OFT refers local bus merger to the Competition Commission

32-12 18 April 2012

The OFT today referred the completed acquisition by McGill's Bus Services Limited (McGill's) of the Arriva Scotland West local bus business to the Competition Commission.

McGill's and Arriva Scotland West operate competing local bus services in Renfrewshire and East Renfrewshire, to the west of Glasgow, including the town of Paisley. The OFT is concerned that, because of their strength in this area compared to other operators, the merger will result in a loss of competition of local bus services in this area.

The merger reduces competition on a number of sections of routes where the parties previously competed, and creates a monopoly for sections of some journeys. Furthermore, the OFT is concerned that the merger removes the potential competitive constraint that each party exercised on the other across the Renfrewshire region. Although there are other bus companies operating at some level in this region, the OFT is concerned that the main constraint that each of the merging parties faced in terms of restricting entry and expansion by rival operators was from the other.

Ali Nikpay, Senior Director and Decision Maker in this case, said:

'The Competition Commission's market investigation into the bus industry shwed how important competition between bus operators at a local level is.

'Where local competition exists, the OFT will look carefully at mergers between rivals that have the potential to result in price rises or a reduction in journeys for passengers. As such, we believe it is appropriate that the Competition Commission reviews this merger in detail to ensure that the interests of passengers in this part of Scotland are protected'.

The Competition Commission is expected to report by Tuesday 2 October.

NOTES

The Competition Commission has carried out a market investigation into the local bus industry. The final report was published on 20 December 2011 - see Competition Commission sets out future destination for bus market.
The Reference Test - the OFT has a duty to make a reference to the Competition Commission if the OFT believes that it is or may be the case that a relevant merger situation has been created and the creation of that situation has resulted or may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises, and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million, or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.
The Competition Commission may extend the 24 week period within which it is required to publish its report by no more than eight weeks if it considers that there are special reasons why the report cannot be published within that period.
The text of this decision will be placed in the mergers section as soon as is reasonably practicable.

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