Great North Eastern Railway Ltd / InterCity East Coast Franchise

OFT closed case: Anticipated acquisition by Great North Eastern Railway Limited of the InterCity East Coast Franchise.

Affected market: Rail franchise

No. ME/1372/04

The OFT's decision on reference under section 33(1) given on 21 December 2004

PARTIES

Great North Eastern Railway Limited (GNER) operates the InterCity East Coast (ICEC) rail franchise on behalf of its parent company GNER Holdings Limited (GNER Holdings) which is the current ICEC franchisee. The franchise ends on 1 May 2005. In the 52 weeks to 4 January 2004, GNER's UK turnover was £429,083,000.

InterCity East Coast Franchise (ICEC) operates long distance high speed passenger rail transport services linking London with parts of East Anglia, East Midlands, Yorkshire, northeast England and Scotland. As stated above, it is currently operated by GNER and its turnover for the 52 weeks ended 4 January 2004 was £429,083,000 (see [note 1]).

TRANSACTION

GNER has submitted a bid to the Strategic Rail Authority (SRA) to operate the ICEC franchise commencing on 1 May 2005. The entry into a franchise agreement will, pursuant to section 66(3) of the Railways Act 1993, constitute an acquisition of control leading to the ICEC franchise business and the business of GNER ceasing to be distinct.

A satisfactory notification was submitted on 31 October 2004 and the 40 working day administrative deadline is 24 December 2004.

BACKGROUND

The anticipated merger arises from a competition for the award of the ICEC franchise commencing on 1 May 2005. In May 2004, the SRA announced that four parties, one of which is GNER, had successfully pre-qualified as bidders for the franchise. The other pre-qualified bidders are: Danish Railways (DSB) and First London, Scottish and North East Railway Ltd (First Group plc), and InterCity Railways Limited (Virgin/Stagecoach). The SRA issued an Invitation to Tender to the pre-qualified bidders on 6 October 2004 and is expected to announce its preferred bid in February 2005.

JURISDICTION

As a result of this transaction the businesses controlled by GNER and the ICEC franchise will cease to be distinct. The UK turnover of the ICEC franchise exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.

RELEVANT MARKET

The parties do not overlap in the supply of any good or service. GNER's ultimate parent company, Sea Containers Limited (see [note 2], operates cross-Channel ferry services between England and France and charters special train services for on-board holidays and excursions in the UK. These services are considered to be entirely distinct from, and therefore do not compete with, the ICEC's scheduled rail passenger services.

THIRD PARTY VIEWS

No third parties expressed concerns. 

ASSESSMENT

No overlaps or vertical competition issues are created by the merger. Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.

NOTES

  1. The correct date is 3 January 2004.
  2. The correct name is Sea Containers Ltd.

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