On 20 May 2014, the UK competition regulator, the Competition and Markets Authority (CMA), provisionally reaffirmed the view of its predecessor the Competition Commission (CC) and upheld a ban on Eurotunnel, the channel tunnel operator, from continuing to operate a ferry service between Dover and Calais. The provisional decision is significant as it demonstrates that the UK regulator will continue (in their view) to vigorously enforce competitive markets, even if that enforcement amounts to a ban on access to market for a dominant player.
In 2012, Eurotunnel acquired the liquidated Dover to Calais ferry business of SeaFrance and rebranded the business as MyFerryLink. The CC in June 2013 considered the purchase and decided that Eurotunnel would continue to subsidise the loss making ferry business from its tunnel business and force one of the other ferry competitors out to become one of two operators on the route. This would also increase Eurotunnel’s market share of the Dover to Calais transport market to over half and that this dominant position was undesirable to consumers and would likely lead to higher ticket prices.
Eurotunnel challenged that decision of the CC and proposed that the MyFerryLink business (which is a partnership with a co-operative of the former SeaFrance employees) could find funding independently and operate the service independently from Eurotunnel. Alongside this proposal, the CMA has re-examined the ban to assess whether there has been any substantial change in the market since it took over from the CC.
The CMA has provisionally ruled that there has been no such change in market conditions and has upheld the CC’s original decision that Eurotunnel should withdraw from the market within 6 months. It considered that the independent proposal by the SeaFrance co-operative would cause too much delay and uncertainty to a fragile market. Interestingly, the CMA did find in Eurotunnel’s favour that the 6 month window should not be shortened, as suggested by a competitor, on the basis that it would cause instability and disadvantage customers with advance bookings.
The current decision by the CMA clearly puts the number of competitors and the likely effect on consumer ticket prices, top of the agenda when studying the competitive effect of acquisitions on transport routes. Companies operating in similar markets and considering acquisitions would be well advised to examine their proposals in detail following this latest move by the new CMA.
The CMA’s final decision on the matter is due next month.