**UPDATE: Regulator Mulls 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, and signalled that it is minded to accept the remedies.
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 Stagecoach had also pledged not to take decisions on the East Coast rail service which may impact the competitiveness of coach services 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 said it welcomed the regulator’s announcement that it has reasonable grounds to believe that the undertakings Stagecoach has proposed are acceptable to address the issues the CMA has identified.
Stagecoach added that it and Virgin have worked closely with the existing operator of the franchise ahead of the start of the contract in March. “Both partners are finalising arrangements to ensure a smooth transition for customers and employees and the running of services under the Virgin Trains East Coast brand as planned,” Stagecoach said in a statement.
Stagecoach shares were trading up 1.0% at 340.30 pence per share on Friday afternoon.
By Joshua Warner; firstname.lastname@example.org; @JoshAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved