Ban on Eurotunnel ferry service confirmed by CMA
The Competition and Markets Authority (CMA) has confirmed its decision that Eurotunnel should be barred from operating its MyFerryLink service from Dover.
The decision comes as a result of the CMA confirming that it has jurisdiction over Groupe Eurotunnel's (GET's) acquisition of 3 ferries and related assets that previously belonged to the ferry operator SeaFrance and that developments in the market since the Competition Commission's (CC's) (see Notes for editors) original decision in June 2013 do not provide any reason to change that decision.
Eurotunnel will be given 6 months to stop running services from the date of an order to that effect. It could also find another owner for the MyFerryLink business, if that made MyFerryLink completely independent of Eurotunnel.
Alasdair Smith, Chairman of the Eurotunnel Remittal Group and CMA Panel Deputy Chair, said:
"With 2 of the operators on the Dover-Calais route making substantial losses, it remains our view that the current level of competition on the route is unsustainable and likely to lead to the exit of a competitor. That will leave Eurotunnel, which is funding MyFerryLink's current losses, as one of only 2 ferry operators in addition to owning the competing rail link. Eurotunnel's purchase of the ferries means it now has over half the market and its share will rise further if competitors exit.
It would be much better for passengers and freight customers to have 3 competing cross-Channel operators " with Eurotunnel running the rail link and 2 independent operators on the ferry route. We will stop MyFerryLink running services out of Dover while it is owned by Eurotunnel but we would not prevent Eurotunnel from finding a suitable purchaser that was completely independent of Eurotunnel to operate the ferry service.
Our primary concern is to protect competition on the route for the benefit of customers. We are conscious of the potential effect of our decision on the jobs of the MyFerryLink workers. However, there will also be job losses if MyFerryLink remains on the route and another operator leaves.
In order to reduce disruption and uncertainty for ferry customers, and to enable Eurotunnel to find an independent purchaser for the business if it chooses to sever its links with the ferry operations, there will be a 6-month notice period before the ban comes into effect."
In 2012, the Channel Tunnel operator acquired the 3 ferries and related assets of the former SeaFrance operation (now liquidated) and recommenced a ferry service on the Dover-Calais route under the MyFerryLink brand.
In June 2013, the CC decided that by adding the ferries to its existing Channel Tunnel business Eurotunnel would increase its share of the market to over half - and was likely to end up as one of only 2 ferry operators on the route - leading to price rises for passengers and freight customers.
Following a legal challenge to that decision, the CC considered again whether GET, together with a workers' cooperative formed by former SeaFrance employees (known as SCOP SeaFrance), acquired an "enterprise" giving rise to a merger under the UK merger control rules, after the issue was remitted to the CC by the Competition Appeal Tribunal (CAT) in December. The report published by the CMA today confirms the provisional decision made in March that the acquired assets did constitute an enterprise and had enabled GET and SCOP SeaFrance to establish ferry operations more quickly, more cheaply and with less risk than if alternative assets had been separately acquired in the market.
The CMA has also looked at whether there have been any material changes in the market which should lead it to reconsider its remedies decision. Although passenger growth on the Dover-Calais route has been greater than originally anticipated, at least 2 of the ferry operators are still making substantial losses. The CMA has concluded that, if Eurotunnel is allowed to continue its ferry service from Dover, a competitor is likely to withdraw from the Dover-Calais route. This would leave Eurotunnel as the operator both of the rail link and 1 of 2 ferry services operating between Dover and Calais. This confirms the provisional decision on this issue which was published in May.
The CMA rejected an alternative proposal from the SCOP to operate the service independently from Eurotunnel. This remedy would require the SCOP to have access to substantial financing and the CMA believes that the proposal as it stands would be subject to too much uncertainty, risk and delay to represent an effective solution. The CMA has also rejected a proposal from DFDS (one of the other ferry operators) to reduce the original implementation period before Eurotunnel would be required to stop running ferries in and out of Dover from 6 to 3 months.
Eurotunnel started a ferry service on the Dover-Calais route in August 2012 under the MyFerryLink brand, using vessels which were owned and operated by SeaFrance before it was placed in liquidation in November 2011. Eurotunnel also operates passenger and freight train services through the Channel Tunnel between Folkestone and Calais. The former SeaFrance vessels are operated by the SCOP SeaFrance under a commercialisation agreement with Eurotunnel. SCOP SeaFrance is a cooperative mainly composed of former employees of SeaFrance.