Tuesday, May 20, 2014

RoRo Freight and Passenger Ferry Row Reaches the Final Rounds

Last Chance to Have a Say in the Future of Seaborne Cross Channel Trade
Shipping News Feature

UK – FRANCE – It seems the end may be in sight for the long running saga which began with the demise of cross channel freight and passenger ferry company SeaFrance back in January 2012. The phoenix rising from those particular ashes was RoRo operator MyFerryLink, basically a rescue plan funded by Channel tunnel operator Groupe Eurotunnel which was embraced by the French but which was subsequently knocked back as illegal by the UK’s Competition Commission last June after referral from the Office of Fair Trading (OFT).

The Commission’s decision that the ownership of MyFerryLink meant one body controlled over 50% of cross channel trade, thus creating an environment in which it would prove uneconomic for more than two seaborne services to operate, was subsequently overturned on appeal in December by the Competition Appeal Tribunal. This decision in turn was provisionally reversed in March when the matter was referred back to the Commission for a rethink and it is this ‘final’ decision which the UK’s Competition and Markets Authority (CMA), which has taken over duties from the now defunct OFT, has supported.

The grounds for closing a service which employs so many, particularly French, staff who had previously found themselves out of work obviously have to be strong and Eurotunnel has put up an instant defence in a statement saying:

"Two years after the acquisition of three ferries and following the decision of the Appeal Tribunal, which rejected the original decision by the Competition Commission, Groupe Eurotunnel submitted to the Competition and Markets Authority (CMA) that a material change of market had occurred, based upon the 12% growth since SeaFrance ceased its operations.

"Groupe Eurotunnel believes that, when stating that there has been no material change, the CMA simply seeks to justify the Competition Commission’s original analysis, despite the change in the facts relating to the market. Groupe Eurotunnel believes that the CMA's preliminary decision is based upon an erroneous analysis of the significant changes in the cross-Channel ferry market since the Competition Commission's original findings relating to the market in 2012."

The basis of the Eurotunnel defence is simply that market growth has been far greater than the 2% predicted by the CMA and that the rival likely to be most affected by the perceived overcapacity, DFDS (which in fact also made a bid for SeaFrance assets), continues to operate successfully in the market, whereas the Competition Commission's original decision was based on the premise that DFDS would rapidly be forced to exit the market.

The CMA however points out that MyFerryLink has actually run at a loss since the service started and, during its considerations, it has provisionally rejected an alternative proposal from the workers’ cooperative formed by former SeaFrance employees (SCOP) to operate the service independently from Eurotunnel. This remedy would require the SCOP to have access to substantial new financing and the CMA believes that the proposal as it stands would be subject to too much uncertainty and delay to represent an effective solution. Alasdair Smith, CMA Deputy Panel Chair and Chairman of the Eurotunnel Remittal Group, said:

“MyFerryLink is making losses and being funded by Eurotunnel. This is causing the current level of competition on the Dover–Calais route to be unsustainable and is likely to lead to the exit of a competitor. The interest of cross-Channel customers, both passengers and freight, will not be well served if Eurotunnel ends up as one of only two ferry operators in addition to owning the competing rail link. Eurotunnel’s purchase of ferries means it now has over half the market and its share will rise further if competitors exit.

“It’s much better to have three competing cross-Channel operators, Eurotunnel running the rail link and two independent operators on the ferry route. We have looked again at our proposed solution of banning Eurotunnel from operating ferries from Dover. We don’t think any of the alternatives proposed to us will restore effective competition on the Channel. A six-month notice period before the ban comes into effect will minimise disruption and uncertainty for ferry customers.”

The CMA has also provisionally rejected a proposal from DFDS to reduce the original implementation period before Eurotunnel would be required to stop running ferries in and out of Dover from six to three months. The CMA considers that the longer period is still necessary to avoid the aforementioned uncertainty for ferry passengers and freight customers who have advance bookings or annual contracts.

Note however all those ‘provisionals’, there is a document on the CMA site setting out ‘provisional consideration’ of possible material changes of circumstances, together with an invitation for interested parties to comment by 5pm on Tuesday 3 June 2014 via an e mail to eurotunnel.SeaFrance@cma.gsi.gov.uk or by post to: Eurotunnel remittal, Competition and Markets Authority, Victoria House, Southampton Row, London WC1B 4AD. Following the responses it receives to its provisional decisions the CMA will consider the matter further before publishing its final decision in the remittal next month.