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11.07.17

CMA raises competition concerns over SW franchise award to First MTR

The government market regulator has today raised concern about the award of the South Western franchise to First MTR.

In March, the franchise was awarded to the company, which is a joint venture between First Group and Hong Kong based firm MTR.

The Competition and Markets Authority (CMA) has been investigating the award of the new franchise (which is due to start on 20 August) since May, and on the majority of the routes there were found to be no issues with competition.   

However, the regulator has now intervened as it argues that there could be a lack of competition on the route between London and Exeter, as FirstGroup also run the GWR franchise, which is the only other route down to the south west.

This could mean that passengers using this route could end up paying higher fares and receive a worse service due to a lack of competition.

Andrea Coscelli, acting chief executive and decision-maker of the CMA, said: “This is a crucial rail route to the south west, used by around half a million passengers a year. It’s therefore vital that passengers do not suffer as a result of reduced competition.

“The CMA believes that without its intervention, FirstGroup may be able to increase fares for passengers between London and Exeter, as it will be the only rail operator running all services on this route.

“We look forward to hearing from the companies involved about how they think they can overcome this.”

Both FirstGroup and MTR have now been given the opportunity to offer proposals (known as ‘undertakings in lieu of reference’) to ensure that the concerns identified by the CMA are addressed.

If the suggestions tabled by the two companies are considered sufficient then they will avoid an in-depth phase 2 investigation.

Previously, the CMA had ruled on a similar issue with the award of the Northern franchise, and in this case, the winning operator Arriva agreed to cap fares on the route to resolve the regulator’s concerns.

It also follows the CMA clearing the award of the TPE franchise to FirstGroup last year as it found that competition on the route would not be negatively affected.  

A spokesperson for FirstGroup told RTM: “We have been discussing our plans for the new South Western franchise with the CMA for several months.

“Now that this update gives more clarity, we look forward to submitting our proposals on this issue which we envisage will satisfy their concerns.”

First MTR will now have five working days to propose their undertakings, and the CMA will announce its preliminary decision on whether these measures are sufficient by 25 July.

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Comments

Andrew Gwilt   11/07/2017 at 18:49

But where will the Class 707's go to once the new Aventra trains have been delivered and has replaced the Class 455's, Class 456's, Class 458's and Class 707's. Why can't First MTR Southwestern Railway keep the Class 707's but get rid of the converted Class 458/5's and the Class 455's & Class 456's. Southern could receive the Class 707's that would replace the Class 455's used on the South London suburban routes. Or could the Class 707's go to East Midlands Trains or c2c or perhaps to be scrapped.

Jimbo   11/07/2017 at 23:06

@Andrew Gwilt - 707's again?!? in a comment on an article that is nothing to do with rolling stock ?? The answer to your question is market forces.

Jimbo   11/07/2017 at 23:12

Why is a kind of monopoly on London to Exeter services an issue? First already has a monopoly on services from London to Cardiff. The CMA didn't do anything when Thameslink & Southern services from London to Brighton were combined into a monopoly, and there are many other locations where a monopoly exists on the railways. That is before you consider all the alternatives to railways. Besides, very few people travel all the way from London Waterloo to Exeter because the service from Paddington is far quicker. Most of the people arriving at Exeter have joined the train at the intermediate stations. Lastly, isn't the CMA leaving this a bit late - the new contract goes live next month.

Andrew Gwilt   11/07/2017 at 23:22

@Jimbo. First MTR SWR will only use the Class 707's for up to 2018/2019 when new trains are being built that SWR have ordered.

Noam Bleicher   12/07/2017 at 11:11

Jimbo is right - the LSWR route caters for a completely different market to the GWR one. I suspect the number of passengers doing the full WAT EXD journey for any purposes other than scenery is vanishingly small given how long it takes. You might as well ask why LUL are 'competing' with SWT from central London to Richmond!

Brian Armitage   12/07/2017 at 15:58

Further to Jimbo's observation, perhaps the CMA would like to look at Stagecoach's share of services out of Euston/St Pancras/ Kings Cross?

Rail Realist   13/07/2017 at 10:26

Actually, there are a significant number of people who use the SW Trains service from London to Exeter and particularly from Clapham Junction. It saves having to cross London with luggage if arriving at the latter on a Southern Train. Ok, it might take a bit longer but Exeter Central is much handier for the city than St Davids. The fares are also much cheaper on a like for like basis ignoring any special offers. the CMA is right to raise this

Peter Long   14/07/2017 at 12:19

what about the Bristol route plus megatrain fares?

Andrew JG   16/07/2017 at 19:27

Was thinking if Trenitalia c2c could use the Class 707's to add extra trains and to introduce more extra seats during rush hour. Even though c2c are ordering 18 new trains as they got 74 Class 357's with 17 of the Class 357's have been converted to 357/3's with metro style seats and some are operating on Fenchurch St-Grays via Rainham and Upminster-Grays services. Or could Southern might use the Class 707's to replace the Class 455's on South London suburban routes. Or could the Class 707's end up being scrapped which is a waste of money since Siemens have built the Class 707's.

Andrew Gwilt   16/07/2017 at 19:29

Ok I get it. Jimbo is right. Goodness sake.

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