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East Coast competition concerns


CMA highlights areas of concern with new Virgin/Stagecoach franchise

The Competition and Markets Authority (CMA) has raised concerns that the award of the new East Coast franchise to Virgin/Stagecoach consortium Inter City Railways Ltd (ICRL) may reduce competition at two locations on the route, potentially leading to ‘higher fares or reduced service quality for rail passengers’.

One area of concern is between Peterborough and Grantham and Peterborough and Lincoln, where Stagecoach-owned East Midlands Trains provides the only competing rail service and there is a ‘minimal’ coach service.

The other is on routes from Edinburgh to Dundee and Aberdeen, which overlap with Citylink coach services, operated and jointly owned by Stagecoach. The CMA says that ‘the only competing public transport services are provided by ScotRail and Arriva CrossCountry’.

The CMA is also concerned that the award may impact on competing rail and coach services on these routes, again leading to higher fares or reduced service quality.

The body says it looked at other routes, but found that either competition with existing Stagecoach or Virgin services was limited or that ICRL ‘will continue to face sufficient competition with other operators’. This includes Anglo-Scottish routes, where the CMA suggested that air services will provide ‘significant rivalry’.

ICRL now has the opportunity to offer undertakings to resolve the concerns identified by the CMA, and the CMA will then decide if these are a ‘suitable remedy’. If it agrees, it will consult on these before accepting; if no undertakings are offered or the CMA does not accept them the franchise award will be referred for an in-depth phase 2 investigation. All the CMA’s functions in phase 2 merger investigations are performed by inquiry groups chosen from the CMA’s panel members. The appointed inquiry group are the decision makers on merger investigations.

Any decision is not expected to delay the start of the franchise on 1 March, although the CMA may decide to impose a ‘hold-separate’ order for the duration of its investigation, aimed at avoiding integration of businesses or loss of competition between East Coast services and existing services, without impeding proper operation of the franchise.

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