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OFT considers undertakings instead of reference to the Competition Commission of the anticipated acquisition by Virgin Group Investments Limited and Stagecoach Group plc of the Intercity East Coast Franchise

216/04    21 December 2004

The OFT has decided today not to refer the anticipated acquisition by Virgin Rail Group Ltd (Virgin) of the InterCity East Coast Franchise (ICEC) to the Competition Commission provided that satisfactory undertakings are given to address competition concerns identified. The OFT has concerns in relation to the supply of passenger transport services at some points along the ICEC route between Doncaster and Edinburgh. If the parties do not agree such undertakings, then the transaction will be referred.

Vincent Smith, OFT Director of Competition Enforcement, said: 'If Virgin, which currently holds the Cross Country rail franchise, also wins the East Coast franchise, it will be the only rail operator between certain points on the route between Doncaster and Edinburgh. This might lessen competition, to the detriment of the travelling public even though these routes are subject to regulation. The Cross Country franchise comes up for re-tender in 2006, so an effective and proportionate remedy for the competition concerns we have identified would be provided by undertakings relating to fares and ticket mix on relevant routes in the meantime. Virgin has offered undertakings which may address the OFT's concerns.'

NOTES

1. The Reference Test — The OFT has a duty to make a reference to the CC if the OFT 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; and the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.

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. Under section 73 of the Enterprise Act 2002 the OFT may, instead of making a reference, and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned, or any adverse effect which has or may have resulted from it or may be expected to result from it, accept from such of the parties concerned as it considers appropriate undertakings to take such action as it considers appropriate. In doing so, the OFT will have regard to the need to achieve as comprehensive a solution as is reasonable and practicable to the substantial lessening of competition and any adverse effects resulting from it.

4. Before accepting any such undertakings under Schedule 10 of the Enterprise Act 2002, the OFT shall give notice of the proposed undertakings and will consider any representations made in accordance with that notice.

5. The full text of this decision will be placed on the mergers section of this website as soon as is reasonably practicable.

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