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Eurotunnel Ferry Move Could Mean Price Rises

(c) Sky News 2013

Passengers and freight firms may face higher ticket prices following Eurotunnel (Paris: FR0010533075 - news) 's purchase of three ferries from defunct operator SeaFrance, according to the competition watchdog.

By adding ferry services to its existing Channel Tunnel business, Eurotunnel would "significantly increase" its already high share of the cross-Channel market and prices would rise, the Competition Commission (CC) has provisionally found.

The watchdog said Eurotunnel decided to acquire the SeaFrance ferries in order to prevent ferry operator DFDS (Copenhagen: DFDS.CO - news) /LD Lines from buying them.

Eurotunnel was concerned that if DFDS/LD Lines acquired the assets cheaply, it could drive down prices for customers, the CC found.

The group last year branched out into sea transport with the 65m euros (£56m) purchase of three of the ships formerly operated by SeaFrance, a unit of French railway operator SNCF that went into liquidation early last year.

France's competition watchdog cleared the takeover which saw Eurotunnel launch ferry services between Dover and Calais on August 20, under the MyFerryLink brand.

Alasdair Smith, deputy chairman of the CC and chair of the Eurotunnel/SeaFrance Inquiry Group, said: "It would seem that Eurotunnel moved into the ferry business because it was concerned at the increased competition it would face if another operator bought the assets.

"Given that the company already holds a market share of over 40%, we're concerned that customers could lose out from Eurotunnel increasing its share even further and being able to raise prices on the tunnel services.

"In view of the current excess capacity on the Dover-Calais route, it also seems likely that one of the current ferry operators is likely to exit in the short to medium term.

"We think that 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.

"We will now look at how we can protect competition in this market. Whilst our focus is primarily on customers' interests, we will also consider carefully the interests of the ferry employees," he added.

In its report, the CC said DFDS/LD would be likely to cease operating services between Dover and Calais in the short to medium term "in the context of excess capacity and continuing competition from MFL".

P&O Ferries, MyFerryLink and DFDS/LD are the three operators which currently run cross-Channel ferry services on the Dover-Calais route.

Groupe Eurotunnel said it would be challenging the finding that the addition of a new operator was "detrimental to competition and could lead to an increase in prices".

It said the acquisition of the former SeaFrance ships - nine months after the company ceased all operations - and the creation of a new competitor meant increased competition and customers had an "additional choice".

Jacques Gounon, chairman and CEO of Groupe Eurotunnel, said: "Eurotunnel intends to continue to work with the Competition Commission to allay the concerns raised by existing ferry operators and to demonstrate that the creation of MyFerryLink is a good thing for the market as it is both pro-customer and pro-competition."

The CC is expected to publish its final report by April 14.

Eurotunnel operates the vehicle shuttle services in the Channel Tunnel between Britain and France and earns revenue on other freight and passenger trains that pass through the tunnel.

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