BAA Ltd v Competition Commission

In a statutory challenge to a compulsory divestiture remedy, proportionality must be assessed within the statutory scheme and in light of the public interest identified by the decision-maker. Once divestiture is the only effective remedy for an adverse effect on competition, the owner’s loss of freedom to choose whether or when to sell is inherent in the remedy. The remedy remains proportionate if the sale timetable is properly calibrated to give the owner a fair opportunity to market the asset and obtain its market value. A further period designed to await more favourable market conditions is not required. A new loss argument, unsupported by evidence before the decision-maker, cannot ordinarily found a judicial review challenge.

BAA challenged the Competition Commission’s 2011 report, which confirmed that BAA must sell Stansted airport after the Commission had previously found an adverse effect on competition arising from BAA’s common ownership of major London airports. The challenge was brought under section 179 of the Enterprise Act 2002 against the Competition Appeal Tribunal’s judgment dismissing BAA’s application.

Before the Court of Appeal, BAA argued that the Tribunal had misconstrued the Commission’s 2009 report on substitutability and had failed to account for the loss caused by a compulsory sale in prevailing market conditions. The central issues were whether the latter argument was new or had already been rejected, and whether the divestiture timetable made the remedy disproportionate.

1. Appeal dismissed. The Tribunal’s dismissal of BAA’s challenge to the Commission’s 2011 report was upheld.
2. The Tribunal had not misconstrued the 2009 report. Read as a whole and in a common-sense manner, the Commission’s findings supported the conclusion that the airports were, at least, significantly and strongly substitutable. The remedy of requiring Stansted’s divestiture would otherwise have been inconsistent with the suggested interpretation.
3. The so-called “time cost” argument either was a new point, raised too late before the Tribunal, or repeated the timetable argument advanced in 2009 and rejected in the Tribunal’s judgment [2009] CAT 35, against which BAA had not cross-appealed. BAA had provided no evidence to the Commission quantifying the alleged loss attributable merely to a compulsory sale. The point therefore failed for want of evidence.
4. More fundamentally, proportionality under section 138 of the Enterprise Act 2002 had to be assessed in the context of the statutory scheme as a whole. The Commission had found an adverse effect on competition, concluded that remedial action was required in the public interest, and determined that divestiture was the only effective remedy. Loss of freedom to choose whether or when to sell was inherent in that remedy.
5. Where the timetable was calibrated to give the owner a proper opportunity to market the asset and obtain a fair market price, the owner’s interests had been sufficiently protected. A further “market value plus” period, allowing the owner to wait for better market conditions, was not required by proportionality. The approach was analogous to compulsory acquisition in the public interest at market value.

• Court of Appeal (Civil Division): The appeal from the Competition Appeal Tribunal was dismissed on 26 July 2012.
• Competition Appeal Tribunal: BAA’s application under section 179 of the Enterprise Act 2002 for review of the Competition Commission’s 2011 report was dismissed: [2012] CAT 3.