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Arriva v Luton Airport: The need for tender loving care

27 February 2014

Arriva the Shires Ltd v London Luton Airport Operations Ltd [2014] EWHC 64 (Ch), High Court judgment of 28 January 2014

The High Court issued a clear warning to operators in the airport industry (and hope for those frustrated by their tendering practices) that when tendering for concession arrangements any unfair treatment could be caught by competition law, even if the public procurement rules do not bite.

Arriva Shires Ltd (ATS) had been running the 757 London Victoria to Luton Airport bus service for 30 years under a concession arrangement. However, in early 2013 Luton decided to hold a tender for the concession, rather than renewing the deal with Arriva. 

National Express emerged as the successful provider and secured a concession giving them the exclusive right to operate coach services from most of central London over a seven year period. 

ATS launched proceedings in the High Court under Chapter II of the Competition Act 1998, which prohibits companies in a dominant position within a particular market from abusing their dominance, to the detriment of competitors or customers. 

Abuse can be sanctioned with fines of up to 10% of worldwide, group turnover and also lead to follow on lawsuits from companies affected by the illegal behaviour.

One of the important aspects of the Arriva judgment is that it establishes that dominant companies must take special care to avoid distorting competition between operators in a neighbouring, downstream market, even where they are not active on that market themselves. 

In this case, this meant that although Luton did not run its own coach or bus service from the airport, it was required not to distort competition between operators which did (assuming, of course, the airport was in a dominant position).

The Court proceeded on the assumption that Luton was dominant as it operated within a distinct market for the granting of rights to use land and infrastructure at Luton Airport to operate bus services from the Airport. 

That assumption will be tested and considered in more detail in a later judgment, but can already be seen to be legally credible and respectable. 

Arriva alleged two counts of abuse of dominant position. The first related to the conduct of the tender process. It alleged less favourable treatment in the evaluation process than its competitor, National Express (which emerged with the contract). 

It argued this constituted unlawful discrimination. The Court held that although the tender process had been informal, there was no evidence of discrimination within that process. 

The second aspect related to the terms of the concession awarded to National Express. The Airport entered into the New Concession agreement with National Express, granting the operator a seven year exclusivity period and giving a right of first refusal on services to new destinations in London. 

The Court agreed that this seriously distorted competition between coach operators wanting to provide services from the bus station without any objective justification.

Liability of the airport will only be established if it is ultimately found to be in a dominant market position. 

Nonetheless, the case illustrates that airports and facilities operators (such as ports) must consider carefully whether they occupy such a position. 

In cases where they are dominant, this judgment illustrates that they must take special care when selecting contracting partners to run concessions (or running tender processes) and concluding contract terms with concession providers. 

This article was written by Paul Henty.

For more information please contact Paul on +44 (0)20 7427 6506 or paul.henty@crsblaw.com