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UK Regulator Questions Eurotunnel Ferry Deal

Tuesday 05 March 2013

The UK Competition Commission has questioned the purchase by Eurotunnel of the three ferries belonging to the former SeaFrance.

Cross-Channel passengers and freight customers could face higher prices following Eurotunnel’s acquisition of three ferries from the former ferry operator, SeaFrance, the UK Competition Commission (CC) has provisionally found.

According to a summary of the CC’s provisional findings published last month, by adding ferry services to its existing Channel Tunnel business, Eurotunnel would significantly increase its already high share of the cross-Channel market and prices would rise.

The CC also found that Eurotunnel decided to acquire the SeaFrance ferries in order to prevent ferry operator DFDS/LD from buying them. Eurotunnel was concerned that if DFDS/LD obtained the assets cheaply, it could drive down prices for customers.

Chairman of the Eurotunnel/SeaFrance Inquiry Group and CC Deputy Chairman, Alasdair Smith, said:

‘It would seem that Eurotunnel moved into the ferry business because it was concerned at the increased competition it would face if another operator bought the assets. Given that the company already holds a market share of over 40 per cent, we’re concerned that customers could lose out from Eurotunnel increasing its share even further and being able to raise prices on the tunnel services.

‘In view of the current excess capacity on the Dover–Calais route, it also seems likely that one of the current ferry operators is likely to exit in the short to medium term. We think that customers will be better off if there are two independent ferry companies competing with the tunnel than if one of the two is owned by Eurotunnel.

Eurotunnel provides rail transport services to both passengers and freight customers across the narrowest section of the English Channel via the Channel Tunnel. Until November 2011, SeaFrance provided ferry services to both passengers and freight customers across the same section of the English Channel between Dover and Calais.

Three of the four vessels and other related assets operated by SeaFrance at the time of its liquidation were subsequently bought by Eurotunnel which then launched ferry services between Calais and Dover on 20 August 2012 under the MyFerryLink brand.

In a statement Eurotunnel said it was not surprised by the CC's decision but would question it as the French Competition Authority had already approved the deal. Moreover, the company believed that ''the existing ferry operators in the Short Straits market have sought to use the process initiated by the British Competition Authorities to protect their own interests from new entrants and increased competition''.

According to Eurotunnel, a new ferry operator in the cross-Channel market will tighten the competition, offering an additional choice for the customers.

The company stated it would continue to work with the CC to settle the concerns of the existing ferry operators.

The CC is expected to publish its final report by 14 April 2013.

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