a legal blog on market regulation

Abuse of dominance: no commercial gain, no abuse?

Is it necessary for there to be some commercial benefit to be gained by a dominant undertaking from its conduct before that conduct can be condemned as abusive?

No, says Mrs Justice Rose in Arriva the Shires Ltd v London Luton Airport Operations Ltd [2014] EWHC 64 (Ch).

The case involved a claim by Arriva against Luton Airport. Arriva had operated a bus route from the airport to London Victoria for 30 years. On each occasion that Arriva’s contract expired, it had been rolled forward. Some changes in management took place at Luton. Luton decided not to roll forward Arriva’s contract upon its expiry in April 2013. Instead, they invited coach operators to bid for the right to operate the route. Arriva submitted a bid, but the right was won by a competitor, National Express.

National Express was granted the exclusive right to operate a route from Luton to London.

Arriva claimed Luton had abused its dominant position in the market for the grant of rights to use the airport land and infrastructure to operate bus services from the airport. Deciding only on the issue of abuse (the question of dominance had been assumed in Arriva’s favour, but remains now to be determined), Rose J held that Luton had committed an abuse.

Luton submitted that the case didn’t fall into any of the established categories of exclusionary behaviour so far identified by the Commission or the Courts. It argued that there could only be an exclusionary abuse in two categories of cases: first, where the dominant undertaking is competing on the downstream market and acting to foreclose that market to its own advantage (the classic Commercial Solvents v Commission situation); second, where the dominant undertaking distorts competition between itself and its customers on the downstream market by entering into contracts with customers which require them to buy their supplies only from the dominant undertaking.

Luton argued there was in this case a complete absence of a competing downstream interest because Luton did not itself operate any coach service. Furthermore, the exclusivity arrangement was not one which tied Luton’s customers into only contracting with Luton airport: this was a very different scenario in which Luton was essentially tying its own hands by saying that it would only contract with one customer.

Rose J rejected these arguments. Of particular interest, she held that the Aéroports de Paris v Commission decision [2000] ECR II-3929 applied not only in the context of discriminatory pricing but also in the context of refusal to supply. Appling it, she held it was not necessary for there to be some commercial benefit to be gained by a dominant undertaking from its conduct for it to constitute an abuse.

However, she did not hold the absence of commercial gain was entirely irrelevant in a Chapter II case, but considered that it “may well be highly relevant” on the issue of objective justification. She reasoned: “[i]f a dominant undertaking can show that it has nothing to gain from refusing to supply a customer, that would support its contention that, as a matter of fact, the refusal was based on an entirely legitimate objective justification – why else would it forgo the sale?”.

That potential relevance was, however, of no assistance to Luton in this case. Rose J held that in any event Luton did derive an important commercial and economic benefit from granting an exclusive concession to a bus operator, because they shared in the revenue by reason of receipt of a fee based on a percentage of the bus operator’s revenue and a substantial minimum guaranteed payment. She held that Luton’s reason for granting exclusivity to National Express was to protect National Express from competition in the downsteam market, in the expectation that this would maximise the fees that National Express was prepared to pay Luton for the rights to operate the bus service.



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