Regulator Mulling Stagecoach Undertakings On East Coast Rail Franchise

  • John Adam
  • 20th February 2015
Regulator Mulling Stagecoach Undertakings On East Coast Rail Franchise

**Regulator Mulling Stagecoach Undertakings On East Coast Rail Franchise**

LONDON (Alliance News) – The Competition and Markets Authority Friday said it is considering undertakings provided by Stagecoach Group PLC after the competition regulator identified two potential competition concerns about a rail franchise contract awarded to Stagecoach and Virgin Group Holdings Ltd.

In November, the UK government awarded the InterCity East Coast rail franchise to Inter City Railways Ltd, a joint venture between Stagecoach, which holds 90%, and Virgin Trains, which holds the remaining balance.
On February 6, Stagecoach said it would work with the UK competition regulator to resolve anti-trust concerns that the regulator raised about the contract. The CMA separately said it found that the franchise award did not raise significant concerns in most areas, but could potentially reduce competition on certain routes, including the overlap of East Coast rail services with East Midland Trains services operated by Stagecoach between Peterborough and Grantham and between Peterborough and Lincoln. It is also concerned about an overlap of rail services with Citylink’s coach services, which are operated and jointly owned by Stagecoach, between Edinburgh and Dundee as well as between Edinburgh and Aberdeen.

“The CMA in its phase 1 investigation found that there is a realistic prospect that the award of the East Coast rail franchise to Inter City Railways would lead to higher fares or reduced service quality for rail passengers travelling on these overlapping routes,” the CMA said on February 6.
“In addition, the CMA was concerned that the award to Inter City Railways may result in higher coach fares or reduced coach services quality, including a reduction in frequency, on these overlapping coach and rail services routes, given that coach services are unregulated,” it added.

Stagecoach said it had noted that the CMA had raised “limited issues” at the time, and has now offered undertakings to the CMA to try and resolve the regulators concerns.
“The undertakings offered by Stagecoach in relation to the rail journeys commit it to a price cap on certain fares set by East Midlands Trains and provide for the ongoing monitoring of such rail fares by the Competition and Markets Authority,” said the Authority Friday.
The CMA said that under Stagecoach’s undertakings, it would not take decisions which may impact the competitiveness of the coach services as against East Coast on the Edinburgh to Dundee and Edinburgh to Aberdeen journeys. These decisions relate to fares, timetables, frequency and service quality, said the Authority.
“The CMA has decided that there are reasonable grounds for believing that the undertakings offered by Stagecoach, or a modified version of them might be accepted,” it said.
The CMA will now conduct a public consultation “shortly,” before making a decision on whether or not to accept Stagecoach’s undertakings by April 21. The Authority said it may extend the deadline if it believes there are any special reasons to do so.
Stagecoach shares were trading slightly lower at 336.70 pence per share on Friday afternoon.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved

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By John Adam
John Adam was one of the Invezz Founding Partners & Lead Editor's up until 2017. John has an unmatched breadth and depth of experience in all things investing, and we wish him the best in his pastures new.
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