Stagegroup lodged an application to the CAT under section 120 EA02 for a judicial review of the CC decision that Stagecoach’s acquisition of Preston Bus Limited may be expected to result in a substantial lessening of competition ("SLC") in the market for the supply of commercial bus services in the Preston area.

Stagecoach relied on four grounds of challenge: (i) that the CC had misdirected itself as to the correct legal approach; (ii) that the CC made a number of highly material findings of fact which were unsupported by the evidence; (iii) that the CC acted in a procedurally unfair manner; and (iv) that the CC imposed a disproportionate remedy.

In relation to the first ground, the CAT concluded that the CC had applied the correct legal test when considering whether the merger led to an SLC. However, with regard to the second ground the CAT concluded that the CC had not acted rationally in its choice of counterfactual, particularly as it had not clearly explained why it had based the counterfactual on an assumption that Stagecoach had not launched services on the Preston intra-urban routes in June 2007, thereby disregarding what actually happened in the relevant market prior to the merger. The CAT held there was an inconsistency in this regard with the CC’s analysis of the failing firm defence in which it did consider the actual position in the market as at September 2008. The CAT upheld Stagecoach’s submissions that there was no factual support for the CC’s findings that Stagecoach’s conduct was pursued with little regard for profit and normal commercial considerations. In doing so, the CAT concluded that the second ground of Stagecoach’s application succeeded.

The CAT did not find it necessary to come to a conclusion on the third ground and indicated that it would hear further submissions from the parties on the form of an appropriate order.