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12.09.16

Arriva’s Northern takeover could lead to some ‘significantly’ higher fares, CMA finds

There is a risk of higher fares on a number of rail routes in the north because of Arriva’s integration with Northern, the competition watchdog has said.

Arriva pledged an £800m programme of improvements after it took over the franchise in April, but the merger was halted by the Competition and Markets Authority (CMA), which then announced an in-depth investigation into the risk that it could lessen competition on some routes where Arriva already operates rail or bus services.

The provisional findings of the investigation suggest that there is no risk of higher fares on most routes, but there is “a substantial lessening of competition” (SLC) on the Leeds to Sheffield, Wakefield to Sheffield, Chester to Manchester and Chester to Stockport rail routes.

Phil Evans, chair of the inquiry, said: “We assessed the franchise award thoroughly and have provisionally found that it could lead to higher fares for passengers on some local rail and bus services in the north of England, which would be significant for consumers using these services.

“However, we have not identified competition concerns arising from this merger on most routes and we recognise Arriva’s commitment to bringing a range of benefits through the Northern rail franchise to passengers, such as better trains and improved customer service. Our remedies will protect passengers in the relatively few local areas where we have identified competition concerns.

“We are now inviting responses to our provisional findings and remedies notice, and will continue to assess all the evidence before we make our final decision.”

Arriva operates CrossCountry, Chiltern, Arriva Trains Wales, Grand Central and the open access Alliance Rail service, as well as London Overground, Tyne and Wear Metro and 5,900 bus services.

The CMA said there was also a risk of higher fares on nine bus routes where Arriva operates services – three in the Redcar area, two in the Huddersfield area, one in the Darlington area and three in Northumberland.

It is now considering a number of remedies, including introducing a restriction on fare increases.

Restriction on fare increases is ‘likely’

The CMA’s report noted the inquiry group’s “current view” is that a restriction is “likely to be effective” and proportionate.

However, it said it is unlikely to introduce a “structural remedy” such as disposal or franchising of some of Arriva’s operations.

The report describes a structural remedy as “effective” but “unnecessary” because of the relatively small number of flows affected by competition concerns.

Chris Burchell, managing director of Arriva UK Trains, said: “We are pleased that the CMA in their provisional findings have recognised Arriva’s commitment to bringing a range of benefits to passengers through the Northern rail franchise, including through better trains and improved customer service.

“We have maintained throughout this process that the operation of the Northern franchise by Arriva alongside our existing bus and rail businesses does not create any competition concerns and so we are disappointed that the CMA has identified a small number of these in a handful of local areas.

“This remains an on-going process and Arriva is committed to continuing to engage constructively with the CMA to resolve their concerns and demonstrate that the award of the Northern rail franchise doesn’t lessen competition.

“We remain fully committed to delivering our transformational plans for the Northern franchise for the benefit of all our passengers.”

The CMA is seeking views from interested parties on the best remedies to impose on Arriva, including alternatives to those it is currently considering. Anyone wishing to respond to the provisional remedies should do so by 23 September, and anyone wishing to respond to the initial findings of the investigation should do so by 30 September.

To respond, email arrivanorthern@cma.gsi.gov.uk or write to: Project Manager, Arriva/Northern merger inquiry, Competition and Markets Authority, Victoria House, Southampton Row, London, WC1B 4AD.

(Image c. Phil Noble from PA Images)

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Comments

Tim   12/09/2016 at 17:25

Love how the Arriva boss has unilaterally decided that the merger "does not create any competition concerns"... Uh, mate, there's an entire quango running a full investigation to decide that, I think your interests in this might be slightly vested. As a regular passenger on one of those routes, I'd like to suggest to him that having no competition definitely DOES create competition concerns...

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