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Badgerline monopoly

16th March 1989, Page 20
16th March 1989
Page 20
Page 20, 16th March 1989 — Badgerline monopoly
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Which of the following most accurately describes the problem?

• Badgerline's takeover of Midland Red West, trading as City Line, is "against the public interest", says a Monopolies & Mergers Commission report published this week.

However, the report finds that Badgerline/City Line's virtual monopoly in and around Bristol (with 82% of routes) has not hurt the travelling public, and the merger will not be reversed if Badgerline can satisfy the Office of Fair Trading that competition will be maintained.

"The quality of the services provided by Badgerline and City Line was generally appreciated and the restoration of inter-availability of tickets between them had been popular with passengers," says the report.

Badgerline's contention that it would keep up service levels to exclude competitors is accepted by the Commission, which concludes that there is "no material loss of potential competition in the provision of commercial services" as a result of the merger. The problem lies in the possibility that the two firms will stop competing for Avon County Council tendered routes, leading to a hike in tender prices and perhaps forcing the cessation of some services.

The Commission believes the Council's fears are well founded. "There was a real expectation that effective competition between Badgerline and City Line for these contracts would disappear as a re suit of the merger," it says. The report concludes: "Divestment would be an unnecessarily drastic remedy if there was a satisfactory alternative which would preserve the benefits arising from the merger." It recommends that within six months, Badgerline should come up with safeguards to protect the tendered services which satisfy the OFT directorgeneral.

Badgerline's group managing director Trevor Smallwood says he is "disappointed with the report's finding, since we largely agree with the views of the dissenters" (two of the sixstrong panel found in favour of the merger). But group marketing director Chris Carr stresses that things could have been worse: "Bearing in mind that we could have been ordered to divest immediately, it is not a bad situation." Can is confident Badgerline can reach agreement with the OFT within the specified six months.

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