Exemplary damages awarded for driving out the bus
The Cardiff Bus Decision is significant (particularly in the context of small markets) as it illustrates that, whilst conduct may be “of minor significance” and statutorily exempted from financial penalty by the OFT, there is still potential for a contravening company to be on the hook for substantial damages claims.
In 2004, bus company 2 Travel introduced a number of “no-frills” bus services in Cardiff. In response, the incumbent bus services provider, Cardiff City Transport (Cardiff Bus) launched its own budget service running on the same routes, but with lower fares (services which it ran at a loss). In late 2004, 2 Travel ceased its services and went into liquidation. Shortly afterwards, Cardiff Bus ceased offering its own “no-frills” services on the routes.
The OFT found that Cardiff Bus had engaged in predatory pricing by debuting its “no frills” service for the purpose of eliminating 2 Travel as a competitor. However, the OFT could not impose a penalty on Cardiff Bus due to the fact that its turnover fell below a minimum threshold amount.
In spite of this, in a recent judgment, the CAT awarded £60,000 exemplary damages (plus £33,818.79 compensatory damages for lost profits) to 2 Travel in a follow-on claim against Cardiff Bus.
In a context where many damages cases settle out of court, the Cardiff Bus decision is highly significant. It is the first case of a final damages award by the CAT, and also involved a finding of exemplary damages (ie. punitive rather than compensatory) for breach of UK competition law. Also interestingly, the CAT in its decision, refused to use the OFT penalty regime as a yardstick in its assessment of the level of exemplary damages it may award.