Ban on Eurotunnel ferry service confirmed by CMA
30 Jun 2014 11:13 AM
The Competition and
Markets Authority (CMA) has confirmed its decision that Eurotunnel should be
barred from operating its MyFerryLink service from
Dover.
The decision comes as a result
of the CMA confirming that it has jurisdiction over Groupe Eurotunnel’s
(GET’s) acquisition of 3 ferries and related assets that previously
belonged to the ferry operator SeaFrance and that developments in the market
since the Competition Commission’s (CC’s) (see Notes for editors)
original decision in June 2013 do not provide any reason to change that
decision.
Eurotunnel will be given 6
months to stop running services from the date of an order to that effect. It
could also find another owner for the MyFerryLink business, if that made
MyFerryLink completely independent of Eurotunnel.
Alasdair Smith, Chairman of the
Eurotunnel Remittal Group and CMA Panel Deputy Chair, said:
With 2 of the operators on the
Dover–Calais route making substantial losses, it remains our view that
the current level of competition on the route is unsustainable and likely to
lead to the exit of a competitor. That will leave Eurotunnel, which is funding
MyFerryLink’s current losses, as one of only 2 ferry operators in
addition to owning the competing rail link. Eurotunnel’s purchase of the
ferries means it now has over half the market and its share will rise further
if competitors exit.
It would be much better for
passengers and freight customers to have 3 competing cross-Channel operators
– with Eurotunnel running the rail link and 2 independent operators on
the ferry route. We will stop MyFerryLink running services out of Dover while
it is owned by Eurotunnel but we would not prevent Eurotunnel from finding a
suitable purchaser that was completely independent of Eurotunnel to operate the
ferry service.
Our primary concern is to
protect competition on the route for the benefit of customers. We are conscious
of the potential effect of our decision on the jobs of the MyFerryLink workers.
However, there will also be job losses if MyFerryLink remains on the route and
another operator leaves.
In order to reduce disruption
and uncertainty for ferry customers, and to enable Eurotunnel to find an
independent purchaser for the business if it chooses to sever its links with
the ferry operations, there will be a 6-month notice period before the ban
comes into effect.
In 2012, the Channel Tunnel
operator acquired the 3 ferries and related assets of the former SeaFrance
operation (now liquidated) and recommenced a ferry service on the
Dover–Calais route under the MyFerryLink brand.
In June 2013, the CC decided that by adding the ferries to its
existing Channel Tunnel business Eurotunnel would increase its share of the
market to over half – and was likely to end up as one of only 2 ferry
operators on the route – leading to price rises for passengers and
freight customers.
Following a legal challenge to
that decision, the CC considered again whether GET, together with a
workers’ cooperative formed by former SeaFrance employees (known as SCOP
SeaFrance), acquired an ‘enterprise’ giving rise to a merger under
the UK merger control rules, after the issue was remitted to the CC by the
Competition Appeal Tribunal (CAT) in December. The report published by the CMA
today confirms the provisional decision made
in March that the acquired assets did constitute an enterprise and had
enabled GET and SCOP SeaFrance to establish ferry operations more quickly, more
cheaply and with less risk than if alternative assets had been separately
acquired in the market.
The CMA has also looked at
whether there have been any material changes in the market which should lead it
to reconsider its remedies decision. Although passenger growth on the
Dover–Calais route has been greater than originally anticipated, at least
2 of the ferry operators are still making substantial losses. The CMA has
concluded that, if Eurotunnel is allowed to continue its ferry service from
Dover, a competitor is likely to withdraw from the Dover–Calais route.
This would leave Eurotunnel as the operator both of the rail link and 1 of 2
ferry services operating between Dover and Calais. This confirms the provisional decision on this issue which was
published in May.
The CMA rejected an alternative
proposal from the SCOP to operate the service independently from Eurotunnel.
This remedy would require the SCOP to have access to substantial financing and
the CMA believes that the proposal as it stands would be subject to too much
uncertainty, risk and delay to represent an effective solution. The CMA has
also rejected a proposal from DFDS (one of the other ferry operators) to reduce
the original implementation period before Eurotunnel would be required to stop
running ferries in and out of Dover from 6 to 3 months.
Eurotunnel started a ferry
service on the Dover–Calais route in August 2012 under the MyFerryLink
brand, using vessels which were owned and operated by SeaFrance before it was
placed in liquidation in November 2011. Eurotunnel also operates passenger and
freight train services through the Channel Tunnel between Folkestone and
Calais. The former SeaFrance vessels are operated by the SCOP SeaFrance under a
commercialisation agreement with Eurotunnel. SCOP SeaFrance is a cooperative
mainly composed of former employees of SeaFrance.
The final report and all other
information relating to the inquiry are available on the inquiry case
page.
Notes for
editors
- The CMA is the UK’s
primary competition and consumer authority. It is an independent
non-ministerial government department with responsibility for carrying out
investigations into mergers, markets and the regulated industries and enforcing
competition and consumer law. From 1 April 2014 it took over the functions of
the CC and the competition and certain consumer functions of the Office of Fair
Trading, as amended by the Enterprise and Regulatory Reform Act 2013.For more
information see theCMA
homepage.
- The CMA therefore took over this
case from the CC at the start of April.
- The members of the Eurotunnel
Remittal Group are: Alasdair
Smith(Chairman of the Group and CMA Deputy Panel Chair), Robin Aaronson,Ivar
Grey and Malcolm
Nicholson.
- Enquiries should be directed
to Rory
Taylor or Siobhan Allen or
by ringing 020 3738 6798 or 020 3738 6460.
- For CMA updates follow us on
Twitter @CMAgovuk, Flickr andLinkedIn.