Watchdog pauses investigation into First Group’s West Coast Rail franchise
The UK’s competition watchdog has paused its investigation into the decision to award the West Coast Rail franchise to First Group after the company offered to make changes to the deal.
The Competition and Markets Authority (CMA) said last week it would escalate its probe into First Group’s joint venture with Trenitalia on the route unless the companies agreed to make changes, such as imposing a price cap on the line.
The company’s share price jumped 4.52 per cent to 110.4p following the announcement.
Read more: First Group shares sink as losses widen
Today the regulator said it had “reasonable grounds” to believe adaptations offered by the companies could satisfy its concerns.
Under its phase one investigation, the CMA highlighted competition concerns on 21 routes where passengers would only be able to choose between train companies affiliated with First Group.
An initial investigation found that the joint venture could “lead to higher fares and less availability of cheaper tickets.”
In previous cases, such as the award of the East Midlands franchise to Abellio and First Group and MTR’s acquisition of South Western, the CMA’s concerns were resolved after the firms agreed to cap prices on the route.
In a statement today the watchdog said: “The CMA considers that there are reasonable grounds for believing that the undertakings offered by First Group and Trenitalia or a modified version of them, might be accepted by the CMA under the Enterprise Act 2002.”
Read more: CMA flags competition concerns on West Coast Rail franchise
Yesterday First Group reported a loss before tax of £187.1m in the six months to the end of September, up from a £4.6m loss a year ago, despite a seven per cent rise in revenue to £3.53bn.