The Competition & Markets Authority has provisionally confirmed an earlier decision by the Competition Commission that Eurotunnel should be barred from operating a ferry service from Dover.
This follows a review of whether circumstances had changed enough in the market for it to alter its original decision.
In 2012, the Channel Tunnel operator acquired the three ferries and related assets of the former SeaFrance (now liquidated) and recommenced a ferry service on the Dover–Calais route under the MyFerryLink brand.
In June last year, the Competition Commission decided that by adding the ferries to its existing Channel Tunnel business Eurotunnel would increase its share of the market to over half - and was likely to end up as one of only two ferry operators on the route - leading to price rises for passengers and freight customers.
Following a legal challenge to that decision, the CC considered again whether the acquisition of the ferries by Eurotunnel, in partnership with a workers’ cooperative formed by former SeaFrance employees (known as the SCOP SeaFrance), qualifies as a merger under the UK merger control rules, after the issue was remitted to the CC by the Competition Appeal Tribunal (CAT).
In March the CC provisionally ruled that it did have jurisdiction to make the decision.
The Competition & Markets Authority took over the case from the CC at the start of April.
The CMA has now also looked at whether there have been any material changes in the market which should lead it to reconsider its decision.
Passenger growth on the Dover–Calais route has been greater than originally anticipated, but at least two of the ferry operators are still making substantial losses.
The provisional view of the CMA is that, if Eurotunnel is allowed to continue its ferry service from Dover, a competitor is likely to withdraw from Dover-Calais.
This would leave Eurotunnel as the operator both of the rail link and one of two ferry services operating between Dover and Calais.
The CMA has also looked at its original remedy which bans Eurotunnel from running ferry services from Dover.
It has provisionally rejected an alternative proposal from the SCOP to operate the service independently from Eurotunnel.
This remedy would require the SCOP to have access to substantial new financing and the CMA believes that the proposal as it stands would be subject to too much uncertainty and delay to represent an effective solution.
The CMA has also provisionally rejected a proposal from DFDS to reduce the original implementation period before Eurotunnel would be required to stop running ferries in and out of Dover from six to three months.
The CMA considers that the longer period is still necessary to avoid causing uncertainty for ferry passengers and freight customers who have advance bookings or annual contracts.
Alasdair Smith, CMA deputy panel chair and chairman of the Eurotunnel Remittal Group, said: “MyFerryLink is making losses and being funded by Eurotunnel.
“This is causing the current level of competition on the Dover–Calais route to be unsustainable and is likely to lead to the exit of a competitor.
“The interest of cross-Channel customers, both passengers and freight, will not be well served if Eurotunnel ends up as one of only two ferry operators in addition to owning the competing rail link.
“Eurotunnel’s purchase of ferries means it now has over half the market and its share will rise further if competitors exit.
“It’s much better to have three competing cross-Channel operators – Eurotunnel running the rail link and two independent operators on the ferry route.
“We have looked again at our proposed solution of banning Eurotunnel from operating ferries from Dover.
“We don’t think any of the alternatives proposed to us will restore effective competition on the Channel.
“A six-month notice period before the ban comes into effect will minimise disruption and uncertainty for ferry customers.”
The CMA will now consider the responses it has received to its provisional decisions before publishing its final decision in the remittal next month.
MyFerryLink started a ferry service on the Dover–Calais route in August 2012, using vessels acquired by Eurotunnel which were previously owned by SeaFrance before the ferry company was placed in liquidation in November 2011.
The vessels are operated by the SCOP SeaFrance, a cooperative including many former employees of SeaFrance.
Eurotunnel also operates passenger and freight train services through the Channel Tunnel between Folkestone and Calais.