First fines for cartel activity

PN 06/02 30 January 2002

Bus companies found to have shared routes in Leeds

Two national bus companies have broken competition law because their subsidiaries based in Leeds and Wakefield agreed to share routes between themselves.

The OFT has set penalties for Arriva plc of £318,175 and FirstGroup plc of £529,852. Both penalties have however been reduced under the OFT's leniency programme where businesses blow the whistle or co-operate from an early stage. Download the full text of the decision (pdf file 129 kb).

This is the first infringement decision concerning an anti-competitive agreement made by the OFT under the Competition Act 1998, which came into force in 2000.

Staff of subsidiaries in Yorkshire of Arriva plc and FirstGroup plc met in a hotel room and agreed that Arriva would withdraw its five buses from two complete routes leaving FirstGroup with no competition on those routes. In turn FirstGroup withdrew from two routes that Arriva took on. Both businesses accepted that their staff had attended meetings and had agreed who would run certain routes.

Deterrence

While the scope of the agreement was not large, a substantial sum – over £0.5 million between the two companies – was included in the financial penalty for deterrence. The OFT regards deterrence as vital in combating cartels.

Leniency

When businesses act as whistleblowers on a cartel or co-operate at an early stage of an investigation, the OFT can grant leniency, which can result in financial penalties being reduced by up to 100 per cent.

FirstGroup plc asked for leniency first and at an early stage of the investigation, and it was granted 100 per cent leniency subject to it co-operating fully. As a result, it will not have to pay any financial penalty.

Arriva plc also benefited from the leniency programme, but only to the extent of a 36 per cent reduction making a total financial penalty of £203,632.

John Vickers, Director General of Fair Trading, said:

'Running a cartel is a serious breach of the Competition Act and undermines competition. Both companies co-operated in this investigation and benefited from our leniency programme. This can be a very effective means of obtaining information about cartels. The case shows that the full benefits of leniency are only available to the first one through the door.'

NOTES

1. Powers under the Competition Act 1998
The Act gives the Director General powers to investigate suspected infringements of the Act's prohibitions:

i. the Chapter I prohibition prohibits agreements between undertakings, decisions by associations of undertakings or concerted practices which have the object or effect of preventing, restricting or distorting competition in the UK (or any part of it) and which may affect trade within the UK (or any part of it); and

ii. the Chapter II prohibition prohibits conduct by one or more undertakings which amounts to the abuse of a dominant position in a market which may affect trade within the UK (or any part of it).

2. The investigation was started as a result of an anonymous letter sent to the Office of Fair Trading alleging that the two bus companies had been involved in route swapping.

3. The Director General has the power to impose financial penalties under the Act and the approach he adopts is set out in the Director General of Fair Trading's Guidance as to the Appropriate Amount of a Penalty, OFT 423 March 2000. The procedures for leniency are set out in the Guidance.

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