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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