cartels or abuses of dominance.
Following a two-year long investigation, the CC published its final report in March 2009. The CC found that BAA ’s common ownership prevented competition between Glasgow and Edinburgh airports: both airports had spare capacity but did not compete against each other for airline businesses. The CC further considered that BAA had no effective longterm infrastructure strategy and did not seek to develop new runway capacity in the London area. While acknowledging that Government policies (e.g., delays in approving a third runway at Heathrow) have contributed to existing capacity constraints, the CC argued that primary responsibility lay with BAA . In particular, the CC argued that if London airports were owned by separate owners, competitors would have taken advantage of capacity constraints at Heathrow in order to divert business from Heathrow and gain market shares. Capacity constraints and lack of competition between airports hurt both airlines and passengers.
…and orders the break-up of BAA
The CC ordered BAA to sell both Gatwick and Stansted, as well as either Edinburgh or Glasgow airports. BAA must sell all three airports within two years, beginning with Gatwick, then Stansted, and finally one of the Scottish airports. While antitrust regulators frequently impose divestments in merger cases, this is the first time that the CC has ordered a break-up of a company outside of the merger control context.
The CC also imposed certain behavioural undertakings on BA with respect to Aberdeen Airport. It has recommended that the Civil Aviation Authority strengthens its consultation processes in relation to Heathrow, the UK ’s only hub airport. Finally, in order to promote effective competition between airports, the CC is advocating a reform of airport regulation.
BAA initiated the sale of Gatwick in September 2008, prior to the release of the CC ’s final report. However, BAA has also appealed the CC ’s report before the Competition Appeal Tribunal. BA argues that the CC failed to take into account the adverse financial impact of its report, in particular by requiring BAA to sell three airports in the current financial and economic circumstances. It also complains that one of the members of the CC ’s panel has links to an organisation interested in acquiring the airports.