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OFT refers anticipated acquisitions of the Greater Western rail franchise

185/05    30 September 2005

The OFT today referred to the Competition Commission (CC) three bids – by FirstGroup plc (First), National Express Group plc (NEG) and Stagecoach plc (Stagecoach), via its subsidiary Brunel Trains – for the Greater Western rail franchise (GWF).

The acquisition of a rail franchise is a merger under competition law.  The OFT has decided that the test for reference is met for each bid in relation to the supply of public transport services on a large number of routes within the GWF area, which covers the South West of England and parts of Wales.

For many routes and journeys in the GWF region, passengers can choose between a GWF rail service on the one hand, and either a First or Stagecoach bus service, or an NEG coach service, on the other. On many of these overlaps there are no other public transport alternatives – which means that whatever bus or coach versus rail competition exists would be lost for that journey. The bids by Stagecoach (and NEG) also raise some issues concerning rail verses rail competition.

As the public road transport network of each bidder is different, so too are the particular routes and journeys that raise competition issues. In relation to many such instances for each bid, it was not possible at the OFT stage of merger review to resolve the question of whether competition would be lessened so that prices or service would change to the detriment of passengers. It is now for the CC to assess these issues further. The CC may also consider the extent to which any pro-competitive benefits of each bid might outweigh any detriment to competition and passengers, and, if necessary, any appropriate remedies.
 
NOTES

1. The Competition Commission has recently examined road-on-rail competition issues in three of its recent reports: National Express Group plc and the Greater Anglia Franchise, a report on the acquisition by National Express Group plc of the Greater Anglia franchise (November 2004);  FirstGroup plc and the Scottish Passenger Rail franchise, a report on the proposed acquisition by FirstGroup plc of the Scottish Passenger Rail franchise currently operated by ScotRail Railways Limited (June 2004); and Arriva plc and Sovereign Bus & Coach Company Ltd A, report on the acquisition by Arriva plc of Sovereign Bus & Coach Company Ltd (January 2005). The OFT has had careful regard to the findings of the CC in all of these cases.

2. 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 a relevant merger situation has been created; and that 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.

3. 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.

4. The CC 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.

5. The full text of these decisions will be available from the Mergers EA02 area of this site. To view these please use the following links: FirstGroup plc, National Express Group plc and Stagecoach plc.

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