McGills merger: OFT refers to competition commission

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McGills more than doubled in size after the Arriva Scotland West takeover
McGills more than doubled in size after the Arriva Scotland West takeover

Worries about the consequences of route monopolies lead to CC referal

The OFT has referred the completed acquisition by McGill’s Bus Services of the Arriva Scotland West local bus business to the Competition Commission. The £10m takeover deal was announced in December 2011, which caused McGills to more than double in size.

McGill’s operates close to 200 vehicles from it’s Greenock and Barrhead depots and took on Arriva’s depots in Johnstone and Inchinnan, along with 165 buses. Arriva Scotland West operates competing local bus services in Renfrewshire and East Renfrewshire, to the west of Glasgow, including the town of Paisley. The OFT expressed concern because of their strength in this area compared to other operators, which could mean the merger may result in a loss of competition of local bus services in this area.

The merger reduces competition on a number of sections of routes where the parties previously competed and creates a monopoly for sections of some journeys, such as those in and around Paisley. The OFT is concerned the merger removes the potential competitive constraint each party exercised on the other services across the Renfrewshire region.

Although other bus companies operate at some level in this region, the OFT is concerned the main constraint each of the merging parties faced in terms of restricting entry and expansion by rival operators was from the other.

Ali Nikpay, Senior Director and Decision Maker in this case, said: “The Competition Commission’s market investigation into the bus industry showed how important competition between bus operators at a local level is. Where local competition exists, the OFT will look carefully at mergers between rivals which have the potential to result in price rises or a reduction in journeys for passengers. As such, we believe it is appropriate the Competition Commission reviews this merger in detail to ensure the interests of passengers in this part of Scotland are protected.”

The merger was reported to the OFT by the MP for Paisley and Renfrewshire North, Jim Sheridan.

Mr Sheridan said: “One company having a monopoly of routes in the area is not a healthy situation for the travelling public, particularly in an area where travel by bus was the only option for many.”

A spokesman from McGills said: “We can confirm we received notification from our lawyers that the OFT has referred our acquisition of the assets of Arriva Scotland West to the Competition Commission for investigation. The full details of the decision have yet to be disclosed by the OFT.”

Ralph Roberts, McGill’s Managing Director said: “We are disappointed to hear of the OFT’s decision. Despite McGill’s offering a number of guarantees to the OFT in relation to fares, routes, frequencies and the introduction of a multi-operator ticket; we now face another six months of uncertainty. The decision throws into sharp relief that we have a London-based government agency having a direct impact on local business, without the required local market knowledge.”

He added: “McGill’s has saved jobs and bus routes in Renfrewshire following Arriva’s decision to withdraw from the Scottish marketplace. Had we not done so, we would be witnessing a similar scene here as we have seen in Dalkeith and Musselburgh in recent weeks, with the loss of over 200 jobs.”

The Competition Commission is expected to report by Tuesday October 2.