Anticipated acquisition by Freightliner Limited of two inter-modal rail port terminals from Deutsche Post AG

Affected market: Supply of haulage services

No. ME/2697/07

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, third party views, assessment and decision.

The OFT's decision on reference under section 33(1) given on 8 June 2007. Full text of decision published 21 June 2007.

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

PARTIES

Freightliner Limited (Freightliner) is a UK rail haulage operator. It also owns and operates eight inter-modal inland rail ports (terminals) throughout the UK.

Deutsche Post A.G. is ultimately the owner of two inter-modal inland rail ports located at Daventry and Doncaster (the Target Sites). The Target Sites facilitate inter-modal inland terminal handling services with 2006 UK turnover in Doncaster of £[ ] and in Daventry of £[ ].

TRANSACTION

Freightliner proposes to acquire the operating leases, assets, employees and contracts relating to each of the Target Sites which are enterprises for the purposes of section 23 of the Enterprise Act 2002 (the Act). The administrative deadline expired on 17 April 2007.

[ ]. The value to Freightliner of the transaction is enhanced by the ability to bring additional business and improve operational efficiency.

JURISDICTION

As a result of this transaction, Freightliner and the Target Sites will cease to be distinct within the meaning of section 26(1) of the Act.

The parties overlap in the supply of inter-modal (between rail and road) inland terminal handling services to third parties in the UK, for which their combined share of supply in the UK will exceed 25 per cent. The share of supply test in section 23(4) of the Act is therefore 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 vast majority of downstream customers who expressed a view were unconcerned as they considered that road haulage is an alternative which could be used if inter-modal terminal handling service prices increase or quality declines increasing overall contract prices for inter-modal inland transportation services. In particular, customers were contacted in the Daventry warehousing and distribution park area as we considered that these would be most at risk if third party access was foreclosed and if inter-modal road transportation was in fact not an alternative.

All Freightliner's rail-only competitors in inter-modal inland rail transportation services were concerned about foreclosure and their ability to continue using the Target Sites in a fair and non-discriminatory manner as the Target Sites will be controlled by a rival rail-based inter-modal container haulier and terminal operator.

However even those competitors who were concerned were of the view that inter-modal road haulage provides a constraint to inter-modal rail haulage, both in general terms and, in most cases, in terms of the Target Sites. Accordingly, the weight of competitor views does not support a theory of harm to competition, in other words, harm to customers flowing from harm to rail-based inter-modal container haulage competitors.

ASSESSMENT

Freightliner is a rail-based competitor active in the wider market for inter-modal containers haulage, which is predominantly road-based but also features several rail-based suppliers such as Freightliner itself. It is acquiring two inter-modal terminals at Doncaster and Daventry that facilitate transfer of inter-modal containers between rail and road.

The OFT tested the competitive constraint posed by road-based hauliers on rail-based inter-modal container haulage in the relevant local areas, which reinforced the general conclusion applicable to Great Britain as a whole. Downstream customers confirmed that they perceive no adverse merger effects because of their ready ability to switch to road-based inter-modal container hauliers should rail-based alternative become less competitive from their standpoint. This fact is also a principal reason why the acquisition does not change the competitive incentives of the terminal owner of Doncaster and Daventry to raise prices or otherwise offer less favourable terms to any 'captive' rail-based inter-modal container haulier competitors using those terminals because it does not stand to benefit downstream, where it has no market power and no prospect of gaining such power as a result of any foreclosure strategy. Accordingly, for the reasons developed in more detail above, the competitive constraints of road-based alternatives are unchanged by the merger and, for the reasons developed above, preclude any competition concerns in this case.
 
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.

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