The UK Competition and Markets Authority (CMA) has banned Groupe Eurotunnel from operating its MyFerryLink ferry services from Dover, UK, to Calais, France, for ten years.
Primarily run by a cooperative comprised of former SeaFrance employees know as SCOP SeaFrance, MyFerryLink has a fleet of three vessels, which were acquired by Groupe Eurotunnel following the liquidation of its former close competitor SeaFrance in January 2012. The vessels recommenced service on the Dover-Calais route on 20 August 2012 and MyFerryLink currently operates up to 24 daily crossings on the route. Groupe Eurotunnel also provides rail transport services to passengers and freight customers and runs the Le Shuttle car carrier service.
In June 2013, the UK Competition Commission (CC) prohibited Groupe Eurotunnel from operating ferry services from the Port of Dover, due to pricing concerns. The CC indicated that by adding ferry services to its existing Channel Tunnel business, Eurotunnel would increase its market share to more than 50%, which would cause prices to rise for passengers and freight customers due to lack of competition on the route.
While passenger growth on the Dover-Calais route has been greater than originally anticipated, at least two of the ferry operators have made substantial losses in that period. The CMA believes that if Eurotunnel is allowed to continue its ferry service, one competitor is likely to withdraw from the Dover–Calais route, which would leave Eurotunnel as the operator of both the rail link and one of two ferry services operating on the route.
“With two 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,” said Alasdair Smith, chairman of the Eurotunnel Remittal Group and deputy chair of the CMA chair. “That will leave Eurotunnel, which is funding MyFerryLink’s current losses, as one of only two ferry operators in addition to owning the competing rail link.”
Last year, Groupe Eurotunnel appealed the proposed decision, prompting the CC to investigate whether Groupe Eurotunnel and SCOP SeaFrance acquired an enterprise giving rise to a merger under the UK merger control rules. A report published by the CMA on 27 June confirmed that the acquired assets did constitute an enterprise and had enabled Groupe Eurotunnel 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.
Consequently, the CMA has rejected SCOP’s proposal to operate the service independently from Eurotunnel, which would require the company to have access to substantial financing. According to the CMA, the proposal would be subject to too much uncertainty, risk and delay to represent an effective solution. However, it has recommended that Groupe Eurotunnel sells the MyFerryLink business to an independent purchaser. To enable the company to find an independent buyer, there will be a six-month notice period before the ban comes into effect.
“It would be much better for passengers and freight customers to have three competing cross-Channel operators – with Eurotunnel running the rail link and two independent operators on the ferry route,” said Alasdair Smith, chairman of the Eurotunnel Remittal Group and deputy chair of the CMA chair. “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.”
Groupe Eurotunnel has contested the decision, revealing that it will appeal to the Competition Appeal Tribunal to seek its review of the CMA’s revised conclusions.
“We continue fundamentally to disagree with the CMA on a number of critical points, » said the company in a statement on its MyFerryLink website. “First and foremost, we do not consider that the CMA has jurisdiction to review the transaction as a matter of UK merger law. It is also manifestly the case that the CMA’s decision will reduce choice and is bad for consumers, bad for competition and bad for all those involved in cross-Channel operations including staff, employees, customers and the wider regions in both Dover and Calais.”
The company said that by removing a competitor from the market, the CMA “is creating a de facto duopoly in the maritime sector”, which will lead to an increase in prices for consumers and a reduction in revenues for the ports of Dover and Calais.
“The decision by the CMA is a denial of the reality of the situation,” said Jacques Gounon, chairman and CEO of Groupe Eurotunnel. “It penalises the consumer and puts 600 people out of work without any real justification.”
The company has also reassured customers that services will continue to operate. “Given that any appeal is unlikely to be finally determined until much later this year at the earliest, we would like to reassure our loyal customers that we will continue to operate our full schedule throughout the summer season and beyond,” it said in a statement.