First Group to Get Derailed?: The CMA launches an investigation into the proposed West Coast Rail franchise

December 4, 2019

2 min read

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What's going on here?

The CMA raises concerns about the negative consumer impact of the proposed West Coast Rail franchise.

What does this mean?

The proposed West Coast Rail franchise, controlled by First Group and Trenitalia, is set to takeover Virgin Trains’ West Coast line in 2020. Following an investigation into the proposed rail franchise, the Competition and Markets Authority (CMA) has flagged potential negative impacts on consumers.  The warnings target 21 routes linking London with North-West England and Scotland. The potential impact for consumers refers to higher fares and less availability of cheaper tickets. In addition, passengers would have no alternative providers to choose from, increasing the risk of anti-competition practices: First Group controls Transpennine Express, the only other alternative. First Group stated they are working closely with the CMA, yet the CMA warns that it is ready to start a more in-depth Phase 2 investigation should First Group fail to submit sufficient proposals.

What's the big picture effect?

The decision to launch the investigation should not come as a surprise, given the size of the combined yearly turnover of the two companies. Indeed, it has actually been described as “expected” by a First Group spokesperson. However, it links two important events for the CMA and the railway industry. 

First, it came ahead of the publication of the rail review commissioned by the government. The preliminary conclusion indicates the ineffectiveness of the franchise system and the need to replace it with a different system to protect passenger`s interest. 

Second, the investigation arrives at a time of shift in the CMA’s role. In its February mission statement for change, the CMA has requested more investigation and fining powers, alongside a change in its statutory duty, from promoting competition to treating the consumer interest as paramount. Such a shift will most likely result in an increase in consumer enforcement action by the CMA. As Lord Tyire, CMA Chair, put it: “the task of rebuilding public trust and confidence requires much more. It requires the CMA to be a more visible and vocal consumer champion”. 

Large scale cases like this, and more importantly their outcomes, will no doubt be indicative of how the CMA’s role will or will not change and as such it is crucial to keep an eye on how this case develops.

Report written by Bogdan Ciacli

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