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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