Cross-Channel Car Ferries: A report on the existence or possible existence of a monopoly situation in relation to the supply in the United Kingdom of cross-Channel car ferry services and on a proposal to enter into agreements for the joint or co-ordinated supply of such services

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Summary

On 24 July 1989, the Director General of Fair Trading asked the Commission to investigate cross-Channel car ferry services between the ports of Dover, Folkestone or Ramsgate and the ports of Boulogne, Calais or Dunkirk. (The reference is at Appendix 1.1; a map illustrating cross-Channel car ferry routes is at Figure 1.1). A monopoly situation exists in favour of a number of subsidiaries of Peninsular and Oriental Steam Navigation Company (P & O), all part of the P & O European Ferries Division (P&OEF); a similar monopoly situation also exists in favour of Sealink (UK) Ltd (Sealink), and its subsidiary Hoverspeed (UK) Ltd.

We were asked to consider the effect on the public interest of a proposal by P & O and Sealink to enter into agreements for the joint or co-ordinated supply of the reference services. The joint service (which would exclude Hoverspeed) would involve co-ordination of sailings, interchangeable tickets, agreement on fares, and pooling of revenues. P & O and Sealink are at present prevented from operating such a service by undertakings which followed previous reports of the Commission, but argued that a joint service, to be introduced in 1991, was the only way in which they would be able to provide effective competition to the Channel tunnel, at present planned to open in 1993.

The participants in the proposed joint service, including Société Nationale des Chemins de fer Francais-Armement Naval (SNCF), Sealink's partner in an existing joint service on these routes, together accounted in 1987 for some 78 per cent of passenger vehicles carried on the reference routes and Sealink's subsidiary Hoverspeed for a further 14 per cent. In our view, competition between P&OEF and Sealink has been to the benefit of passengers, by moderating fare increases, and encouraging improvements in quality of service. This competition would be eliminated by the proposal. We do not believe that sufficient competition would be provided by Sally Line, the only other ferry operator included in the reference services, or by other routes which involve longer crossing times and generally higher fares (and on which P&OEF and Sealink and their partners in existing pooling arrangements are themselves the major operators), or by other forms of travel. Nor do we see any likelihood of competition from new entrants before the tunnel opens. We have concluded, therefore, that the proposal will result in a reduction of competition and choice, higher fares and poorer quality of service in the period until the tunnel opens. We do not believe that there would be offsetting benefits to the public interest in this period.

We considered whether a joint service introduced in 1991 would have such adverse effects after the tunnel opened-or whether it could be authorised later without detriment to competition. The tunnel will be a very strong competitor to the ferries on the reference routes, but there is considerable uncertainty about the future pricing strategies of the tunnel and the ferries. The tunnel could, for example, base its fares on those of the ferries and itself adopt the higher level of fares which we believe would result from the joint service. In our view, however, it would be impracticable now accurately to evaluate the effects on competition between the tunnel and the ferries.

We do not believe that the proposal offers sufficient prospects of benefit to competition after the tunnel opens to offset the substantial and irremediable detriment to competition in the interim. We do not accept that any joint service would need to be introduced so far in advance of the tunnel's opening. Should the proposal be disallowed, we also consider it unlikely that both operators would withdraw from the services after the tunnel opens. Given the inherent advantages of the Dover-Calais route, should one operator withdraw, ferry operations on this route should still be able to offer effective competition to the tunnel; one member, however, did not agree with this view.

We have concluded that the proposal may be expected to operate against the public interest. We do not believe that the adverse effects of the proposal can be adequately remedied by regulation of price or quality of service. We have accordingly recommended that the proposal should not be allowed.

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