Memorandum submitted by the Competition
The Committee will be familiar with the legal
structure underpinning the economic regulation of the three London
and one Manchester airports. Put simply, the CAA proposes a price
control which is normally intended to last five years, the Competition
Commission (the CC") reviews and comments on the proposal,
and the CAA makes the final decision. The Committee will have
seen our most recent reports which were published in 2002, and
we expect to be asked to look at the London airports about a year
from now, and Manchester a year after that. The Committee will
no doubt understand that it would be improper for me, or indeed
anyone else at the CC, to seek to add to, or comment on, or pre-empt,
what is or might be said in our formal reports.
It is of course interesting to compare this
system with the way in which the major utilities are price controlled.
It is noticeable, for instance, that the CAA, the expert body
with detailed knowledge of the industry, takes the final decisionand
this is not the case, in other industries, or at least it is not
the case if the industry appeals their regulator's decision. But
the aviation industry does (uniquely) need to argue its case in
front of two regulatory/competition bodies, and this imposes costs
on the industry which somebut not allmight regard
The CC does not have a view as to whether the
system ought to be changed. We stand ready, as an expert body,
to look at any industry or set of companies referred to us by
the OFT or the economic regulators. But the objectives and detailed
design of individual regulatory systems are matters for the relevant
government departments, their Ministers and Parliament.
I would, however like to stress that we are
keen to work with the CAA and with the industry to minimise the
burden of our inquiries. We welcome the CAA's efforts to gather
together as much evidence as possible, and where possible reach
agreement with both sides of the industry, before we begin work.
And we have already begun informal discussions with the CAA so
as to ensure as smooth a handover as possible at the time of the
next reference. The Committee will understand, however, that we
must reserve the right to question evidence submitted by the CAA,
and investigate agreements reached with the industry, ifduring
our inquiryit seems sensible to do so.
13 January 2006