The Competition and Markets Authority has secured an “offer of commitments” from two of Britain’s largest ferry operators, after concerns were raised over their capacity sharing agreement.
P&O Ferries and DFDS Seaways entered into the agreement in a bid to allow freight customers to “turn up and go” at the ports of Dover and Calais, regardless of which operator they booked with.
The competition regulator opened its probe into the deal last November, saying that it was concerned that some aspects of the deal could ultimately lead to higher prices and fewer sailings.
“For example, when implementing this agreement, P&O and DFDS created a single schedule to space out the firms’ departures more evenly,” the CMA said.
“However, as part of this, the companies also removed some journeys entirely from their schedule and documentation gathered by the CMA showed they planned to further reduce the number of sailings in the future.
“Such behaviour could lead to higher prices and less frequent journeys for both tourists and freight customers.”
The watchdog said it was also concerned that the agreement could encourage each company to cancel off-peak sailings at short notice, as it would allow them to keep revenue from customers even if they travelled on the other firm’s ferry.
Such cancellations would cause disruption to freight and tourist customers on the busy Dover-Calais route, and could also lead to higher prices.
In addition, the CMA said it believed the agreement had the potential to fix the amount of freight customers each firm carries in relation to the other.
Fixing amounts in such a way would likely reduce the companies’ incentives to compete for customers by offering lower prices and better service quality.
Following CMA intervention, the two companies had proposed to not agree with one another on the number of sailings that each company operates, put “strict limits” on the number of sailings that they may cancel, and to amend the agreement to make clear that it would not fix the amount of freight customers that either company could carry.
“The ‘turn up and go’ function this agreement provides is without doubt a positive thing for customers,” said CMA executive director of enforcement Michael Grenfell.
“However, as the UK’s competition authority, it is essential that we scrutinise business coordination to make sure it doesn’t lessen competition.
“We found the agreement between P&O Ferries and DFDS was at risk of breaking competition law and could ultimately lead to higher prices and fewer sailings taking place – which is why we stepped in.
“We have taken a close look at the commitments offered by these firms, and will also carefully consider any responses to our consultation, to see whether our concerns are addressed. If they aren’t, our investigation will continue.”
The CMA said it would now consult on the commitments offered, providing an opportunity for third parties to voice any thoughts or concerns.
Reporting by Josh White at Sharecast.com.
