Judgment

Judgment of the Tribunal following the first trial relating to abuse, on the assumption the three Defendant train operating companies (“TOCs”), namely: South Western Railway (“SWR”), London & South Eastern Railway (“LSER”), and Govia Thameslink Railway (“GTR”) are dominant.

Mr Justin Gutmann is the class representative (the “CR”) in three parallel collective proceedings brought pursuant to s. 47B of the Competition Act 1998 (“CA”). Each of the three proceedings raises broadly the same allegations of abuse of dominance contrary to the Chapter II prohibition in section 18 CA, with regard to the practice and arrangements by the TOCs regarding the sale of a particular kind of rail ticket known as a Boundary Fare.  The CR alleges that the relevant TOC in each case failed to make Boundary Fares sufficiently available and/or to take reasonable steps to make customers purchasing tickets aware of Boundary Fares, with the consequence that class members effectively paid twice for part of their journeys.  The proceedings are brought on an opt-out basis and seek aggregate damages for the respective classes.

Boundary Fares are a form of extension or add-on ticket sold for use with a Transport for London ("TfL") Travelcard.   On the basis that a valid Travelcard will cover travel on part of the journey which the customer wishes to take, the Boundary Fare covers the balance of the journey from the outer edge of the zone to which the Travelcard applies to the customer’s destination.  All three Defendants sell (or have sold) such Boundary Fares for almost all journeys originating in each TfL zone to destinations on their network.  Given that customers holding a Travelcard have already paid for the part of their journey which the Travelcard covers, they need only purchase such a Boundary Fare, whereas if they purchase a full, origin-destination fare they will be paying unnecessarily for the first part of their journey.  However, Boundary Fares are not available for certain tickets, of which by far the most significant are advance fares and season ticket fares.

The alleged abuse effectively comprises two distinct elements: (a) insufficient awareness among customers of Boundary Fares; and (b) lack of availability of Boundary Fares. The claims are only in respect of outward Boundary Fares, i.e. where the journeys originated in a TfL zone (but covering also return fares). 

The Defendants all denied that the various matters relied on by the CR amount to a failure to discharge their ‘special responsibility’ as (presumed) dominant undertakings and any abuse of dominance as a matter of competition law.  In the alternative, if it could otherwise amount to abuse, they submitted that their conduct was objectively justified. 

Alleged lack of awareness

There was no suggestion that any of the Defendants adopted a policy to keep Boundary Fares obscure or to leave customers unaware of their existence. On the contrary, all the Defendants sold Boundary Fares from all their TOs, and Boundary Fares were mentioned in the training of TO staff. 

The Defendants stressed that Boundary Fares were only one category among over 1000 types of fare they sold. 

The Tribunal held that the evidence relied upon by the CR is support of this allegation was wholly unsatisfactory. In particular, there was no survey of Travelcard holders using any of the three Defendants that might indicate a lack of awareness of Boundary Fares. 

The Tribunal concluded that even if (contrary its finding above) the CR had been able to establish that there was insufficient customer awareness of Boundary Fares, there was no unfair trading amounting to an abuse on the basis that none of the Defendants actively promoted or advertised Boundary Fares.  The Tribunal explained, however, that this was not sufficient to dispose of the cases: if Boundary Fares were not reasonably available for customers to buy, this could amount to an abuse. 

Alleged lack of availability

The CR’s case on lack of availability concerned: (1) the channels through which existing Boundary Fares could be purchased, and (2) special fares for which no Boundary Fare equivalent existed.

Existing Boundary Fares

There were three main channels through which the TOCs sold rail tickets: (a) station ticket office (“TOs”); (b) station ticket vending machines (“TVMs”); (c) on-line (website or app.). 

The relative significance of the different channels varied as between the Defendants and over the relevant claim periods. 

In the case of LSER, TOs were the channel accounting for the highest share of earnings, and for SWR and GTR they remained a significant outlet throughout.  Boundary Fares were available for purchase from all TOs of all TOCs.  The CR therefore concentrated his criticism on sales through TVMs and online.

TVMs were a significant channel for each Defendant. The Tribunal therefore agreed that, in general terms, making Boundary Fares sufficiently available should include enabling them to be bought from TVMs.  The Tribunal noted however that there were practical issues with obtaining and installing TVMs with the necessary functionality.  The Tribunal was entirely satisfied that SWR and GTR conducted themselves entirely reasonably in the steps they took to enhance functionality on their TVMs so as to sell Boundary Fares.  The delays involved in upgrading or replacing TVMs, could not amount to the imposition of an unfair selling system or a departure from “normal competition” that constitutes an abuse of dominance.

The Tribunal noted that the position of LSER was more complex. The Tribunal was satisfied however that the decision not to permit anywhere-to-anywhere functionality on the LSER TVMs was governed by concerns about fraud; and although it emerged that SWR also had a significant proportion of ungated stations, that did not detract from the fact that this was the rationale for LSER’s decision. 

The Tribunal explained that, in addressing the question whether Boundary Fares were inaccessible for customers, it was necessary to consider the overall picture.  When Boundary Fares were available for purchase through the Defendants’ more significant channels, the Tribunal did not consider it was unreasonable or other than ‘normal’ commercial conduct that more effort and expense was not devoted to enable their introduction to their online sales channel.  That was particularly the case when point-to-point fares, which could similarly be used by way of extension to a Travelcard were always available online. More specifically, the Tribunal did not regard this as coming close to an unfair trading practice that could constitute an abuse under competition law. 

Both as regards TVMs and online sales, the Tribunal concluded that none of the Defendants adopted a deliberate strategy to restrict the supply of Boundary Fares, save for LSER’s decision that it would not sell any form of ticket from its TVMs that originated other than at the station where the TVM was located. 

A further aspect of the claims concern third party retailers (“TPRs”).  The CR’s case concerning sales by TPRs was that the Defendants should have required TPRs to sell Boundary Fares, and/or that if there was greater awareness and availability of Boundary Fares, that would have led TPRs to offer Boundary Fares to avoid losing business. 

Although not required to do so, all TPRs were authorised to sell Boundary Fares.  The Tribunal concluded that there was no evidence that any of the three Defendants sought to discourage TPRs from selling Boundary Fares, or suggested to TPRs that such sales would be contrary to their policy. The decision whether or not to sell Boundary Fares was taken independently by each TPR. 

Other fares

The CR alleged that insofar as there were types of fare for which no Boundary Fare existed, the failure to offer a Boundary Fare constituted an abuse.  Much the most significant categories to which this allegation applied were advance fares and season tickets. The Tribunal rejected the CR’s allegations and concluded that none of the conduct alleged against the Defendants constituted an abuse of a dominant position.