FirstGroup gets the go-ahead for ScotRail bid

Published on 29/04/2004 01:00

FIRSTGROUP was given the green light to press ahead with its bid for the ScotRail train franchise yesterday, but was warned that it may be hit with a number of regulatory restrictions if it succeeds.

Publishing its report into the Aberdeen firm’s involvement in the race for ScotRail, the Competition Commission said that First - which also operates bus services in and around all of Scotland’s cities - could have too tight a grip on Scotland’s transport infrastructure if it won the franchise.

It would lead to a "substantial lessening of competition," the report said, and First would be in a position to push up fares and cut services to passengers - particularly in the Glasgow and Edinburgh areas.

Nonetheless, the commission said it would not block First’s bid or force the company to sell off any of its bus services if it won the franchise. Instead, it would impose "behavioural remedies" - such as restrictions on pricing and the frequencies of bus and train services.

News of the ruling - which was welcomed by First - sent the company’s shares 3.3 per cent higher to 274.25p. A spokesman for First said: "Initially, when you read the report, you get the impression that we would have complete dominance of Scotland’s transport network, which isn’t the case. But this appears to have been recognised in the ruling.

"The point we’ve made from the beginning is that the rail market and the bus market are two different things."

The Strategic Rail Authority is expected to announce its preferred bidder for the seven-year ScotRail franchise by June. The final decision on who wins the franchise is left to Nicol Stephen, the Executive’s transport minister.

First’s bid was referred to the commission by the Office of Fair Trading amid concerns over the group’s existing market share in the bus market in Scotland.

The firm is up against National Express - the current operator of the ScotRail franchise - and Arriva. National Express recently had its franchise extended until October to account for the delays in the bidding process.

First has been given 21 days to respond to the report and is being allowed the opportunity to suggest other potential "behavioural remedies" that could answer the regulator’s concerns. Third parties with an interest in the ruling have until 13 May to lodge any responses to the report in writing.

First’s spokesman said the board had only been shown a draft of the report late on Tuesday night and had yet to examine the findings in detail. Further discussions with the commission are expected before a formal response is given.

Despite the Executive’s long-term commitment to improving integrated transport links, one of the commission’s suggested restrictions on First is to ban the firm from selling "inter-modal" tickets which would be valid on either trains or busses.

The FirstGroup spokesman said: "There does appear to be something of a dichotomy between what these two branches of government believe in."

A Scottish Executive spokesman said the Competition Commission’s findings "are a matter for FirstGroup and the Competition Commission".