EWS to sell part of Marcroft's in-field maintenance business

Competition Commission final report (89 pages, PDF) on EWS' take-over of wagon engineering firm Marcroft. The Commission found that the transaction could lead to a substantial lessening of competition in the rail freight haulage market, because it would enable EWS to increase its rivals' costs by disrupting the wagon maintenance services provided by Marcroft. This theory rests on the Commission's finding that Marcroft was, and will be, not fully constrained by competition from other wagon maintenance providers. This is in line with the emerging conclusions.

The report considers whether such disruption of haulage competitor's maintenance arrangements would constitute an abuse of a dominant position by EWS/Marcroft and be prohibited as such by Article 82 or the Competition Act 1998. The Commission argues that there is "uncertainty surrounding the application of the prohibition to allegations of excessive pricing", points out that "there have been few decisions by either the OFT (and sectoral regulators) or the European Commission finding abuse on the basis of excessive prices", and highlights the very long delays involved in competition law enforcement in the past as "illustrative of the practical considerations that may arise in the enforcement process" (whilst wishing "to make clear that we are not making any criticism of the conduct and effectiveness of the enforcement process itself"). Together these factors are taken to indicate that competition law enforcement would not provide an effective remedy against the risk identified, and the Commission took the view that the legal requirement to comply with competition law was not sufficient to prevent a substantial lessening of competition in practice.

The Commission found that a divestment of all or part of Marcroft outstations business was necessary to remedy this lessening of competition. After extended negotiations the Commission appears likely to agree to a partial divestment whereby EWS would sell only the part of Marcroft's business providing in-field maintenance to six customers (1,852 wagons). There are also some appendices to the report.

For further information or advice please contact Franck Latrémolière.

Filed under Competition Commission, Public transport.

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

About Reckon