COMPETITION LAW APPARENT BIAS IN THE COMPETITION COMISSION? BAA LTD V competition commission and ryanair ltd [2010] ewca civ 1097 LAURA ELIZABETH JOHN NOVEMBER 2010 The Court of Appeal has restored the Competition Commission ( the Commission ) decision ordering BAA to divest itself of Gatwick airport, Stansted airport, and either Glasgow or Edinburgh airport, finding that there was no apparent bias in its decision. BAA s successful judicial review Where the OFT has reasonable grounds for suspecting that a feature of a particular market is preventing, restricting or distorting competition, it has power under section 131 Enterprise Act 2002 ( EA02 ) to refer the matter to the Competition Commission for a market investigation. After investigating, if the Commission finds that there are adverse effects on competition it has the power to order the adoption of appropriate remedies, including divestiture. In this case the Commission issued a report 1 which found that BAA s common ownership of airports in southeast England and lowland Scotland gave rise to adverse effects on competition ( the Report ). It directed that the appropriate remedy was for BAA to divest itself of Gatwick airport, Stansted airport, and either Glasgow or Edinburgh airport. BAA sought a judicial review of the Report, under section 179 EA02, alleging apparent bias by the Commission. The Report was prepared by a Panel of six members which included Professor Moizer. Professor Moizer had acted as an external adviser to the Greater Manchester Pension Fund since 1987 ( the Pension Fund ). It transpired that the same ten local authorities which managed the Pension Fund, whom he advised, also owned the issued share capital in the Manchester Airport Group plc ( the Manchester Group ). The Manchester Group owned Manchester airport, played an active role in the Commission s 1 Report entitled BAA airports markets investigation: A report of the supply of airport services by BAA in the UK, published on 19 March 2009
APPARENT BIAS IN THE COMPETITION COMISSION? investigations, and from 16 December 2008 expressed an interest in purchasing Gatwick airport. The Pension Fund was a participant in the bid. BAA alleged that Professor Moizer s interest in the Manchester Group gave rise to apparent bias, vitiating the Report. The Competition Appeal Tribunal ( the Tribunal ) held 2 that there had been apparent bias from October 2007 when it had become clear that the Manchester Group intended to play an active role in the Commission s investigations, and that it would be interested in purchasing any of BAA s assets that it might be ordered to sell. The Commission appealed on 4 grounds: (1) The Tribunal was wrong to conclude that there was apparent bias before December 2008, as Professor Moizer did not know of the Pension Fund s intention to participate in a bid for Gatwick Airport by the Manchester Group; (2) Any apparent bias after December 2008 was of no operative effect, as BAA had decided in September 2008 to sell Gatwick airport in any event; (3) Any apparent bias after December 2008 did not vitiate the decision of the Commission in the Report; (4) BAA had waived any right that it might have had to object to Professor Moizer s presence on the Commission panel. Apparent bias does not arise before the Panel member is aware of the conflict of interest The Court of Appeal accepted the Commission s argument that any apparent bias did not arise until December 2008, when Professor Moizer was first informed of the Pension Fund s potential interest in participating in the Manchester Group s bid for Gatwick airport. Maurice Kay L.J., with whom Jacob and Patten L.J.J.s agreed, held that the Tribunal erred in treating the Manchester Group and the ten local authorities as Professor Moizer s clients (paragraph 19). His professional and contractual relationship was with the Pension Fund. 2 BAA Ltd v Competition Commission and Ryanair Ltd [2009] CAT 35
Although the Pension Fund was managed by local councillors from the same ten local authorities that owned the Manchester Group, this did not mean that the Pension Fund could be assimilated with the Manchester Group. Rather, the position of those councillors as fund managers was the same as any other pension fund managers; they owed a fiduciary duty to the fund beneficiaries and not to any other party. Therefore Professor Moizer s relationship with them could not be treated as extending to the local authorities they represented, or to the Manchester Group. The Tribunal had been heavily influenced in its decision to the contrary by the fact that when the Commission conducted a price control of airport charges in 2002, including charges at BAA s airports and at Manchester airport, it had ensured that Professor Moizer did not participate in the consideration of charges at Manchester airport because of his connection with the Manchester Group through the Pension Fund. The Tribunal had considered that at least as much discomfort should have been felt in preparing the Report as had been felt during the earlier charge control 3. The Court of Appeal, however, accepted the Commission s submission that its approach in 2002 had been taken out of an abundance of caution in order to avoid allegations of apparent bias, rather than because such apparent bias would have arisen if it had failed to take these steps (paragraph 24). As such, its approach in 2002 could not be determinative. Applying the test of whether a fair-minded observer would conclude that there was a real possibility of apparent bias (the test laid down by Lord Hope in Porter v Magill [2002] 2 AC 357 at paragraph 103), the Court held that once in possession of the true facts of Professor Moizer s position a fair minded observe would conclude he was too remote from [the Manchester Group] and its owners for apparent bias to be a real concern. (paragraph 26). No vitiation of the Report The Court of Appeal rejected, in short measure, any suggestion that there was no apparent bias once Professor Moizer became aware of the conflict of interest in December 2008 (paragraph 27). It accepted, however, that the apparent bias which did arise was not such as to vitiate the Report. 3 BAA Ltd v Competition Commission and Ryanair Ltd [2009] CAT 35 at para. 130
APPARENT BIAS IN THE COMPETITION COMISSION? It was not disputed as a matter of law that apparent bias by one member of a judicial panel does not necessarily taint the other members; by analogy the discharge of one juror does not mean that a whole jury been contaminated. The issue was whether any contamination arose on the facts of the case, as cases in this area are necessarily fact sensitive (paragraph 35). As a matter of fact the Court held that although Professor Moizer did not step down from the panel until 3 March 2009, more than two months after learning of the conflict of interest, nonetheless that did not taint the remaining members of the panel. The Court accepted that the Commission s provisional findings and possible remedies (published in August 2008) had not changed significantly after December 2008. In these circumstances the rest of the panel could only have been contaminated if Professor Moizer had prevented his colleagues from changing their minds. Maurice Kay L.J. agreed with the submission that any such conclusion would be moving into the reaches of fantasy. (paragraph 36). Alternative Grounds The Court of Appeal rejected the Commission s two alternative grounds of appeal. No requirement to prove operative effect The argument that any apparent bias did not have operative effect because BAA had already decided to sell Gatwick airport was rejected both as a matter of law and of fact. As a matter of law, the Court accepted BAA s argument that BAA ought not to be put in the position of having to prove operative effect once apparent bias has been established. That would be to blur the distinction between actual and apparent bias. (paragraph 31). On the facts, the Court noted in any event that the timing of the decision to sell had been conditioned by the Commission s provisional findings, and that any purchaser and conditions of sale would have had to be acceptable to the Commission. Requirements of waiver The Court considered afresh whether BAA could be said to have waived its right to complain of Professor Moizer s involvement in the Pension Fund, as the Tribunal s findings had been premised on its conclusion that apparent bias arose in October 2007 (a conclusion overturned by the Court in response to the first ground of appeal). The Court applied the test it had laid down in Jones v DAS Legal Expenses Insurance Limited
[2003] EWCA Civ 1071 that a litigant must raise an objection once he is aware of full facts, meaning that he should understand the nature of the case rather than the detail. (paragraph 58). It held that the burden of proof lies with the party alleging bias to prove that they did not know the relevant facts at an earlier date. Although the Tribunal had not found the authorities for that rule compelling, Maurice Kay L.J. saw no basis for departing from them, and confirmed that they establish a salutary rule, preventing potential objectors from staying silent in the hope that a decision might still go their way (paragraph 52). On the facts, the Court held that discharging the burden of proof in practice does not require a high standard. As to the absence of knowledge, a litigant company does not have to produce individual witness statements from everyone who is employed by it and involved in an investigation (paragraph 59). A statement from a team leader, indicating that he had spoken to the individual team members, and from an in-house lawyer, was sufficient to establish that BAA was not aware of the Pension Fund being owned by the same ten local authorities as the Manchester Group before it was notified of that fact by the Commission in January 2009. As to what constitutes full facts, the Court accepted that it was legitimate for BAA to write to the Commission, in February 2009, seeking more information about Professor Moizer s involvement with the Pension Fund, the chronology of his involvement, and his awareness of the Pension Fund s participation in the bid for Gatwick airport. Although it was not self-evident that BAA needed the information it had requested, the Court noted that the investigation was at a very advanced stage, and that BAA was therefore entitled to make its request before deciding whether to raise an objection (paragraph 60). In the circumstances, it could not be said that BAA had waived its right to object by failing to do so in January 2009. Conclusions The significance of the decision in practical terms may lie in the ease with which the Court of Appeal upheld the Tribunal s findings that apparent bias arose from the point at which Professor Moizer became aware of the conflict of interest. Although the Commission had already issued its provisional determination, the fact that Professor Moizer did not step down for over two months after becoming aware of the conflict meant the Report was vulnerable to a judicial review challenge. In practice the Report was saved in this case by the fact that it did not differ significantly from the Commission s provisional determination, but it appears the judgment may open the way for future litigants to dispute whether that threshold is met in their cases, and particularly if the apparent bias were to arise before a
provisional determination were issued. The possibility of future conflicts issues cannot be ruled out, given the Commission is constituted of experts who work with the Commission on a part-time basis (with the exception of the Chairman) and continue to work in their respective fields, and also given the unexpected twists which a market investigation may take. The Commission has already announced a review of its rules and procedures on conflicts of interest, to attempt to ensure that any such risk is minimised in future. Ben Rayment appeared for the Competition Commission. Monckton Chambers 1 & 2 Raymond Buildings Grays Inn London, WC1R 5NR Tel: +44 (0)20 7405 7211 Fax: +44 (0)20 7405 2084 Email: chambers@monckton.com www.monckton.com