BAA decision means no UK monopoly is safe
The Competition Commission has moved into new startling territory in ordering BAA to split up its airport business. Until now it has blocked expansion: now it is telling established businesses to shrink.
Anti-trust legislation in America forced Standard Oil and the Bell telephone business to demerge into smaller independent units but that has not been seen in Britain until now. The Competition stop deals happening; it can order deals to be undone retrospectively – like telling BSkyB to sell the 17 per cent stake it bought in ITV – but it has not previously unwound monopolies created decades ago.
BAA certainly has a monopoly - 90 per cent share of flights in the south use its airports and 84 per cent in Scotland - and the regulator has concluded that the lack of competition works against the passengers’ interest. Its proposed remedy is for the company to sell two of its three London airports – Heathrow, Gatwick or Stansted – and to sell either Glasgow or Edinburgh airports.
That is a drastic remedy in corporate terms even if it benefits the consumer.
But Ferrovial, BAA’s Spanish owner, has every right to think the goalposts have been moved on this situation.
British Airports Authority was created to be a monopoly on the argument that state control of all the major airports concentrated control and gave economies of scale. BAA was privatised as a monopoly 20 years ago, the lack of competition enhancing the proceeds the state received from the sale. It was allowed to operate as a monopoly for two decades as a publicly quoted company.
Only when the Spanish bought BAA did the Competition Commission begin the investigation that now concludes monopoly is bad.
And this is not the time to sell three major airports – two of which will be competing against each other and all of which will face competition from the London and Scottish airport BAA chooses to keep.
The suspicion is that the sale process will be long – perhaps long enough not to be affected by the recession and credit crunch. But now we know the Competition Commission can break up existing companies, no large corporation should consider itself safe.
