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Civil Aviation Act 2012

Dominant airports
Section 5: Dominant areas and dominant airports

44.Section 3 has the effect that operators of dominant airport areas located at dominant airports require a licence to levy charges for airport operation services. This section explains what comprises a dominant airport area and a dominant airport.

45.This section introduces the concept of an ‘airport area’ (and therefore a ‘dominant airport area’) to allow for the possibility of there being more than one operator at an individual airport. This could be the case, for example, if an airline acquired or leased a terminal building. As there can be more than one ‘airport area’ at an airport, it follows that there can be more than one ‘operator of an airport area’ at an airport.

46.This differs from the approach used in the AA 1986, which refers to an airport operator as “the person for the time being having the management of an airport, or, in relation to a particular airport, the management of that airport”. That Act does not include provision about cases in which there is more than one operator of an airport.

47.Section 5 states that an airport area is dominant if the CAA makes a determination that the market power test is met in relation to the area and publishes a notice to that effect.

48.This section also introduces the concept of a ‘core area’ and states that an airport is dominant only if there is some overlap between one or more dominant airport areas and all or some of the airport’s core area. Non-core airport areas include car parks with pedestrian access to the passenger terminal building or pick-up and drop-off points. Therefore if the only dominant airport area at airport X comprised the pick-up and drop-off points, airport X would not be a dominant airport.

Section 6: Market power test

49.Section 5 states that an airport area is dominant if the CAA publishes a determination that the market power test is met in relation to the area. This section states that the market power test is met in relation to the airport area only if the CAA is satisfied that tests A, B and C are all met by the operator of that airport area.

50.There is an important distinction: tests A, B and C are applied to the operator of the airport area; in contrast the market power determination is made in relation to an airport area. The determination applies to an area, rather than to the operator, to allow for it to remain valid in the event that a new operator takes over management control of the assets. Section 7(9) states that a market power determination, once published by the CAA, will continue to have effect until overtaken by a subsequent determination. So if operator A acquires a dominant airport area (which is located at a dominant airport) from operator B, the market power determination and therefore the prohibition will apply to operator A.(11)

51.Section 6 states that tests A, B and C all have to be met by the operator of an airport area for the market power test to be met. These tests are designed to ensure that operators of airport areas are only subject to economic regulation if: (A) the operator has or is likely to acquire substantial market power; (B) competition law on its own is not sufficient to address the risk the operator may abuse its market power; and (C) the benefits of regulating the operator outweigh the costs.

52.Subsections (6) and (7) limit the circumstances in which test A is met.

53.Subsection (6) states that test A is only met if:

  • the product market in which the operator has (or is likely to acquire) substantial market power is a market for services which include or comprise one or more airport operation services; and

  • the geographic market in which the operator has (or is likely to acquire) substantial market power includes, comprises or forms part of the airport area.

54.Subsection (6) would therefore prevent an operator being regulated solely on the basis that it satisfies the market power test in relation to a different product or geographic market.

55.Subsection (7) states that in conducting test A in respect of an airport area which includes all or part of the core area as well as other areas in the airport, the CAA must identify a market for one or more airport operation services provided in the core area and geographically the market must include the core area. So for example if an operator controlled an entire airport (which includes a core area) but its substantial market power was limited to a market comprising car parks with pedestrian access to the passenger terminal building (which is not a core area), then test A would not be met.

56.Subsection (10) states that the CAA must have regard to relevant competition notices and guidance published by the European Commission and relevant advice and information published by UK competition authorities when applying the market power test.

Section 7: Market power determinations and Section 8: Publication of market power determinations

57.Section 7 empowers the CAA to determine whether or not the market power test is met in relation to an airport area whenever it considers it appropriate to do so. This is defined as a “market power determination”.

58.In order to comply with European law (Directive 2009/12/EC of the European Parliament and of the Council of 11 March 2009 on airport charges), this section also requires the CAA to determine whether the market power test is met in relation to an airport area in certain specified circumstances and if requested by certain specified people. Those specified circumstances are listed in subsection (2) and the exceptions to this are listed in subsection (5).

59.When a request is made for a market power determination in respect of an airport area, the CAA is empowered to treat that request as if it were a number of requests in respect of a number of airport areas that consist of or include that area. Or it could consider an area including, but wider than, the area for which the request is made. For example, if someone requested a market power determination in relation to an area which comprises the entire airport and there is more than one operator at that airport, the CAA would need to consider the areas managed by the different operators separately.

60.Subsection (7) states that the CAA should have regard to the market(s) in which the operator has substantial market power (test A) when choosing the airport area that is to be the subject of a market power determination. The following simple example illustrates what is meant here. Imagine the CAA concluded that the operator was dominant in the provision of runways, but not in the provision of passenger terminals. In such circumstances subsection (7) would not prohibit the CAA from making a market power determination in relation to an area that included the passenger terminals, but it does mean that the CAA would need good reasons for doing so.

Section 9: Operators of areas, Section 10: Operator determinations and Section 11: Publication of operator determinations

61.Section 9 defines an operator of an airport area as the person with overall responsibility for the management of all of that area. This means that where two separate entities both have some form of management control over an airport area (for example the lessee and lessor of a passenger terminal building), only one of them can comprise the operator of the area for the purposes of this Part of the Act.

62.Section 10 empowers the CAA to determine who has overall responsibility for the management of the area, including in cases where one or more separate entities have some form of management control over the airport area. This is defined as an “operator determination”. Subsection (4) sets out the factors that the CAA must in particular consider when making an operator determination.

63.Subsection (5) of section 10 provides that the CAA must make an operator determination in relation to a person, if requested to do so by that person. Subsections (6) and (7) list the exceptions to this requirement.

64.When a request is made for an operator determination in respect of an airport area, the CAA is empowered by subsection (8) of section 10 to treat that request as if it were a number of requests in respect of a number of airport areas that consist of or include that area. Or it could consider an area including, but wider than, the area for which the request is made.

65.An operator determination, once published by the CAA, will continue to have effect until the CAA publishes a notice withdrawing it. If the CAA withdraws the operator determination without making a further operator determination then the identity of the operator will depend on the facts and any regulations which have been made by the Secretary of State under powers conferred by section 9(2).

Section 12: Advance determinations

66.To give prospective operators greater certainty about whether they would require a licence to levy charges, this section empowers the CAA to make market power determinations and operator determinations in advance of a particular event taking place. For example, suppose a third party was considering whether to lease a passenger terminal building from the current operator. This section empowers the CAA to consider the terms of the lease and determine which party would be the operator of the terminal building if the lease were entered into. If the CAA determined that the third party would be the operator of the terminal building, this section also empowers the CAA to determine whether the third party satisfies the market power test and therefore requires a licence if it were to enter into the lease.

67.The advance determination(s) would not take effect until the circumstances described in the determination(s) arose and until then, any previous market power determination would continue to have effect. The CAA is empowered to delay publication of an advance determination if the circumstances have not yet arisen and doing so would involve disclosing commercially sensitive information.

Section 13: Appeals against determinations

68.This section introduces Schedule 1 where provisions relating to appeals against market power and operator determinations are set out.

Schedule 1: Appeals against determinations

69.Schedule 1 provides a right of appeal to the Competition Appeal Tribunal. It sets out the procedures relating to appeals and to decisions on appeals. The Competition Appeal Tribunal Rules of procedure (under section 15 of the Enterprise Act 2002) also apply insofar as the rules set out in this Schedule do not override them.

70.Paragraph 1 states which parties may appeal against a market power determination or operator determination to the Competition Appeal Tribunal.

71.Paragraph 2 states that parties have 60 days to appeal against a market power or operator determination. The time period for appealing starts on whichever of the following days is the later:

  • the day on which the determination is published; or

  • the day on which the reasons for the determination are published.

72.Paragraph 2 also states that although the Tribunal’s rules of procedure can amend the time period within which an appeal can be made, the rules cannot alter the day on which the time period commences.

73.Paragraph 3 states the circumstances in which the Competition Appeal Tribunal may allow an appeal and the decisions that it may take.

74.Paragraph 4 states that if a default position in respect of an airport area is suspended during the appeal or is set aside, the previous market power determination in respect of the airport area takes effect again or continues to have effect (as appropriate), unless the Competition Appeal Tribunal orders otherwise.

75.Paragraph 5 establishes that the Competition Appeal Tribunal when deciding an appeal must have regard to the duties imposed on the CAA by section 1.

76.Paragraph 6 makes provision for further appeals on points of law.

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Unless there is an operator determination stating that operator B is the operator of the dominant airport area. In practice it is expected that operator B would notify the CAA of the expected change of operator. The CAA would then withdraw the original operator determination and may make a further operator determination on operator A. Otherwise, operator B would remain subject to regulation as the operator of an area over which it no longer has requisite management control. (See also notes on sections 9, 10 and 11 for information about “operator determinations”.)

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