Consumers deserve full protection under the Competition Act
Financial Times - 29th March 2001
Last year you published a letter in which we called on Steven Byers to ask for an investigation into the abuse of dominant position by the four airlines currently allowed to operate business services from Heathrow to North America. The secretary of state subsequently refused to do so, as did the then director-general of the Office of Fair Trading, John Bridgeman. Both cited in justification the continuing negotiations on the Bermuda II air services agreement, the director-general adding that the Civil Aviation Authority had the power to regulate air fares and that "there is intense competition in economy class fares and UK customers are generally able to obtain lower economy class fares than passengers in continental Europe".
As we have explained in a letter to the new director-general, John Vickers, we find these arguments unconvincing. First, business and economy are separate markets; business passengers need much greater flexibility and to argue there is no need for an investigation because business passengers can fly economy is like saying there would never be a justification for investigating an abuse by cereal-makers because people could buy orange juice and toast instead.
Second, the "open skies" negotiations between British and US governments have since broken down and in the absence of any agreement it is surely the responsibility of the OFT (and not the Civil Aviation Authority) to ensure that the four carriers allowed to operate North Atlantic services from Heathrow do not abuse their dominant position at the expense of business consumers. It is the OFT that is entrusted with responsibility to uphold the 1998 Competition Act, which outlaws under the Chapter II provisions the abuse of a dominant position in a market, including the imposition of unfair purchase or selling prices.
Nor should a resumption of negotiations preclude an investigation; indeed, one might argue, given the government's admission last month that its strategy in the Bermuda II negotiations was determined by British Airways, that failure by the OFT to investigate is hampering an agreement by perpetuating the status quo.
The consumer deserves full protection under the Act. That is why we support the recent decision by the OFT to look at the prices charged for compact discs sold in the UK, although we regret that the OFT acted only after the European Commission had announced its own investigation. We broadly supported the music industry's position on copyright during the recent vote in the European Parliament but we see no justification for dollar/sterling parity prices for essentially the same product and, as members of the economic and monetary affairs committee in the European Parliament with responsibility for competition, we will be closely watching the results of the OFT's and the Commission's investigations.
Dr Charles Tannock MEP, Theresa Villiers MEP (Con)