Ban on Eurotunnel ferry service provisionally confirmed by CMA
21 May 2014 10:24 AM
The Competition and
Markets Authority has provisionally confirmed an earlier decision by the
Competition Commission that Eurotunnel should be barred from operating a ferry
service from Dover.
This follows a review of whether
circumstances had changed enough in the market for it to alter its original
decision.
In 2012, the Channel Tunnel
operator acquired the three ferries and related assets of the former SeaFrance
(now liquidated) and recommenced a ferry service on the Dover–Calais
route under the MyFerryLink brand.
In June last year, the
Competition Commission (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 two 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 the acquisition of the ferries
by Eurotunnel, in partnership with a workers’ cooperative formed by
former SeaFrance employees (known as the SCOP SeaFrance), qualifies as a merger
under the UK merger control rules, after the issue was remitted to the CC by
the Competition Appeal Tribunal (CAT).
In March the CC provisionally
ruled that it did have jurisdiction to make the decision. The
Competition and Markets Authority (CMA) took over the case from the CC at the
start of April (see Notes for editors). The CMA has now also looked at whether
there have been any material changes in the market which should lead it to
reconsider its decision. Passenger growth on the Dover–Calais route has
been greater than originally anticipated, but at least two of the ferry
operators are still making substantial losses. The provisional view of the CMA
is that, if Eurotunnel is allowed to continue its ferry service from Dover, a
competitor is likely to withdraw from Dover–Calais. This would leave
Eurotunnel as the operator both of the rail link and one of two ferry services
operating between Dover and Calais.
The CMA has also looked at its
original remedy which bans Eurotunnel from running ferry services from Dover.
It has provisionally 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 new financing and the CMA believes that the
proposal as it stands would be subject to too much uncertainty and delay to
represent an effective solution.
The CMA has also provisionally
rejected a proposal from DFDS to reduce the original implementation period
before Eurotunnel would be required to stop running ferries in and out of Dover
from six to three months. The CMA considers that the longer period is still
necessary to avoid causing uncertainty for ferry passengers and freight
customers who have advance bookings or annual contracts.
Alasdair Smith, CMA Deputy Panel
Chair and Chairman of the Eurotunnel Remittal Group, said:
MyFerryLink is making losses and
being funded by Eurotunnel. This is causing the current level of competition on
the Dover–Calais route to be unsustainable and is likely to lead to the
exit of a competitor. The interest of cross-Channel customers, both passengers
and freight, will not be well served if Eurotunnel ends up as one of only two
ferry operators in addition to owning the competing rail link.
Eurotunnel’s purchase of ferries means it now has over half the market
and its share will rise further if competitors exit.
It’s much better to have
three competing cross-Channel operators – Eurotunnel running the rail
link and two independent operators on the ferry route.
We have looked again at our
proposed solution of banning Eurotunnel from operating ferries from Dover. We
don’t think any of the alternatives proposed to us will restore effective
competition on the Channel. A six-month notice period before the ban comes into
effect will minimise disruption and uncertainty for ferry
customers.
The CMA will now consider the
responses it has received to its provisional decisions before publishing its
final decision in the remittal next month.
MyFerryLink started a ferry
service on the Dover–Calais route in August 2012, using vessels acquired
by Eurotunnel which were previously owned by SeaFrance before the ferry company
was placed in liquidation in November 2011. The vessels are operated by the
SCOP SeaFrance, a cooperative including many former employees of SeaFrance.
Eurotunnel also operates passenger and freight train services through the
Channel Tunnel between Folkestone and Calais.
The document setting out
our provisional consideration
of possible material changes of circumstances is available on the
inquiry home page. Comments are invited from any interested parties by 5pm on
Tuesday 3 June 2014.
To submit evidence, please
email Eurotunnel.SeaFrance@cma.gsi.gov.uk or write
to:
Inquiry Manager
Eurotunnel remittal
Competition and Markets Authority
Victoria House
Southampton Row
LONDON WC1B 4AD
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.
- 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 8798 or 020 3738 6460