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.
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”.)