The Competition and Markets Authority (CMA) announced in October that it would carry out a review of the undertakings given in relation to the completed acquisition by FirstBus plc of SB Holdings Ltd (SBH) in 1996. FirstBus changed its name to FirstGroup in 1997.
The undertakings limit the fares that FirstGroup can charge and require the company to maintain a minimum level of service in some areas. They also govern some aspects of how FirstGroup schedules its services.
In a provisional decision published today, the group of independent CMA panel members carrying out the review have found that the undertakings are no longer appropriate due to a change in circumstances.
Phil Evans, chair of the FirstGroup undertakings review group, said:
We have examined each of the initial concerns about the merger that ultimately led to the undertakings being imposed. We have provisionally found that the constraint that rival operators now place on FirstGroup is as great, if not greater, than the constraint that FirstBus and SBH placed on each other before the merger and think the undertakings should be lifted.
We recognise that if the undertakings are removed, FirstGroup might restructure some of its fares and routes. The undertakings artificially held prices down in some areas and required the maintenance of otherwise unprofitable routes. This both reduced the chances of a rival bus operator bringing in a competing service which could benefit passengers and made investment in better bus services uneconomic.
We place strong weight on the fact that in hearings there was universal agreement from competitors and public transport authorities that the undertakings were either having little effect or having harmful effects.
Further details, including the CMA’s summary of its provisional decision and notice of intention to release the undertakings, can be found on the case page.
Anyone wishing to respond to the provisional decision should do so in writing, by 5pm on 5 April 2016. Please email email@example.com, or write to:
FirstGroup Undertakings Review
Competition and Markets Authority
London WC1B 4AD
Notes for editors
- The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law.
- The members of the review group are: Phil Evans (Chair), Jayne Scott, and Roger Finbow.
- The undertakings, affecting FirstGroup’s bus business, were given by FirstGroup to the then Secretary of State for Trade and Industry in 2002 following a review in 1997 by the Monopolies and Mergers Commission of the FirstBus acquisition of SBH. The undertakings were subsequently varied following the Competition Commission’s review of the undertakings in 2008.
- The fares cap applies to FirstGroup operations in the First Edinburgh and First Glasgow areas. The First Edinburgh area comprises the unitary authorities of Stirling, Clackmannanshire, Falkirk, West Lothian, Midlothian, East Lothian and the Scottish Borders. The First Glasgow area comprises the unitary authorities of the City of Glasgow, North Lanarkshire, South Lanarkshire, East Dunbartonshire, West Dunbartonshire and East Renfrewshire. The requirement to operate a minimum level of service also known as the ‘mileage floor’ applies to FirstGroup operations in the First Edinburgh area. The price cap and mileage floor do not extend to Edinburgh.
- The CMA has the ability to supersede, vary or release certain undertakings accepted under the Fair Trading Act 1973; this includes the FirstGroup undertakings. This power is exercisable in the same circumstances, and on the same terms and conditions as applied to the Secretary of State under the Fair Trading Act 1973; namely that by reason of any change of circumstances the undertakings are no longer appropriate and need to be varied, superseded or released.
- For more information on the CMA see our homepage or follow us on Twitter @CMAgovuk, Flickr and LinkedIn.
- Enquiries should be directed to Rory Taylor (firstname.lastname@example.org, 020 3738 6798).