Competition & Markets Authority raises concerns over East Coast franchise

Competition & Markets Authority raises concerns over East Coast franchise

The Competition & Markets Authority has raised concerns over the operation of the East Coast franchise, which is due to be handed back to private hands after five years under government control.

The organisation reviewed whether competition concerns could arise given the coach and rail services already operated by Stagecoach Group, which is due to take over control of the line alongside partner Virgin Rail.

The CMA found that the franchise award did not raise significant concerns in most areas, but could potentially reduce competition on some routes.

The include the overlap of East Coast rail services with East Midland Trains services operated by Stagecoach between Peterborough and Grantham and between Peterborough and Lincoln.

On both of these overlapping rail services there is no other rail operator and only a minimal coach service, the CMA pointed out.

ADVERTISEMENT

There was also concern over the overlap of East Coast 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 only competing public transport services are provided by ScotRail and Arriva Cross Country.

The CMA’s analysis recognises that important aspects of rail services are regulated and also governed by increasingly prescriptive franchise agreements.

However, 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.

In addition, the CMA was concerned that the award to ICRL 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.

The CMA did not have sufficient evidence to suggest that private transport, including transportation by car, is a sufficiently strong constraint on any of the overlap flows it considered.

Andrea Coscelli, executive director, markets and mergers, CMA, and decision maker in this case, said: “Our investigation has shown that no significant competition concerns arise on most routes where East Coast services overlap with existing Stagecoach or Virgin Trains rail or coach services.

“However, we found that the award could give rise to higher fares or reduced service quality for rail passengers travelling between Peterborough, Grantham and Lincoln and for coach and rail passengers travelling between Edinburgh, Dundee and Aberdeen, in some cases possibly affecting thousands of consumers relying on public transport services.”

ICRL can now offer a resolution to these concerns to avoid the award being referred for an in-depth phase 2 investigation.

The CMA looked carefully at whether competition concerns could arise on other routes, but found that competition between East Coast rail services and existing services of Stagecoach and Virgin Group Holdings (Virgin Trains) was limited and/or that ICRL will continue to face sufficient competition from other operators.

This includes routes between London and Scotland, where both the East Coast and West Coast rail services will be operated by consortia of Stagecoach and Virgin Trains.

The evidence examined by the CMA indicated that competition between the East Coast and West Coast rail services was limited and that air services between London, Edinburgh and Glasgow provide significant rivalry to the rail services.