Anticipated acquisition by Greater Manchester Buses South Limited of A. Mayne & Son Limited

Affected market: Local bus services in Greater Manchester

No. ME/3398/07

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.

The OFT's decision on reference under section 33(1) given on 10 January 2008. Full text of decision published 16 January 2008.

Please note that square brackets indicate text or figures which have been deleted or replaced with a range at the request of the parties and third parties for reasons of commercial confidentiality.

PARTIES

Greater Manchester Buses South Limited (GMBS) is a wholly owned subsidiary of Stagecoach Group plc (Stagecoach). GMBS operates commercial and tendered local bus services throughout the Greater Manchester area.

A. Mayne & Son Limited (Mayne) operates commercial and tendered local bus services in the Greater Manchester area. Until recently it also operated a Manchester-based coach hire service which is not being acquired by GMBS. In 2006 the turnover of the bus services business that is being transferred was [around £3 million].

TRANSACTION

Mayne was restructured for the purpose of the transaction. The coach hire business has been transferred to Maynes Coaches Limited, a separate company and not part of the transaction [ ]. The entire share capital of Mayne (comprising the bus services business) will be acquired by GMBS for [less than £5 million].

JURISDICTION

As a result of this transaction GMBS and Mayne will cease to be distinct.

The parties overlap in the supply of local bus services in the Greater Manchester area where they have a share of supply of around 30 per cent. As a result the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met. The Office of Fair Trading (OFT) therefore 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.

THIRD PARTY VIEWS

Most third parties (competitors) were unconcerned about the merger. One was concerned that the merger would increase GMBS's already strong position within the Greater Manchester area and between Ashton and Manchester in particular. One customer was concerned that the merger would give GMBS a monopoly on some routes.

ASSESSMENT

The parties overlap in the supply of commercial and tendered local bus services within Greater Manchester. Although not concluding on the product market, the OFT has examined this merger on the basis of commercial services (on a flow by flow basis) and tendered services (within the Greater Manchester area) separately.

For tendered services the OFT considers that after the merger sufficient competition will remain to constrain the merged entity. The OFT has not found it necessary to conclude on whether barriers to entry into tendered services are low, but it does consider that they are likely to be lower than for commercial services and supply side entry from commercial services is likely to be easy. In any case, the OFT recognises that the degree of entry required to offset any loss of competition arising from this merger will not need to be significant.

For commercial services, the parties overlap on 15 flows. On all but one of these the parties are the only two operators. In that one flow First Group and Speedwell also operate bus services and the increment arising from the merger is small. First Group runs a service along the flow significantly more frequently than what does GMBS and will provide effective competition to GMBS after the merger.

On all of the overlapping flows Mayne has a very low share of overall passengers - the largest increment arising as a result of the merger in any of the flows is less than six per cent. The increment arising from the merger on four of the flows is particularly negligible and so the OFT dismissed the possibility of competition concerns occurring as a result of the merger on those flows.

On seven of the flows, the OFT does not consider Mayne to be an effective competitor to GMBS because the frequencies of its buses are considerably less than those of GMBS's buses. Therefore, the OFT does not consider that the merger will lead to a substantial lessening of competition on those seven flows. This approach is in line with the approach taken by the CC in previous bus cases.

In the remaining three overlapping flows, the OFT has observed pricing evidence that demonstrates that Mayne has not exerted a competitive constraint on the prices of GMBS and therefore there is no realistic prospect of a substantial lessening of competition arising as a consequence of the merger on those three flows.

In the main, third parties are unconcerned about the merger.

Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.

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