The OFT has referred the acquisition of Preston Bus Limited by Stagecoach Bus Holdings Limited to the Competition Commission. Both Stagecoach and Preston Bus provide local bus services in Preston and, as a result of this acquisition, Stagecoach has become the predominant provider of commercial bus services in this area. Given the absence of any evidence of likely entry in the short to medium term by other bus operators, the OFT was concerned that this could result in higher prices or decreased service quality to local bus users.
The OFT was made aware that Preston Bus was in significant financial difficulties prior to its sale, and carefully considered whether it could be characterised as a 'failing firm'. However, while it is possible that Preston Bus may have failed and gone into administration had it not been sold, the OFT was not confident that all the failing firm conditions were met to the standard required for a first phase investigation. Specifically, it considered that there could have been a more competitive alternative to the merger: given the interest in Preston Bus expressed by other bidders, the OFT could not rule out that Preston Bus' assets could have been used by another operator to enter the market and compete against Stagecoach.