Provisional findings on BAA break-up and regulation

Competition Commission consultation (several PDF files, including a 290-page main report and a 10-page notice of possible remedies) on its inquiry into BAA's ownership of airports.

The proposals include requiring BAA to sell two London airports and one Scottish airport.

On regulation, possible recommendations to the Government include changing the law to introducing a licensing system, enabling conditions such as financial adequacy and ring-fencing to be imposed and enforced by the CAA. The possibility of a special administration regime similar to those in place for water, rail and energy networks is mentioned (but little is said about it).

There is a recommendation to extend CAA's competition law enforcement role to airports. Specific competition law issues e.g. relating to taxi, bus, car hire and parking are not addressed:

8.7. These concerns arise irrespective of common ownership ... They are not in our view appropriately addressed under the terms of this inquiry.

Responses by Wednesday 17 September 2008.

Comment. BAA's recent refinancing appears predicated on continued common ownership of its three London airports, and of Edinburgh and Glasgow airports. There could be substantial costs involved in unwinding covenants in connection with the divestment or financial ring-fencing of individual airports. If so, would these costs be taken into account by the Competition Commission when deciding whether to require divestment or recommend ring-fencing? If it was a merger inquiry, the answer would be no — divestment costs attributable to integration before a merger clearance are disregarded according to paragraph 4.10 of the guidelines. But the Competition Commission's guidelines on market investigations do not address the corresponding issue when a remedy is made more expensive by actions taken a few days before the notice of possible remedies. Franck

For further information or advice please contact Franck Latrémolière.

Filed under Competition Commission, Price controls, Public transport.

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