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UK and France at Odds Over My Ferry Link

Thursday 04 July 2013

The future of the former SeaFrance ferry service between Dover and Calais continues to hang in the balance.

The uncertainty about the future of the service is the result of a decision of the UK Competition Commission that Eurotunnel must either sell its two My Ferry Link passenger ships or be prohibited use of the port of Dover.

The decision follows a review of the competition implications of the purchase of the ships belonging to SeaFrance by Eurotunnel in June 2012, after the liquidation of the ferry operator in January 2012.

These ships are now leased by Eurotunnel to a worker’s cooperative operating a ferry service on the Dover-Calais route, a buy-out that was crafted following months of industrial strife in France over the closure of SeaFrance.

However, the decision of the Competition Commission conflicts with that of an earlier decision made by the French competition authority to allow the purchase of the ships by Eurotunnel.

The option to sell-off the ships granted to Eurotunnel similarly comes up against a decision of the French commercial court which oversaw the liquidation of the SeaFrance, who stipulated that Eurotunnel could not divest itself of the ships for at least 5 years.

As a result of these conflicting decisions, the ball has effectively been put into the lap of the two governments to try and reach solution.

Before they do so, Eurotunnel have made a tribunal appeal against the decision of the UK Competition Commission, which they consider to be "incomprehensible and seriously disproportionate". That hearing has commenced but the outcome may not be known for several months. If they find in favour of Eurotunnel it may get everyone off the hook, although it could then place in jeopardy other cross-channel services.

In their report the UK Competition Commission state that Eurotunnel already controlled 40% of the cross-channel traffic and that control of the ferry service would give it a too dominant a position in the market.

They argued that there was substantial over capacity in the cross-channel market, and that the decision by Eurotunnel to acquire the former SeaFrance assets was motivated by a desire to ensure that they were not purchased by DFDS/LD, one of the other main operators on this route and a bidder for the SeaFrance assets.

The purchase by Eurotunnel was a defensive measure, to prevent cross-channel ferry prices being driven down, and thereby adversely impacting on their car and rail tunnel service.

Nevertheless, in a somewhat contradictory prognosis, the Competition Commission state that, with the control of SeaFrance, Eurotunnel could use its dominant position in the market to drive down ferry prices and ultimately push out competitors.

They state: "We have noted that (Eurotunnel's) rationale for the merger was largely based on removing DFDS from the short-sea market. For so long as overcapacity exists in the short-sea market, the risk of exit by DFDS/LD from the Dover–Calais route remains high, and the incentive for (Eurotunnel) to bring about its exit remains un-changed. Were DFDS/LD to exit the Dover–Calais route, this would result in the market-weakening aspect of the substantial lessening of competition that we have identified."

In reaching its conclusion the Commission admitted there was no clear remedy to resolving the dominant position of Eurotunnel that was not going to cause considerable difficulty in one form or another.

Whilst it is conceivable that the consent of the French court could be obtained to divest itself of the ships, the Commission considered that the process of obtaining this approval was uncertain, as was the timescale for doing so.

Accordingly, it felt that the only other possible solution was to ban their use of the Dover port for a minimum of ten years.

The Commission has given Eurotunnel six months to sell its ships or face the ban, which may be extended as a result of the appeal.

Matt Davies, Managing Director of the leading ferry ticket agency Direct Ferries says, “Whatever the final outcome of this matter, all the evidence to date indicates customers are benefiting from a high degree of price competition in the market”.

"We are currently offering return prices between Dover and Calais for as little as £19 each way", he says.

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