In the March 2011 edition of our Newsletter we reported on the Stena AB (“Stena”)/DFDS acquisition, whereby Stena, through its subsidiary Stena Line (UK) Limited, would acquire sole control of certain DFDS ferry assets, which included the company which owns and operates the Belfast-Liverpool and Belfast-Heysham routes between Northern Ireland and England (the “Target Routes”).
On 2 December 2010, Stena advised the Irish Competition Authority (the “Authority”) that the parties had completed the transaction on 1 December 2010, leading the Authority to conclude that by implementing the acquisition before receiving merger control clearance from the Authority, Stena and DFDS had infringed section 19(1) of the Competition Act 2002 (the “Act”) (the anti-gun jumping provision) and, accordingly, that the acquisition was void in accordance with section 19(2) of the Act. On 14 January 2011, the Authority announced its decision to open a full (Phase II) investigation in relation to the acquisition, having been unable to conclude that the acquisition did not give rise to a substantial lessening of competition (“SLC”) in the Irish State within its Phase I investigation.
On 7 April 2011, the Authority cleared the acquisition. It determined the relevant market to be freight roll-on/roll-off services on a “diagonal corridor” of routes between Northern Ireland and Northwest England. The Authority found that turnover on the Target Routes from traffic that originated from or destined for customers in the State suggested that the acquisition would have at most a minimal impact on competition within the State. Further, the acquisition did not impact on the choices of ferry services from ports within the State (i.e. it did not have an impact on the routes and services into and out of Dublin, Rosslare, or Cork). The Authority’s market enquiry also supported the view that the acquisition would have minimal impact within the State and that there was little scope for any substantial competitive effects (unilateral, coordinated or otherwise) arising from Stena’s acquisition of the Target Routes. Accordingly, the Authority is now satisfied that the acquisition will not lead to a SLC in markets for goods or services in the State.
The Authority also focussed on the decision of DFDS, on 13 January 2011, to withdraw ferry services from the Dublin-Liverpool and Dublin-Heysham routes. The Authority considered that DFDS’ decision to withdraw services was not connected to the acquisition and that Stena was not aware of DFDS’ decision in advance. Further, the Authority found no evidence of a theory of harm of coordinated behaviour which would explain any actual or expected increases in freight prices on routes into or out of Dublin.
Meanwhile, on 25 May 2011, the UK Competition Commission (the “CC”) provisionally cleared the acquisition. The CC’s provisional findings concluded that the acquisition has not resulted in a SLC for the supply of freight and passenger ferry services between the North-West of England and Northern Ireland or for Irish Sea ferry services in general. The CC looked carefully at Stena’s decision to close its Fleetwood-Larne route on 24 December 2010, including reviewing Stena’s internal documents, examining the route’s usage and profitability and taking evidence from range of market participants. The CC concluded that Stena’s withdrawal from that route was probably inevitable, irrespective of the acquisition, as the age of the ferries servicing the route and the specific features of Fleetwood port, which would require any replacements to be purpose built, meant that Stena would have closed the route shortly in any event. Accordingly, the CC concluded that there was no loss of direct competition in the “diagonal corridor” across the Irish Sea resulting from the acquisition.
The CC also considered whether the acquisition meant a loss of competition between the Target Routes and Stena’s other services on the Irish Sea but has provisionally found that not to be the case. In this connection, evidence gathered by the CC suggested that competition between these more distant routes is weaker and, in any event, Stena will continue to face a direct competitor in each of the corridors in which it operates following the acquisition. The case is a reminder that transactions which, on their face, do not appear to have any clear link with the Republic of Ireland can nevertheless trigger the Irish merger control thresholds.
The CC is expected to publish its final report by 25 July 2011.