13/11    8 February 2011

The OFT today referred Stena AB's completed acquisition of two Irish Sea ferry services from DFDS A/S to the Competition Commission.

The acquisition by Stena of assets and vessels on the Liverpool-Belfast and Heysham-Belfast routes was completed on 1 December 2010. Stena announced that it was closing its competing Fleetwood-Larne route the next day.

In assessing the acquisition the OFT considered whether Stena would have exited the Fleetwood-Larne route regardless of the merger. If so, then the closure and not the merger may be the reason for the loss of any competition between the parties. However the evidence available to the OFT was not compelling enough to dismiss its concerns that the closure of the route may have been influenced by the merger.

For this reason, in its assessment, the OFT examined the acquisition as if Stena's Fleetwood-Larne service had continued to operate. The OFT has concluded that the acquisition has created a realistic prospect of a substantial lessening of competition in the supply of ferry services for freight from the north west of England to Northern Ireland.

The OFT has therefore referred the merger to the Competition Commission for a more detailed investigation.

Amelia Fletcher, OFT Chief Economist, said:

'Ferry services between Great Britain and Northern Ireland are important for UK freight customers on both sides of the Irish Sea. In this case, it was not possible for us to be confident that the closure of Fleetwood-Larne could be disassociated from the merger in a market that was already highly concentrated. Prior to its closure, Stena's Fleetwood-Larne service was competing head-to-head with the routes that Stena has now acquired and customers were benefiting from that competition.

The Competition Commission now has the remit to investigate the entire transaction to establish whether there are competition concerns arising from the merger, and if so what remedies may be appropriate.'

NOTES 

1. The Reference Test - The OFT has a duty to make a reference to the Competition Commission if the OFT believes that it is or may be the case that a relevant merger situation has been created; and the creation of that situation has resulted or may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services. The CC might reach a different conclusion on the substantive issues.
2. Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.
3. The Competition Commission is expected to report by 25 July 2011. It may extend the 24-week period within which it is required to publish its report by no more than eight weeks if it considers that there are special reasons why the report cannot be published within that period.
4. The text of this decision will be placed on the Mergers section of this web site as soon as is reasonably practicable.
5. Stena acquired two routes, including the Fleetwood/Larne service from P&O in 2004. Following the OFT's reference of that case in 2004, the Competition Commission reviewed ferry services in the Irish Sea. See the OFT decision Anticipated acquisition by Stena of certain assets operated by P&O on the Irish Sea (pdf 107kb) and the CC report at www.competition-commission.org.uk/rep_pub/reports/2004/487stena.htm.
6. Other relevant cases where the issue on the appropriate counterfactual has been raised include: Tesco/Kwik Save (pdf 232kb). This issue is also addressed in the joint Merger Assessment Guidelines (pdf 709kb), a joint publication of the Competition Commission and the Office of Fair Trading, September 2010. Section 4.3: The 'counterfactual'.
7. The Irish Competition Authority issued a statement in January referring this transaction to its second phase investigation in the Republic of Ireland.This followed its earlier statement of December 2010 in which it declared this transaction to be void after failure to notify it prior to completion taking place in accordance with the Republic of Ireland's merger control provisions. Neither of these statements had any bearing on today's OFT decision.
8. DFDS announced its intention to close its remaining Irish Sea ferry routes on 13 January 2011.
9. Stena gave the OFT initial 'hold separate' undertakings on 13 December 2010. The text of the initial undertakings is available from the initial undertakings page.