OFT refers local bus merger in North Devon to the Competition Commission

59/12 10 July 2012

The OFT today referred Stagecoach Group PLC's (Stagecoach) anticipated acquisition of the North Devon business and assets of First Devon and Cornwall Limited (First) to the Competition Commission, due to concerns the merger will reduce competition in local bus services in the area.

Stagecoach and First operate competing local bus services in North Devon, including in and around the town of Barnstaple. The OFT is concerned that the proposed merger would reduce competition on a number of route sections where the parties currently compete and create a monopoly for several journeys in the area around Barnstaple.

Given this expected reduction in competition, the OFT considers it appropriate to refer the merger to the Competition Commission for an in-depth review.

Although the annual value of the markets concerned is comparatively limited (between £2.5 million and £3.2 million), the OFT considers that the potential impact of the merger in terms of harm to passengers in North Devon is particularly significant. The OFT is also mindful that, as the Competition Commission noted in its recent market investigation report, mergers involving the sale of local bus operations are highly replicable across the country; this fact reinforces the OFT's view that a reference to the Competition Commission is appropriate in this case.

Amelia Fletcher, Senior Director and Decision Maker in this case said:

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

'Mergers between rivals in local markets can 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 Devon are protected.'

The Competition Commission is expected to report by 24 December 2012.

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 arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation and the creation of that situation 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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