Completed acquisition by Stagecoach Bus Holdings Limited of Cavalier Contracts Limited

Affected market: bus services

No. ME/3703/08

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 22(2)(a) given on 18 September 2008. Full text of decision published 26 September 2008.

PARTIES

Stagecoach Bus Holdings Limited (Stagecoach) is part of the Stagecoach Group, an international public transportation group with operations in the UK, USA and Canada. Stagecoach Group's UK bus division operates 7,000 vehicles across a number of regional operating companies in more than 100 towns and cities in the UK. The two Stagecoach operating companies relevant to this merger are Viscount Bus and Coach Company Limited and Cambus Limited.

Cavalier Contracts Limited (Cavalier) is a local bus company operating bus services and contracts throughout Cambridgeshire and southern Lincolnshire. It operated 78 vehicles primarily from its operating bases at Long Sutton, March and Huntingdon. The turnover associated with those parts of Cavalier's business acquired by Stagecoach was £5 million in its last financial year. Since completion of the acquisition, Cavalier was renamed Stagecoach in the Fens Limited.

TRANSACTION

The acquisition of the full share capital of Cavalier by Stagecoach completed on 31 March 2008.

The OFT's statutory deadline for deciding whether to refer the merger to the Competition Commission (CC), extended under sections 25(1) and 25(2) of the Enterprise Act 2002 (the Act), is 18 September 2008.

JURISDICTION

As a result of this transaction Stagecoach and Cavalier have ceased to be distinct. The parties overlap in the supply of bus services in Cambridgeshire, where their combined share of supply is above 25 per cent and therefore the share of supply test in section 23 of the Act is met. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.

THIRD PARTY VIEWS

The OFT has conducted an extensive consultation with third parties in the investigation of this merger. Specific third party comments were dealt with throughout the text of the decision.

Most third parties were unconcerned about the merger. In particular, the three local councils contacted by the OFT (Cambridge County, Peterborough City and Lincolnshire County) not only were unconcerned but also thought the merger would have a positive impact on their communities.

ASSESSMENT

The parties overlap in the supply of commercial bus services on three commercial flows, on the Cambridge Guided Busway. They are both present in the wider area of Cambridgeshire and Peterborough.

On the three overlapping commercial flows, the OFT considered that the merger does not create competition concerns, in particular in view of the threat of expansion and/or entry by other bus operators.

On the wider area comprising Cambridgeshire and Peterborough, the OFT considered whether Cavalier exerted a significant competitive constraint on Stagecoach, or vice-versa, even when not currently competing on a flow-by-flow basis, as a potential competitor. However, the OFT could not find any evidence that Cavalier should be regarded as a potential competitor on Stagecoach (or vice-versa) such that its removal generated competition concerns. The OFT also considered that, even if such a constraint exists, Cavalier is not in a unique position: Whippet remains as an independent competitor post-merger, is in a similar position towards Stagecoach as Cavalier was pre-merger.

The OFT considers that the removal of Cavalier as an independent competitor on the Busway creates the realistic prospect of a substantial lessening of competition, as it is it is more than fanciful that the merger will allow Stagecoach to increase prices or decrease service levels on the Busway in comparison to what the conditions would have been absent the merger. Despite the important role played by the Council in seeking to ensure that prices on the Busway are not excessive, the OFT considers that it may be the case that its incentives and powers are not sufficient to dismiss the possibility of anti-competitive effects arising from the merger.

Consequently, the OFT believes that it 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.

However, the OFT has decided to exercise its discretion not to refer this merger to the CC on the basis that the market concerned is of insufficient importance to justify a reference. Overall, although the factors are relatively finely balanced in this case, the OFT considers that the evidence points towards the impact of the merger being relatively small. In particular, the size of the market is well below the £10 million threshold, there is only a relatively low probability of anti-competitive effects arising from the merger, and these, if they occur, will be of limited scope for the reasons discussed above.

DECISION

This merger will therefore not be referred to the Competition Commission pursuant to section 22(2)(a) of the Act.

Back to top