CELEX: 32015M7483
Language: en
Date: 2015-03-18 00:00:00
Title: Commission Decision of 18/03/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7483 - ABELLIO TRANSPORT / SCOTRAIL) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                        Brussels, 18.3.2015
                                        C(2015) 1950 final

                                        [pic]

To the notifying party:

Dear Sir/Madam,

Subject:    Case M.7483 – ABELLIO TRANSPORT / SCOTRAIL
         Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement on the European
         Economic Area[2]

 1) On 11 February 2015, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC)  No
    139/2004, by which Abellio Scotrail Limited ("Abellio Scotrail", UK) acquires within the meaning of Article 3(1)(b) of the Merger Regulation
    the Scotrail franchise ("the Franchise", UK) by way of public bid (the "Transaction"). Abellio Scotrail and the Franchise  will  hereinafter
    be referred to as "the Parties".

       THE PARTIES

 2) Abellio Scotrail is a subsidiary of Abellio Transport Holding BV ("Abellio", the Netherlands),  a  wholly  owned  subsidiary  of  the  Dutch
    Railways, Nederlandse Spoorwegen ("NS", the Netherlands), ultimately controlled by the State of Netherlands. Abellio Scotrail is established
    to bid for and operate the Franchise.

 3) Abellio was created to tender for and commercially operate a number of passenger railway concessions  or  franchise  contracts  outside  the
    Netherlands. It is active in the UK, Germany and Sweden. In the UK, Abellio's subsidiaries currently operate the Merseyrail  concession  and
    the Northern Franchise, both jointly with Serco Group plc, as well as the Greater Anglia Franchise.

 4) The Franchise, currently operated by a subsidiary of First Group, First Scotrail Limited, consists in the provision of inter-city,  regional
    and suburban passenger rail services throughout Scotland, serving the cities of Glasgow, Edinburgh, Inverness, Aberdeen Stirling, Dundee and
    Perth along with the rest of Scotland.

       THE OPERATION

 5) Following a competitive bidding procedure, the Scottish Ministers awarded the Franchise to Abellio Scotrail. Under the Franchise  agreement,
    the Scottish Ministers appoint Abellio Scotrail as franchisee to provide railway passengers services on the  rail  network  in  Scotland.[3]
    Abellio Scotrail is scheduled to take over the operation of the Franchise on 1 April 2015 for a minimum period of  seven  years,  extendable
    upon decision of the Scottish Ministers to ten years.[4]

 6) The operation of the Franchise is an activity directed towards passengers, who will contract directly with Abellio Scotrail when  using  the
    Scotrail network. As a result, revenue will be generated by the collection of passenger fees through the operation of the Franchise.

 7) Moreover, Abellio Scotrail will employ approximately 4 700 staff and lease  approximately  300  rail  vehicles  for  the  operation  of  the
    Franchise. Abellio Scotrail will also take all commercial decisions in relation to the operation of the Franchise going beyond  the  general
    constraints imposed by the Scottish Ministers[5] and will retain the generated ticket revenue and bear part of the commercial risk.[6] As  a
    consequence, the franchise agreement will confer Abellio the rights to influence strategic decisions of the Franchise.

 8) Therefore, the Franchise constitutes an undertaking in light of paragraphs 24 et seq. of the Consolidated Jurisdictional Notice  and  cannot
    be considered as amounting to an outsourcing or service contract.

 9) On the basis of the above, the Commission concludes that the award of the Franchise constitutes a change of control over an undertaking on a
    lasting basis and therefore is a concentration within the meaning of paragraph 62 and seq. of  the  Commission  Consolidated  Jurisdictional
    Notice.

       EU DIMENSION

10) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[7]. Each  of  them  has  an  EU-wide
    turnover in excess of EUR 250 million, but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one  and  the
    same Member State. The notified operation therefore has an EU dimension pursuant to Article 1(2) of the EU Merger regulation.

       COMPETITIVE ASSESSMENT

1 Market Definition

1 Product market

11) According to Abellio, the market in which the Parties are active is the market for public passenger transportation  services.  The  relevant
    product market could be as wide as all passenger transport services or as narrow as solely rail services.

12) In previous cases, the Commission considered that the relevant product market in relation to the award of a franchise of a  railway  service
    was the supply of public passenger transport services by rail.[8] The Commission also indicated that competitive pressure might  be  exerted
    on a railway franchise by other types of public transport, including buses.[9]

13) In more recent cases, the Commission considered that in countries where the provision of passenger rail services is tendered  or  franchised
    by the relevant state authorities, as in the United Kingdom, it may be appropriate to make a distinction between competition to be awarded a
    franchise or concession to operate passenger railway services ("competition for the market") and  competition  within  the  market  for  the
    supply of public passenger transport services by rail ("competition in the market").[10]

14) The Commission concludes that in this case the exact product market definition can be left open, as the outcome of  the  assessment  of  the
    Transaction would be the same under any plausible market definition.

2 Geographic market

15) Abellio submits that the geographic scope of the market for the supply of public passenger transport services by rail would  not  be  larger
    than the Scotrail franchise network.

16) In previous cases, the Commission defined the relevant geographic market by reference to the extent of the network  comprising  the  railway
    routes, stations and depots, the operation of which is the subject of the franchise agreement.[11]

17) However, in M.2446 - Govia/Connex South Central the Commission considered  that  the  relevant  geographic  market  may  be  defined  as  an
    individual point-to-point route, since rail travellers, especially business travellers and commuters  do  not  regard  an  indirect  journey
    between their point of departure and their intended destination as an acceptable substitute for the direct route.[12]

18) The Commission considered in past decisions that a possible market for the award of a franchise or concession to operate  passenger  railway
    services would be EEA-wide, ultimately however leaving the market definition open.[13]

19) The Commission concludes that in this case the exact geographic market definition may be left open as the assessment of the  case  would  be
    the same irrespective of the market definition.

       competitive assessment

20) Abellio submits that the Transaction will not give rise to any affected market, as the  activities  of  Abellio  do  not  overlap  with  the
    activities of the Franchise that will be acquired by Abellio Scotrail.

21) Abellio currently operates three further rail franchises in the UK, the Merseyrail concession and the Northern Franchise, both jointly  with
    Serco Group plc, and the Greater Anglia Franchise. In addition, another subsidiary of Abellio offers bus transport services  in  the  London
    and Surrey area.

1 Competition in the market

22) Abellio submits that the scope of its current rail and bus activities does not extend to the geographic area covered by the Franchise.  This
    was also confirmed by the CMA, who monitors closely the UK rail market, in the course of pre-notification contacts.[14]

23) There is therefore no overlap on any market for the supply of public passenger transport services on point-to-point routes between Abellio's
    existing public passenger transport services and the services to be operated under the Franchise. Similarly, there is no overlap between the
    activities of Abellio and those of the Franchise on the Scottish network.

24) Therefore, the Commission concludes that Transaction is unlikely to raise serious doubts as to its compatibility with the internal market on
    the market for public passenger transport services by rail.

2 Competition for the market

25) On an EEA-wide market for the award of a franchise or concession to operate passenger railway services,  Abellio  submits  that  its  market
    share would be below 20%. This would be the case irrespective of how the market size is calculated, namely both on a  market  calculated  on
    the basis of train passengers' km and a market calculated on the basis of value (turnover of concessions and franchises).

26) If the geographic market for the award of a rail franchise or concession was considered to be national, the Transaction  would  lead  to  an
    affected market. On the UK market for the award of a franchise or concession to operate passenger railway  services,  Abellio's  share  will
    rise from 14% to 22% on the basis of the generated turnover.[15]

27) Abellio operates four out of 19 of the total rail franchises and concessions that have been awarded  in  the  UK.  Out  of  the  seven  rail
    franchises or concessions that have been tendered in the last two years, Abellio submitted a bid in four. In all cases,  five  bidders  were
    shortlisted and Abellio was in the end awarded two of the franchise contracts, one jointly with Serco.

28) The market for operating rail franchises and concessions in the UK appears to be very competitive. Participating bidders are publically  and
    privately owned, UK and non-UK based companies. Selection takes place on the basis of quality and price. There are currently nine companies,
    other than Abellio operating rail franchises and concessions in the UK, five of which with a market share exceeding 10% of the UK market for
    the award of rail franchises and concessions.

29) In light of the foregoing, the Commission concludes that the Transaction is unlikely to raise serious doubts as to  its  compatibility  with
    the internal market in the market for the award of a concession or franchise for the provision of passenger railway services.

       CONCLUSION

30) For the above reasons, the European Commission has decided not to oppose the notified operation  and  to  declare  it  compatible  with  the
    internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation and  Article
    57 of the EEA Agreement.

                                        For the Commission

                                         (Signed)
                                        Margrethe VESTAGER
                                        Member of the Commission
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[1]   OJ L 24, 29.1.2004, p. 1 ('the Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the  European  Union
      ('TFEU') has introduced certain changes, such as the replacement of 'Community' by 'Union' and 'common market' by  'internal  market'.  The
      terminology of the TFEU will be used throughout this decision.

[2]   OJ L 1, 3.1.1994, p.3 ("the EEA Agreement").

[3]   The Franchise includes a requirement to utilise Scotrail rolling stock to run a small number of through services to  and  from  Glasgow  to
      Carlisle and Newcastle in the North of England. This is achieved through an arrangement with Northern Rail  Limited,  the  train  operating
      company holding the franchise for the North of England. This arrangement, which predates the Transaction, does not include  any  reciprocal
      arrangements and the services offered beyond the Scotrail network are offered by and on the terms of Northern Rail Limited. Therefore, this
      arrangement does not lead to any competitive overlap and will not be discussed further.

[4]   Clause 3 of the Franchise Agreement.

[5]   For example, although the minimum scope of the Franchise activities is pre-defined in the franchise agreement, Abellio Scotrail  may  carry
      out ancillary activities, some of which require the consent of the Scottish Ministers; regulated  fares  must  be  respected,  but  Abellio
      Scotrail will decide on the discounts it will offer; minimum service levels are set in the franchise agreement, but Abellio  Scotrail  will
      decide how to meet them; Abellio Scotrail may introduce changes to rolling stock, timetables or the running of additional services, subject
      to the consent of the Scottish Ministers; Abellio Scotrail is free to market and advertise its services.

[6]   Abellio Scotrail will bear the commercial risk within 5% of an agreed target. For  any  greater  deviation  from  the  agreed  target,  the
      commercial risk will be equally shared by Abellio Scotrail and the Scottish Ministers.

[7]   Turnover calculated in accordance with Article 5 of the Merger Regulation.

[8]   See cases M.816 - CGEA/South Eastern Train Company Limited, of 7 October 1996, paragraph 13; and M.4797  –  Govia/West  Midlands  Passenger
      Rail Franchise of 20 September 2007, paragraph 12.
[9]   See cases n° IV/M.816 - CGEA/South Eastern Train Co Ltd of 7 October 1996, paragraph 15; and M.4797 – Govia/West  Midlands  Passenger  Rail
      Franchise of 20 September 2007, paragraph 12.
[10]  See cases M.5855 - DB/Arriva of 11 August 2010, paragraph 64; and M.4797 – Govia/West Midlands Passenger Rail  Franchise  of  20  September
      2007, paragraph 13.
[11]  See cases M.3273 - First/Keolis/TPE JV of 8 December 2003, paragraph 7; and M.5855 - DB/Arriva of 11 August 2010, paragraph 73.
[12]  See case M.2446 - Govia/Connex South Central of 20 July 2001, paragraph 14. See also case M.5855 - DB/Arriva of 11 August  2010,  paragraph
      74.
[13]  See case M.5855 - DB/Arriva of 11 August 2010, paragraphs 71-72.
[14]  "On the basis of the foregoing, we do not consider that the award of the Scotrail franchise raises any  meaningful  overlaps  and  as  such
      could not give rise to competition concerns", e-mail of 24 November of […] (Legal), Mergers, Competition and Markets Authority.

[15]  It should also be noted that if Abellio's share were calculated on the basis of train passengers' km, it would rise from 12% to 17% of  the
      market for the award of a franchise or concession to operate passenger railway services.

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                                                                  PUBLIC VERSION

 In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC)  No  139/2004
 concerning non-disclosure of business secrets and other confidential information.  The  omissions  are  shown  thus  […].  Where  possible  the
 information omitted has been replaced by ranges of figures or a general description.

                                                                 MERGER PROCEDURE