Grounds for provisional clearance of First / Greater Western

Competition Commission provisional findings (70 pages, PDF) that FirstGroup's acquisition of the Greater Western passenger rail franchise would not lead to a substantial lessening of competition. There are also 108 pages of appendices in several PDF files.

The basis for the finding appears to be that the Competition Commission thought that there could be no meaningful competition between bus and rail in the relevant area, so that the joint control of bus and rail services could not lessen any competition. Both this finding and the quantitative modelling undertaken rest on a view that there would be as little competition in the counterfactual as in the current situation.

The relevant counterfactual is defined as a world in which the Greater Western rail franchise would be run by a hypothetical operator with no bus overlaps. However, the Commission's analysis is based on evidence that there is little competitive constraint on either bus or rail fares at present: to that extent, the counterfactual is effectively assumed to reflect current market conditions. There appears to be no direct analysis of what competitive constraints would be expected to exist in the relevant counterfactual. The report notes "the apparent high level of bus fares in parts of the GWF area compared to elsewhere in the country", but does not consider whether this might provide information about the competitive effects of the existing bus/rail overlaps. The Commission also discusses the possibility of new competitive bus services being introduced in the counterfactual and dismisses it as a source of competition because it saw "nothing to suggest that FirstGroup's current operation of Great Western had caused it to restrict the development of services in parallel to its rail services".

Short consultation period: Responses by Wednesday 22 February 2006, two weeks after the publication of the report. A summary of the report (5 pages, PDF) was released on Thursday 2 February 2006.

For further information or advice please contact Franck Latrémolière.

Filed under Competition Commission, Merger control, Public transport.

Reckon LLP is an economics consultancy with expertise in data analysis, economic regulation and competition law.

About Reckon