Select Committee on Transport Written Evidence


Memorandum submitted by the Competition Commission

  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 decision—and 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 some—but not all—might regard as unnecessary.

  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, if—during our inquiry—it seems sensible to do so.

13 January 2006

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