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Eurotunnel to fight on after Competition Commission bans MyFerryLink

[ June 6, 2013   //   Chris ]

Eurotunnel said it would launch an appeal against a UK Competition Commission decision on 6 June to prohibit it from operating its MyFerryLink service and to ban its vessels from the port of Dover. In a statement, Groupe Eurotunnel said it would “immediately appeal this decision which the group finds incomprehensible and seriously disproportionate.”

The Competition Commission decided that the tunnel operator’s acquisition of three ferries and other assets from the former ferry operator, SeaFrance, could mean higher prices for cross-Channel passengers and freight customers in its final report, published on 6 June. The CC concluded that by adding ferry services to its existing Channel Tunnel business, Eurotunnel would increase its market share to over half and prices would rise. The report comes as no surprise following the CC’s provisional findings published in February.

The CC argued that Eurotunnel acquired the SeaFrance ferries in order to prevent rival ferry operator DFDS/LD from buying them as it was concerned that if DFDS/LD obtained the assets cheaply, it could drive down prices for customers. Moreover, the CC also found that one of the three current ferry operators on the Dover–Calais route was likely to exit in the short term, if the CC took no action, in which case Eurotunnel could gain an even larger share of the cross-Channel market.

Chairman of the Eurotunnel/SeaFrance Inquiry Group and CC deputy chairman, Alasdair Smith, said: “It cannot be good for competition when Eurotunnel, which already holds a market share of over 40%, moves into the ferry business – particularly when it did so to stop a competitor from buying the ferries. Customers would lose out from Eurotunnel increasing its share even further and being able to raise prices on the tunnel services.”

He added: “In view of the current excess capacity on the Dover–Calais route, it also seems likely that one of the current ferry operators will exit in the short term if we don’t take action. 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. By preventing Eurotunnel from operating ferry services out of Dover, we can protect the interests of customers. We did consider ordering Eurotunnel to sell the ferries but we were conscious of the uncertainties and possible delays affecting a sale.

“We can achieve the same outcome this way and it should be clear that we will not be diverted from ensuring the best result for customers.’

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 in August 2012 under the MyFerryLink brand. At the time of the sale the French Commercial Court made an order prohibiting the onward sale by Eurotunnel of the vessels until 2017, so an order by the CC to sell the MyFerryLink business would be subject to delay and uncertainty as it would require the French Court to lift its order.

Before the prohibition at Dover takes effect, Eurotunnel will be given a limited period to sell its two largest ferries to one or more purchasers approved by the CC.

Eurotunnel riposted that the CC’s decision was “not based on any concrete facts, but solely upon a random association of virtual hypothesis” and that the move would create a duopoly of maritime operations on the Straits of Dover into a duopoly, which would disadvantage consumers.

Moreover, prohibiting access to a por flew in the face of EU freedom of movement rules.

The decision also ignored the ruling of the Paris Commercial Court linking the sale of the assets of SeaFrance with a requirement not to re-sell them for a period of five years and was in contradiction with the decision of the French Competition Authority.

Eurotunnel Group chairman and chief executive officer Jacques Gounon, concluded: “This decision by the Competition Commission will reduce the choice of services across the Straits of Dover to the detriment of the consumer. It will inevitably lead to an increase in the price of a crossing”.

Tags: eurotunnel, Myferrylink