Completed acquisition by Go North East of Stanley Taxis

Affected market: Provision of commercial and tendered local bus services in County Durham and Tyne and Wear

No. ME/3404/07

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 22(1) given on 18 March 2008. Full text of the decision published on 1 April 2008.

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

PARTIES

Go North East Limited (Go North East) is a wholly owned subsidiary of Go-Ahead Group plc. Together with its sister companies Go Wear Buses Limited and Go Northern Limited it trades as Go North East and operates commercial and tendered local bus services in the North East of England.

Stanley Taxis operated commercial and tendered local bus services in County Durham and Tyne and Wear. It comprised the bus operations of RM Scott and Partners, with 13 buses, 16 personnel and some equipment. Stanley Taxis' UK turnover in its last financial year was [below £1 million].

TRANSACTION

Go North East acquired Stanley Taxis on 15 October 2007. The extended administrative deadline is 20 March 2008 and the extended statutory deadline is 20 April 2008.

JURISDICTION

As a result of this transaction Go North East and Stanley Taxis have ceased to be distinct. The parties overlapped in the supply of commercial and tendered local bus services in the area where Stanley Taxis was active, consisting of Derwentside (part of County Durham), Gateshead, Sunderland and Newcastle (all part of Tyne and Wear), which the OFT believes forms a substantial part of the UK. The OFT believes the parties' combined share of supply of commercial and tendered local bus services in this area exceeded 25 per cent. As a result, the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.

THIRD PARTY VIEWS

Most of the parties' competitors did not express a concern about the merger, but one was concerned that the merger would result in a very strong position for Go North East in Derwentside. Further, the two parties' customers for tendered services, Nexus and Durham CC, expressed a concern that the merger would reduce the number of operators that can bid for its tendered services. These concerns are discussed below.

ASSESSMENT

The parties overlapped in the supply of commercial and tendered local bus services in an area consisting of Derwentside, Gateshead, Sunderland and Newcastle. In line with previous cases, the OFT has examined the merger with regard to, separately, services tendered by Nexus, services tendered by Durham CC and individual flows in commercial services.

The merger has resulted in a reduction in the number of operators that bid for services tendered by Nexus and Durham CC. As regards services tendered by Nexus, in the past three years the parties faced [ ] for the relatively limited number of contracts for which they bid against each other, but the number of operators competing for tendered services is relatively small. As regards services tendered by Durham CC, there are more operators competing for tendered services. However, Durham CC believed [ ], although this extended to only a relatively small number of contracts in Durham CC's recent tender round and the next tender round is not due to take place until 2012.

The OFT has identified 10 flows on commercial services on which Stanley Taxis was an effective competitor of Go North East and on which no other effective competitors were operating. Hence, the merger has reduced the number of operators on these flows from two to one.

Based on the evidence above, the OFT cannot exclude that the merger raises competition concerns in relation to tendered and commercial services. However, in the area in which Stanley Taxis was active, there are a number of competing operators, including large national operators, with depots that give them the ability [ ] to enter the overlap flows with a commercial service. Competitors have also indicated their willingness to enter. In addition, in view of the very limited scale of the services that were operated by Stanley Taxis, the OFT believes that the barriers to entry for a new operator to replicate these services are low, and are even lower for new operators bidding for tendered services.

The OFT considers that these findings on barriers to entry and expansion are sufficient to address any potential competition concerns arising from the reduction in the number of bidders for tendered services and from the two-to-one commercial service overlaps resulting from the merger.

Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or 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 22(1) of the Act.

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