17 August 2009

"A lessening of competition"

Our headline today is a quote from the Competition Commissions' (CC) interim report on the actions of Stagecoach in purchasing both the ailing Eastbourne Buses and the thorn in its side, nearby Cavendish Renown.

CC deputy chairman and chair of the Inquiry Group, Dr Peter Davis, said: "These two companies were in active competition with each other before Stagecoach bought them. Without Eastbourne Buses and Cavendish coming under common control, we consider it likely these companies would have continued to compete, providing bus services in the Eastbourne area, although potentially on a somewhat reduced scale."

He went onto say that the CC is of the opinion that other operators are reluctant to enter the local market to compete against the now merged operation and that competition between buses and private cars is not enough to stop Stagecoach from taking advantage of this loss of competition it has created.

The provisional conclusion is that a 'substantial' loss of competition is expected as a result of the merger.

The final part of the CC's report will investigate ways to reinvigorate competition while protecting the interests of the passengers. Being considered are the hiving-off of parts of the merged business to another operator; controls on fares and minimum service levels; and moves to encourage new entry by other operators.

The final report will be made known on 27 October. Before then, anyone with specific views should email emily.chissell@cc.gsi.gov.uk or write to Inquiry Manager, Competition Commission, Victoria House, Southampton Row, London, WC1B 4AD.

It is widely assumed that had an operator not stepped into rescue Eastbourne Buses, the world's oldest municipal operator would have folded. Since Stagecoach offered the best deal and were able to make assurances regarding employees' pension schemes that Go-Ahead couldn't, Eastbourne Council sold knowing they'd made the best financial decision for its council tax payers. I think very few people would argue with Stagecoach's intentions here.

But as early as last October (i.e. a month before they'd purchased Eastbourne) it has now been made public that Stagecoach wanted to purchase Eastbourne's main competitor, Cavendish Renown. The cynics have suggested that Stagecoach wanted to be well-placed in case Eastbourne Council didn't want to sell, though in the event Stagecoach went onto purchase the only competition in the area. Had they not done this, by virtue of the interim report issued by the CC, the matter would not have been referred to them.

For the turnover and profit margin Cavendish Renown made, it's been a hefty price for Stagecoach to pay so far - and they've not had bits hived off....yet. Why not have just bought Eastbourne Buses and let the dust settle? I know that 'Stagecoach like to innovate' but this could've been avoided with a few weeks to reflect. (CW)