Consultation deadline (CC): First / Greater Western

Responses are due by Wednesday 22 February 2006 to the Competition Commission provisional findings (70 pages, PDF) released on Wednesday 8 February 2006 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".

A summary (5 pages, PDF) of the report was published on Thursday 2 February 2006. This highlighted that the Competition Commission limited its analysis to nine routes on which specific bus/rail competition could be foreseen; treated willingness of a local authority to pay for tendered services as a competitive constraint on First; and found that, on routes where competition would be lost, "the profit incentive on those routes and flows to raise fares or reduce frequencies purely in order to transfer passengers from bus to rail is limited" and "insufficient to lead FirstGroup to adopt" such a strategy.

The Competition Commission also relies on terms of the franchise agreement as the basis for dismissing competition concerns about multi-modal ticketing.

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

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