Cardiff Bus to face court hearing in March that could decide its survival

October 20, 2011 No Comments »

Cardiff Bus will face a court hearing in March that could determine whether the taxpayer-owned company survives.

The council-owned bus company is facing a £50m compensation claim from a rival firm it drove off the road.

Liquidators for wound-up bus operator 2Travel are bringing a High Court action against Cardiff Bus claiming damages for lost profits and the failure of the business.

The claim follows a decision of the Office of Fair Trading (OFT) in 2008 which ruled that the city’s bus operator abused its dominant market position to put the smaller independent firm out of business.

Swansea-based operator 2Travel started a rival half-hourly Monday to Friday service on Cardiff’s busiest routes in April 2004.

But it folded in May 2005 after struggling to compete when Cardiff Bus launched cut-price fares on the same routes.

The OFT ruled that Cardiff Bus had engaged in predatory conduct by running a service with revenues so far below costs that 2Travel had no chance to compete.

After 2Travel folded, Cardiff Bus then dropped the loss-making service.

In the 2009 OFT judgement, Cardiff Bus escaped a fine because the regulator judged its conduct to be “of minor significance”.

Conduct is of minor significance if the annual turnover of the undertaking considered to have infringed competition rules does not exceed £50m. Cardiff Bus falls into that category.

Three separate claims have also been brought by 2Travel’s former company secretary, David Francis, former CEO David Fowles and non-executive director Nigel Short, who were shareholders.

Overall, £7m is being sought in lost profits, £15m for the loss of the business as a going concern and £15m for being unable to grow the business.

A further £10m is being pursued for the lost commercial opportunity to develop its Swansea depot and another £3m in punitive damages.

The case is due to start at the High Court in Cardiff on March 23.

The OFT judgement said: “In all the circumstances, the OFT concludes that the evidence is sufficient to demonstrate that Cardiff Bus was reacting to 2Travel’s entry by attempting to force the entrant to retreat from the market.

“In the OFT’s view, Cardiff Bus’ conduct contributed to maintaining and strengthening its dominance and did not constitute ‘normal competition on the merits’, but was predatory and an abuse of Cardiff Bus’ dominant position. ”

Cardiff Bus has indicated its intention to vigorously defend its position.

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