On 5 July 2012, the UK's Competition Appeals Tribunal (CAT) handed down a judgment in which it ordered Cardiff Bus to pay 2 Travel plc £93,000 in lost profits and exemplary damages for having abusively forced it out of the Cardiff public transport market.
The judgment follows a 2008 Decision by the Office of Fair Trading (OFT) which held that council-owned Cardiff Bus had, from 19 April 2004 to 18 February 2005, abused its dominant position in the Cardiff public transport market by engaging in predatory conduct against 2 Travel, contrary to the Chapter II prohibition of the Competition Act 1998. Cardiff Bus did not, however, receive a fine for the infringement.
At the heart of the dispute, was Cardiff Bus' introduction of a loss-making "no-frills" bus service (the "white service") in response to 2 Travel's own no-frills service following the latter's entry into the local public transport market. Both bus operators were running their no-frills service buses on the same routes and at similar times. Cardiff Bus' white service lasted until 2 Travel's exit from the market, at which time Cardiff Bus withdrew it altogether.
Despite Cardiff Bus' claims that it had run its white service for market testing purposes and had subsequently withdrawn it due to lack of customer demand, the OFT nonetheless found that 2 Travel had suffered as a direct consequence of Cardiff Bus' behaviour, with which it was unable to compete. In view of all the evidence submitted to it, the OFT concluded that Cardiff Bus was in a dominant position (i.e., it had a 66% market share) and that, by introducing its own white bus service, it had done so specifically for the purpose of driving the entrant out of the market. This conduct contributed to maintaining and strengthening its dominant position and therefore did not constitute "competition on the merits".
Following the OFT Decision, 2 Travel filed a claim with the CAT in January 2011 under Section 47A of the Competition Act 1998 in order to obtain multi-million pound compensatory damages for the loss suffered as a result of having been forced out of the market. In particular, 2 Travel – which is now in liquidation – sought damages for lost profits, loss of its business, wasted management and staff time, loss of opportunity and also exemplary damages.
The main hearings took place between March and May 2012 and focused, amongst others, on Cardiff Bus' behaviour on the market as well as 2 Travel's already difficult financial situation, quite independently of Cardiff's conduct, and whether this was the reason which led to its exit from the market.
Having examined all the evidence submitted before it, the CAT concluded that:
- Cardiff Bus had deliberately and cynically decided to disregard the law as well as 2 Travel's rights;
- Cardiff Bus' conduct was seriously anti-competitive and motivated by an exclusionary intent;
- Cardiff Bus, despite knowing and appreciating the unacceptable antitrust risks, nonetheless deliberately chose to continue its course of conduct.
In light of the above, the CAT decided to award damages to 2 Travel in respect of its claim for loss of profit of £33,818.79, plus interest. In contrast, the CAT dismissed the other claims for compensatory damages on the grounds that certain losses were not attributable to the infringements but rather to the mismanagement of 2 Travel and its overall financial difficulties. Finally, the CAT also found that Cardiff Bus' conduct had been "outrageous", which justified an award of exemplary damages of £60,000 to 2 Travel.
This is the first case where damages are awarded for an action brought under Section 47A of the Competition Act 1998.
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