On 15 March 2018, the Competition and Markets Authority (CMA) published a final version of its guidance on its approach to assessment of UK rail franchise awards under merger control rules, which includes a short guide for bidders and a more detailed guidance note, available here.
The guidance is largely derived from decisional practice and builds on a well-established approach. Rail franchisees now have clear and consolidated reference documents they can use when considering their strategy for dealing with any potential merger control issues relating to the award of a rail franchise.
The CMA has a statutory duty to review the award of rail franchises, as part of its wider duty to promote competition for the benefit of consumers.
The CMA had opened a consultation on draft guidance in October 2017. The CMA made only minor clarifications to the final version of the guidance, which suggests that there was little opposition to the CMA's approach.
The guidance helpfully sets out the basis of the CMA's competitive assessment of franchise awards in detail, explaining that: the CMA looks at rail-rail flow overlaps and bus-rail flow overlaps; when a significant number of flow overlaps are identified, the CMA applies filters to eliminate the flow overlaps that are not likely to lead to competition issues; and the CMA then assesses the remaining flow overlaps in terms of the franchisee's ability and incentive to increase prices, increase journey times, reduce the frequency of the services, and/or reduce the quality of the services. The guidance appropriately recognises that certain franchise models are less likely to raise competition concerns than others (those that impose restrictions on a franchisee's commercial freedom being least likely to raise concerns from a competition perspective).
The guidance also gives clarity on timing and puts in writing the CMA's aim of completing merger reviews prior to franchise start dates.
Do get in touch if you have any questions in relation to the application of the merger control rules to any contemplated rail franchise bid.