Cardiff bus engaged in predatory conduct against competitor, OFT decides

133/08 18 November 2008

Transport operator Cardiff Bus engaged in predatory conduct intended to eliminate a competitor, 2 Travel, the OFT decided today.

The OFT's decision relates to Cardiff Bus' behaviour between April 2004 and February 2005. Cardiff Bus responded to the introduction of a new no-frills bus service by another bus company, 2 Travel, by introducing its own no-frills bus services which ran on the same routes, at similar times as 2 Travel's services and made a loss for Cardiff Bus. Shortly after 2 Travel's exit from the market Cardiff Bus withdrew its own no-frills services.

Before 2 Travel's entry, Cardiff Bus, which is owned by Cardiff Council, was carrying 80,000 people each weekday, and was the only significant provider of urban commercial bus services in the County with a very substantial share of the relevant market.

Predatory behaviour occurs when a dominant company sustains losses in the short run in order to eliminate a competitor. Such behaviour is in breach of the Competition Act 1998.

John Fingleton, OFT Chief Executive, said:

'Predation by a dominant firm to eliminate a rival is a major distortion of competition that harms consumers. This type of behaviour can seriously affect the competitive process by weakening the incentives of efficient competitors to challenge dominant firms and bring greater choice and lower prices to consumers.

'Our decision should send a clear signal to firms that may be dominant, whether on national markets or smaller local markets, that predatory behaviour is a serious infringement of the law.'The OFT has not levied a financial penalty in this case. Cardiff Bus benefits from a limited immunity from penalties because the company's turnover did not exceed £50 million at the time of the conduct.

NOTES

1. The Competition Act 1998 prohibits agreements, concerted practices and conduct that may have a damaging effect on competition in the market. The Chapter II prohibition covers abusive conduct by an undertaking in a dominant position in a relevant market.

2. On making a decision that conduct has infringed the Chapter II prohibition, the OFT may require the undertaking concerned to pay to it a penalty in respect of the infringement. The Competition Act 1998 provides immunity from financial penalty if the conduct is of minor significance. Conduct is considered to be of minor significance if the annual turnover of the undertaking considered to have infringed the Chapter II prohibition does not exceed £50 million. The OFT considers that the annual world-wide turnover of Cardiff Bus does not exceed £50 million. Accordingly, Cardiff Bus benefits from this immunity.

3. The decision will be made available shortly on this website.

4. Businesses can find advice on competition law and how to comply with it on the small businesses area of this website.

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