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GB passenger rail franchise merger control rules

The Railways Act 1993 established a special rule for the application of merger control provisions (now under the Enterprise Act 2002) to the award of a passenger rail franchise (now by the Department for Transport) to a franchisee.

Scope and counterfactual

Section 66(3) of the Railways Act 1993 specifies that a franchise award is to be considered as a take-over of an enterprise operating the train services by the successful bidder, and is subject to merger control on that basis.

This has the effect of requiring the competition effects of joint ownership of competing rail or bus services to be re-investigated afresh through a merger control process when a franchise is re-awarded to its incumbent. See this Reckon paper for details of this point.

Timing of merger control inquiry

Up to 2006 the inquiries took place at various times in the process, depending on when bidders chose to notify their proposed transactions. In several cases the franchise award decision was made during the course of the Competition Commission merger inquiry, leading to the abandonment of the investigations in the competition aspects of the bids of unsuccessful bidders.

In 2006 the relevant authorities agreed that the merger control process would only be triggered once a franchise has been awarded.

Precedents

As of June 2007, all OFT and Competition Commission inquiries undertaken under these provisions have led to a clearance, sometimes subject to undertakings (including fare controls on bus services that would have competed with the franchised rail services). The Competition Commission has never blocked a bid for a franchise or a franchise award.

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Last changed by Franck at 10:02 PM on Saturday 21 July 2007.

Reference for this page:
Reckon Open "GB passenger rail franchise merger control rules" 2007-07-21T22:02:56