Newsroom

OFT issues statement of objection against Cardiff Bus for predatory behaviour

74/07    15 May 2007

The OFT has provisionally found that the council-owned Cardiff Bus Company engaged in predatory behaviour designed to eliminate a competitor.

The OFT has issued a statement of objections relating to Cardiff Bus Company's behaviour between April 2004 and February 2005 during which the company deliberately made a loss after another bus company, 2Travel plc, entered the market. Cardiff Bus is accused of providing a new no-frills bus service which operated below cost and was withdrawn once 2Travel left the market. The OFT found that the Cardiff Bus Company, which carries an estimated 80,000 people each weekday in Cardiff, used its dominant position to run its no frills services with revenues so far below costs that it was impossible for its competitor to remain in the market.

Predatory behaviour is defined as a dominant company sustaining losses in the short run with the knowledge it will be able to recoup them once the competition is forced to exit, and is in breach of the Competition Act 1998.

The OFT has now given Cardiff Bus the opportunity to make written and oral representations, which the OFT will take into account before making a final decision on whether the law has been infringed.

No assumption should be made at this stage that there has been an infringement of competition law. The OFT will not be in a position to decide if the law has been breached until it has received and reviewed Cardiff Bus' response to the statement of objections and any comments from interested third parties.

Robin Finer, OFT assistant director, said:

'Dominant companies have every right to compete vigorously but they have a special responsibility not to distort competition. Though consumers might see a short term fall in prices, ultimately they will lose out if a dominant company can exercise its market power without constraint or regard to normal competitive pressures.'

NOTES

1. A statement of objections gives notice of a proposed infringement decision under the Competition Act 1998 to the party involved. The party then has the opportunity to make written and oral representations in response to the case set out by the OFT. Such representations will be considered by the OFT before any final decision is made.

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

3. The statement of objections will not be published. In accordance with the OFT's guidance on Involving third parties in Competition Act, any person who wishes to comment on the OFT's provisional findings, and who is in a position to materially assist the OFT in testing its factual, legal or economic arguments, may request a non-confidential version of the statement of objections by contacting the OFT no later than 24 July 2007.

4. On making a decision that conduct has infringed the Chapter II prohibition, the OFT may require the undertaking concerned to pay it a penalty in respect of the infringement. The Competition Act 1998 provides immunity from financial penalty if the conduct is conduct of minor significance. The OFT may withdraw that immunity if as a result of its investigation the OFT considers that the conduct is likely to infringe the Chapter II prohibition. Conduct of minor significance is defined as conduct by an undertaking the applicable turnover of which for the business year ending in the calendar year preceding the one during which the infringement occurred 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 immunity.

Back to:2007