CMA to investigate East Midlands rail franchise award

The Competition and Markets Authority (CMA) is investigating the award of the East Midlands rail franchise to Abellio East Midlands.

The news comes after the Government stripped East Midlands Trains of the contract with effect from August this year.

A statement from the CMA said: “[The CMA] is considering whether it is or may be the case that this transaction if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.”

East Midlands Trains (EMT) started legal action against the Department for Transport (DfT) after losing the East Midlands rail franchise in May.

A claim issued at the High Court in London alleges that the Department for Transport breached its statutory duties in connection with the procurement of the new East Midlands rail franchise.

A statement from Stagecoach said: “We have informed the DfT that we are also preparing a claim for judicial review of its decisions to disqualify us from bidding for the East Midlands rail franchise and to award the franchise to Abellio. Additionally, we are considering legal action against the Department in respect of the ongoing competitions for the West Coast Partnership franchise and a new South Eastern franchise.”

“[We refuse] to accept the potential pension risks that the DfT requires operators to bear in relation to the three new franchises. The full extent of these risks is unknown but we estimate them to be well in excess of £1bn.”

Martin Griffiths, Stagecoach Group chief executive, said: “We remain deeply concerned at the Department for Transport’s procurement of the three most recent rail franchise competitions and the rationale behind its decisions.

“Despite our continued requests for full transparency around these matters, many fundamental questions remain unanswered. As a result, regrettably we have had no option but to commence legal action against the DfT to ensure the serious issues involved and the DfT’s opaque decision-making are subject to proper public scrutiny.

“In view of the legal action we have taken today we believe it would be untenable for the DfT to proceed to sign any contract for the East Midlands franchise without a full and proper review of the procurement of that franchise to help restore public confidence in the process.”