UK parliamentary committee view on BAA break-up

Report (175 pages, PDF, including evidence and transcripts) of the transport committee of the lower house of the UK parliament from an inquiry into BAA plc.

The report endorses a break-up of BAA, seemingly asserting that the London airports if under separate ownership would be subject to effective competition and would not need to be price-controlled. It also recommends removing the automatic reference to the Competition Commission as part of any price control review process that remains.

According to the report (in response to easyJet's complaints about excessive charges allowed by CAA, and claims that each of Heathrow, Gatwick and Stansted on its own would still be a monopoly):

83. We agree that breaking up BAA's monopoly would not remove the need for effective regulation. What it would remove though — through the removal of substantial market power — would be the need for the kind of economic regulation in the form of price controls.

Much of the report was only agreed by a majority of the committee that included the chairman Gwyneth Dunwoody MP (Lab), with the minority apparently led by David Wilshire MP (Con). Statements that were only retained in the report after a majority vote include at paragraph 47:

The comparison of the regulation of BAA to an antitrust regime lends further weight to our view that BAA’s market position is fundamentally anti-competitive.

(The comparison referred to is a remark by the Competition Commission that large financial incentives for quality of service might be explained by analogy with the large fines considered necessary for competition law infringements.)

Comment. Loud-mouthed claims, but not a lot to back them up. Some of the report is just stuff and nonsense — e.g. the "fundamentally anti-competitive" claim quoted above. And look at the wild claim at paragraph 80 that “Any airport that were sold off [as part of a BAA break-up] would not be price-controlled, as it would [sic] be in a position of market power, and thus would be free to compete on price.” Leaving aside the typo (missing "not" in the sentence about market power), do they really mean any airport? Not much is left of the credibility of the report after that sort of statement. Franck

For further information or advice please contact Franck Latrémolière.

Filed under Price controls.

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