22 Dec 2016

(by Andreas Stephan) On 20 December 2016, the UK’s Civil Aviation Authority (CCA) found that East Midlands International Airport Ltd (EMIA) and Prestige Parking had breached competition law, by agreeing that Prestige would not sell its car parking services at below a minimum price that was linked to the price of EMIA’s own parking services. No fine was imposed in the case because Prestige Parking is no longer trading and EMIA received immunity in return for revealing the arrangement to the Competition and Markets Authority (CMA), under its . We do not yet have the full decision, but the states, in relation to the minimum pricing that, “EMIA imposed this requirement as a condition of allowing Prestige to access facilities at the airport…”. This appears to suggest EMIA was awarded immunity despite instigating the arrangement.

The CMA’s leniency programme has a condition regarding the ringleader or ‘coercer’ of a cartel. Paragraph 2.7(e) states that, ‘in relation to a grant of immunity, the applicant must not have taken steps to coerce another undertaking to take part in the cartel activity’. A firm that meets the ‘coercer test’ can only benefit from a fine reduction of up to 50 per cent, under Type C leniency. Paras 2.50-2.55 set out how the ‘coercer test’ should be applied. Evidence of a coercer must be ‘clear, positive’ and have involved successful steps ‘to pressurise an unwilling participant to take part in the cartel’. It states the bar is set high, using examples that include: threats to use physical violence; ‘such strong economic pressure as to make market exit a real risk’; and where a large player ‘refuses to supply key inputs to… a small player’. These last two ‘are more likely to apply in cases where there is at least a significant vertical element’.

Although safeguards against ringleaders or coercers being awarded immunity exist in just about every leniency programme around the world, competition authorities rarely (if ever) refuse immunity to the first revealing firm on these grounds. Indeed, they are right to be cautious and to set the bar high, as an effective leniency programme has to provide a high degree of certainty as to how a firm will be treated when it approaches the authority. In addition, as , the role of the ringleader is not usually straightforward. Most cartels have different ringleaders at different times. However, it is usually the largest cartel member that plays the most active role in setting up the cartel.

Turning back to the CAA parking case, as it has been characterised in the press release, it is hard to imagine how a single cartel member could have more of a hand in bringing about the arrangement than EMIA. If Prestige Parking had refused the condition, they would not have had access to the airport and therefore effectively have been unable to provide their services. Perhaps the coercer test failed on the basis that Prestige Parking was not an ‘unwilling participant’, but given EMIA’s dominance and what appears to have been at stake, it is hardly surprising if Prestige did not put up a fight. Had they been declined access to the airport for refusing the linked minimum price, EMIA may have been in breach of dominance rules, as in Purple Parking Ltd and Meteor Parking Ltd v Heathrow Airport Ltd [2011] EWHC 987, and Prestige could have forced access through the courts. But Prestige is unlikely to have had the size and legal resources to know the intricacies of competition law. If it had, it may have avoided the minimum price and challenged EMIA in the way Purple Parking took on Heathrow. EMIA, on the other hand, is owned by Manchester Airport Group, which includes London Stansted.

Like most competition authorities, the CMA has chosen to protect its leniency programme over the need to prevent immunity from benefiting firms that instigate cartel arrangements. Its leniency programme sets the bar extremely high. The use of violence is, thankfully, exceptionally rare in antitrust cases and it is unclear why the coercer test should be primarily focused on vertical economic pressure. The present case is vertical to the extent that it involves Prestige selling its services to the airport’s passengers and appears to constitute a large player refusing to supply a key input (access to the airport) to a small player. In reality, the coercer test seems to impose very little constraint (if any) on a firm’s ability to secure leniency. It means immunity can benefit firms that clearly bear the lion’s share of responsibility for setting up the arrangement. In the present case, immunity may also have benefited the firm that had far better resources for seeking legal advice. This is not to suggest that such firms should not be rewarded for cooperating with the authority, but a 50% discount would be more appropriate than immunity. Instead, in this case we effectively have a fine of zero.

The CMA might argue that it is often the firms with greater responsibility for the cartel that are better placed to blow the whistle, and that a stronger coercer test might have prevented EMIA from coming forward at all. While it is true that the case has been beneficial in raising awareness within the sector, spurring EMIA’s owner to invest in compliance, and in the potential follow-on actions for damages that may be brought, the outcome in this case is, nevertheless, unsatisfactory from a deterrence perspective. While in a cartel of 4 or 5 companies of roughly equal size, granting immunity is perfectly justifiable, when it comes to a cartel of 2, where the revealing firm appears to be significantly more powerful than its rival, it raises questions of legitimacy. EMIA has been rewarded with immunity for reporting an infringement that it appears to have been largely responsible for. This sends a very mixed message to companies able to exert economic pressure on a competitor to get them to agree to an anti-competitive arrangement.