Anticipated acquisition by Arriva plc of the Darlington local bus service business of Stagecoach Group plc

Affected market: Local bus services

No. ME/3052/07

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, assessment and decision.

The OFT's decision on reference under section 33(1) given on 22 August 2007. Full text of decision published 24 August 2007.

Please note that square brackets indicate figures or text which have been deleted or replaced with a range by the OFT or at the request of the parties for reasons of commercial confidentiality.

PARTIES

Arriva Durham County Limited is a wholly owned subsidiary of Arriva plc (Arriva). Arriva is one of the UK's largest bus companies with operations in various locations throughout the UK.

The Darlington local bus service business of Stagecoach Group plc (Stagecoach Darlington) operates entirely within the boundaries of the town of Darlington. Stagecoach Darlington comprises 28 buses, 78 personnel, a freehold bus depot and a leased drivers' rest room and operates on four urban commercial bus services and 17 tendered or contracted bus services. Stagecoach Darlington has an annual turnover of approximately £2.8 million and is part of Stagecoach Group plc (Stagecoach Group), an international public transportation group with operations in the UK, the USA and Canada.

TRANSACTION

Arriva has conditionally agreed to acquire the business (assets and goodwill) associated with Stagecoach Darlington from Cleveland Transit Limited and Busways Travel Services Limited, both wholly owned subsidiaries of Stagecoach Group. The OFT believes that the combination of business and assets being acquired forms an 'enterprise' for the purposes of section 23(1) of the Enterprise Act 2002 (the Act).

The Office of Fair Trading's (OFT) administrative deadline for deciding whether to refer the merger to the Competition Commission (CC) is 22 August 2007.

JURISDICTION

As a result of this transaction Arriva and Stagecoach Darlington will cease to be distinct. The parties overlap in the supply of bus services in Darlington. Within the wider contiguous area comprising Darlington, Durham, Hartlepool and Stockton, which the OFT believes is a substantial part of the UK, the parties combined share of supply of bus services in that area is at least 37 per cent [see note 1]. Therefore, the share of supply test in section 23 of the Act is met. The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.

THIRD PARTY VIEWS

The OFT received comments from four individual consumers, of which only one was concerned about the anti-competitive effects of the anticipated merger. These concerns have been dealt with above.

In commenting on the anticipated merger, Darlington Borough Council is generally unconcerned, in particular in view of the memorandum of understanding that it has signed with Arriva in order to ensure the quality of services does not deteriorate post merger.

No third party bus companies operating in the wider area around Darlington stated to the OFT they were concerned about the merger.

ASSESSMENT

The parties overlap in the provision of commercial local bus services and tendered local bus services in Darlington town, and the merger would result in Arriva becoming the sole operator of commercial bus services in that area. On a flow-by-flow basis, the merger would reduce the number of competitors in commercial bus services in Darlington town from two to one on 21 flows.

However, the OFT believes that barriers to entry and expansion in this particular case are sufficiently low to deter or defeat any attempts by the merged entity to capitalise on the loss of rivalry brought about by the merger. In particular, four firms submitted that they would consider entering the market if the merger were to lead to a change in competitive conditions. Of these, [redacted].

Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.

NOTE

1. This is Arriva's share of supply based on passenger numbers. Its share of supply in the area based on concessionary fare reimbursement figures is 44 per cent. The OFT did not have access to Stagecoach Darlington's share of supply figures in the area.

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