SUMMARY OF THE GO-AHEAD
GROUP PLC AND OK MOTOR SERVICES LIMITED: A REPORT ON THE MERGER SITUATION
In a reference dated 8 September 1995 (see Appendix
1.1) the Secretary of State for Trade and Industry asked us to investigate
and report on the acquisition by The Go-Ahead Group PLC (Go-Ahead) of
OK Motor Services Limited (a bus operator, referred to in this report
simply as OK), OK Motor Services (Travel) Limited (a travel agency and
tour operator), and OK Travel (Inclusive Tours) Limited (a coach tour
operator) for a consideration of 5.4 million.
The reference area consists of the counties of Tyne & Wear,
Durham, Cleveland and four adjacent districts or parts of districts in
Northumberland. At the time of the merger in March 1995, Go-Ahead was
the second largest bus operator in the reference area with a market share
of 29.2 per cent. It operated chiefly in Tyne & Wear and north
Durham. OK was the fifth largest operator with a market share of 5.4 per
cent. It operated widely throughout the reference area, with a majority
of its services being in south Tyne & Wear and Durham.
The bus market in the reference area is dominated by
four large national operators (including Go-Ahead), the others being
Stagecoach Holdings plc (Stagecoach), which has the largest market share,
National Express Group PLC (National Express) and British Bus PLC (British
Bus). Following the merger these four operators together have a 95 per
cent share of the market in the reference area. Each operator has a core
territory within which it is dominant and this limits competition between
them. However, the territories overlap and there is competition on the
main corridors served by Go-Ahead. Within Tyne & Wear competition
is also provided by the Metro and the NewcastleSunderland railway.
The merger has resulted in a slight loss of competition
for commercial bus services. However, we believe that the competition
Go-Ahead continues to face from other bus operators and, on parts of
its network, from other modes of transport such as the Metro will be
sufficient to prevent this loss of competition with OK from producing
adverse consequences for bus users. We also expect that the level of
competition between major bus operators in the reference area will increase
in future, at least to a limited extent, as a consequence of reduced
opportunities to expand by acquisition. This increased competition will
offset the loss arising from the merger.
The merger has also resulted in a loss of competition
for tendered services. However, we consider that the number of potential
competitors for tendered services remains sufficiently large that it
would not be right to conclude that the loss of OK would in itself have
a direct impact on tender prices. In addition, as OK was in a financially
weak state, its loss as an independent competitor would probably have
occurred in the absence of the merger.
The merger will bring some benefits, including efficiency
savings arising from the combined operation of Go-Ahead and OK, greater
inter-availability of tickets and improved passenger information.
We do not consider that the acquisition by Go-Ahead
of OK Motor Services (Travel) Limited and OK Travel (Inclusive Tours)
Limited will have any impact on the travel agency and coach tour markets
in the reference area.
In view of these considerations we conclude that the
merger does not operate and may be expected not to operate against the
public interest. One member of the Group, Professor Pickering, disagrees.
His views are set out in a note of dissent following Chapter 2.
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