R v Monopolies and Mergers Commission and Another ex parte South Yorkshire Transport Ltd and Others

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Templeman,Lord Goff of Chieveley,Lord Lowry,Lord Mustill,Lord Slynn of Hadley
Judgment Date17 Dec 1992
Judgment citation (vLex)[1992] UKHL J1217-1

[1992] UKHL J1217-1

House of Lords

Lord Templeman

Lord Goff of Chieveley

Lord Lowry

Lord Mustill

Lord Slynn of Hadley

Regina
and
Monopolies and Mergers Commission and Another
(Appellants)
Ex Parte South Yorkshire Transport Limited and Others
(Respondents)
Lord Templeman

My Lords,

1

I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Mustill. I agree with it and, for the reasons given by him, I, too, would allow the appeal.

Lord Goff of Chieveley

My Lords,

2

I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Mustill. I agree with it and, for the reasons given by my noble and learned friend, I, too, would allow this appeal.

Lord Lowry

My Lords,

3

I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Mustill.

4

I agree with it and, for the reasons given by my noble and learned friend, I, too, would allow this appeal.

Lord Mustill

My Lords,

5

On 22 March 1990 the Secretary of State for Trade and Industry referred to the Monopolies and Mergers Commission for investigation and report the acquisition of the present respondents, South Yorkshire Transport Company Ltd., of certain companies operating local bus services in South Yorkshire and in parts of Derbyshire and Nottinghamshire. Upon the reference the commission had two distinct tasks. First, to decide whether the "merger situation", as it is known, was one which satisfied the criteria for investigation established by section 64(3) of the Fair Trading Act 1973. If it did not the commission had no jurisdiction to proceed. The commission decided that the criteria were satisfied, and went on to investigate the merger. On 1 August 1990 the commission published its report, to the effect that the merger might be expected to operate against the public interest, and that the most effective means to restore competition would be to require the respondents to divest themselves of the assets and businesses acquired. On the same day the Secretary of State announced that he had accepted the conclusions and recommendation of the report.

6

The respondents disagreed with the commission on both issues, but recognised that the conclusions and recommendations on the question of public interest were not open to effective challenge in the courts. They did however contest by judicial review the finding of the commission, crucial to its jurisdiction, that the geographical area by reference to which the existence of a merger situation had to be ascertained ("the reference area") was a "substantial part" of the United Kindgom, within the meaning of section 64(3) of the Act of 1973. The application for judicial review was heard by Otton J., who in a valuable and comprehensive judgment held that the respondents' challenge was well-founded, that the commission had acted without jurisdiction, and that accordingly the conclusions and recommendations in the report, and the decision of the Secretary of State to accept them, were unlawful and of no effect. The commission appealed to the Court of Appeal [1992] 1 W.L.R. 291 which by a majority (Lord Donaldson of Lymington M.R. and Butler-Sloss L.J., Nourse L.J. dissenting) dismissed the appeal. The commission appeals to your Lordships' House.

7

I must now set out the relevant parts of the legislation, and describe the reference area to which the legislation must be applied. First, the legislation.

8

The crucial sections of the Act of 1973 are as follows:

"9. Monopoly situation limited to part of United Kingdom

(1) For the purposes of a monopoly reference, other than a reference relating to exports of goods from the United Kingdom, the person or persons making the reference may, if it appears to him or them to be appropriate in the circumstances to do so, determine that consideration shall be limited to a part of the United Kingdom. (2) Where such a determination is made, then for the purposes of that monopoly reference the provisions of sections 6 and 7 of this Act, or such of those provisions as are applicable for those purposes, shall have effect as if, wherever those provisions refer to the United Kingdom, they referred to that part of the United Kingdom to which, in accordance with that determination, consideration is to be limited. (3) The preceding provisions of this section shall have effect subject to subsection (4) of section 50 of this Act in cases to which that subsection applies."

"64. Merger situation qualifying for investigation

(1) A merger reference may be made to the commission by the Secretary of State where it appears to him that it is or may be the fact that two or more enterprises (in this section referred to as 'the relevant enterprises'), of which one at least was carried on in the United Kingdom or by or under the control of a body corporate incorporated in the United Kingdom, have, at a time or in circumstances falliing within subsection (4) of this section, ceased to be distinct enterprises, and that either — ( a) as a result, the condition specified in subsection (2) or in subsection (3) of this section prevails, or does so to a greater extent, with respect to the supply of goods or services of any description, or ( b) the value of the assets taken over exceeds [£30 million]. (2) The condition referred to in subsection (1)( a) of this section, in relation to the supply of goods of any description, is that at least one-quarter of all the goods of that description which are supplied in the United Kingdom, or in a substantial part of the United Kingdom, either — ( a) are supplied by one and the same person or are supplied to one and the same person, or ( b) are supplied by the persons by whom the relevant enterprises (so far as they continue to be carried on) are carried on, or are supplied to those persons. (3) The condition referred to in subsection (1)( a) of this section, in relation to the supply of services of any description, is that the supply of services of that description in the United Kingdom, or in a substantial part of the United Kingdom, is, to the extent of at least one-quarter, either — ( a) supply by one and the same person, or supply for one and the same person, or ( b) supply by the persons by whom the relevant enterprises (so far as they continue to be carried on) are carried on, or supply for those persons."

9

Next, there is the reference area. This was delineated by the Secretary of State, when he referred the matter to the commisssion, as — "The county of South Yorkshire, the districts of Bolsover, Chesterfield, Derbyshire Dales, High Peak and North-East Derbyshire in the county of Derby and the district of Bassetlaw in the county of Nottingham." This description in terms of local government boundaries lacks colour. It is easier to visualise the reference area as lying roughly between the Leeds/Bradford conurbation to the North, Lincolnshire to the East, Derby/Nottingham to the South and Greater Manchester to the North-West. More exactly, the spine of the area, some 45 miles long at its greatest extent, runs from just north of Derby through Matlock, and then continues through Chesterfield, Sheffield and Barnsley to a point a few miles south of the line joining Huddersfield, Wakefield and Pontefract. To the west the area encompasses the Derbyshire Dales and the Peak District. On the eastern side of the spine there are found at the northern end the industrial areas of Doncaster and Rotherham. Further south a space of more open country extends to within about ten miles of Lincoln. The total surface area is rather more than 1500 square miles. About 1.8 million people live there. These figures represent 1.65 per cent and 3.2 per cent of the totals for the United Kingdom as a whole.

10

I now turn to the decision under review. This was not the first occasion on which the commission had occasion to consider the meaning of section 64(3) of the Act. In March 1989 the commission published its report in another reference concerning local bus services, where a similar challenge to the jurisdiction was made. The company concerned was Badgerline Holdings Ltd. ((1989) Cmnd. 595). Since the reasoning which led the commission to reject the challenge was adopted by the differently constituted group responsible for the report in the present case, it is necessary to see how the commission arrived at its conclusion. The discussion in Chapter 2 of the Badgerline report is too long to set out in full, but in summary it was as follows. First, the commission correctly stated that the words "a substantial part of the United Kingdom" had to be considered in their statutory context, and continued—

"2.2 We had therefore to consider whether a merger situation qualifying for investigation had been created. This involved deciding whether there was a supply of the reference services (local bus services) in the United Kingdom or a substantial part of the United Kingdom.

2.3 The relevant area for the supply of bus services in what is described in the reference as the 'specified area' (shown in the maps at Appendix 2.1), is defined as 'the County of Avon together with all parts of the Counties of Somerset and Wiltshire and of the County of Gloucester east of the River Severn which lie within 15 miles of the County of Avon'. If this area constitutes a 'substantial part of the United Kingdom' for the purposes of the Act we are required to consider whether the market share test, as described in paragraph 2.1 is in other respects fulfilled."

11

The commission went on to describe the various quantitative and qualitative features of the area in question which it considered relevant and concluded—

"2.9 Thus although the specified area's population and land area represent relatively small proportions of the figures for the United Kingdom, in a number of respects the area plays an important part in the economic development and...

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