SUMMARY OF BRITISH BUS PLC AND ARROWLINE (TRAVEL) LTD: A REPORT ON THE MERGER

The Secretary of State for Trade and Industry has asked us to investigate and report whether a merger situation qualifying for investigation has been created as a result of the merger between two bus operators, British Bus Plc (British Bus) and Arrowline (Travel) Ltd (Arrowline), trading as Star Line, and if so, whether the creation of that situation operates, or may be expected to operate, against the public interest (see Appendix 1.1).

British Bus, the third largest bus operator in the UK, acquired Arrowline, which was based at Knutsford, in Cheshire, on 27 April 1995.

In relation to the first question, we conclude that a merger situation qualifying for investigation has been created by virtue of the fact that the share of supply test has been met in respect of the area comprising the four districts of Vale Royal, Congleton, Macclesfield and Crewe & Nantwich in Cheshire and Trafford in Greater Manchester (the designated area). British Bus supplied 29.9 per cent of bus services measured by turnover and Arrowline 11.8 per cent in that area.

Regarding the question of the public interest, the merger has brought some benefits. These include modest gains in efficiency for Arrowline and incentives to its drivers to deliver a better quality of service. There is increased scope for expansion of Arrowline's business and the potential for it to be a stronger competitor in Trafford.

On the other hand, the merger has led to a loss of actual competition in the supply of commercial bus services in Macclesfield and of tendered services in most of the designated area. The number of bids for tendered work in Trafford, Vale Royal, Congleton and Crewe & Nantwich has, historically, been greater than in the other districts of Cheshire and Greater Manchester, and we do not believe that the loss of competition here is significant. Furthermore, in relation to these districts there are several other operators both within and outside the designated area which are capable of providing competition.

The situation in Macclesfield is more problematic. There are fewer bidders for tenders and there is also less competition for commercial services than in the rest of the designated area. However, on the commercial side, it appears to us that this district can sustain only one sizeable operator providing the full network of services, and any detriment arising from this merger is therefore limited to the loss of competition on a relatively small number of individual routes. On the tendered side, there has been a reduction in the average number of bids per tender, but we feel there is still some scope for small operators to bid for contracts. We note that FirstBus PLC (FirstBus) is poised and capable of entering this market for both commercial and tendered services and Greater Manchester Buses South Limited (GMBS) already has a small presence there. We note also that Macclesfield accounts for only 12.5 per cent by turnover of bus operations in the designated area.

For these reasons we conclude that, on balance, the merger does not, and may not be expected to, operate against the public interest.

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Last Revised 4/98