Ferry operators' merger refused: Channel services will have to compete individually with tunnel

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THE GOVERNMENT yesterday refused permission once more for the two biggest cross-Channel ferry operators to merge their services to compete with the Channel tunnel.

This is the third time ministers have turned down requests from P&O European Ferries and Stena Sealink to pool their short-sea operations between Dover and Calais.

In a further blow, Tim Sainsbury, the Industry Minister, in effect told the two companies there would be no review of the ruling until autumn 1994 at the earliest - six months after the tunnel is due to enter service.

The decision was taken in accordance with the advice of Sir Bryan Carsberg, the Director-General of Fair Trading. He concluded that allowing a merger of the rival ferry services, which account for 80 per cent of passengers and freight on short-sea crossings, would reduce choice, quality of service and price competition.

The announcement drew an angry response from Lord Sterling, chairman of P&O, who had asked that P&O be released from undertakings given in the 1970s and 1980s not to join forces with Sealink.

The P&O chairman, who also acted as special adviser to successive secretaries of state for trade and industry during the 1980s, said the decision 'defies rational explanation'.

But Eurotunnel welcomed the decision, saying it would not be competing full-scale with the ferries until 1995. Sir Alastair Morton, chief executive, added: 'The ferries have been raking in big money in the last two or three years from a strong and growing market and also from the pounds 100m or so a year government subsidy they get via duty free. They don't need to be made even fatter.'

Although a merger was refused, Mr Sainsbury asked Sir Bryan what scope there might be for the two companies to collaborate in areas such as interchangeable tickets, timetabling and capacity reduction, but not price agreements or revenue pooling.

Lord Sterling wrote to Sir Bryan in February, saying that P&O needed to be able to collaborate with Sealink in order to meet the competitive threat from the Channel tunnel.

But Sir Bryan said it was too early to say what impact the tunnel would have on competition. Mr Sainsbury added that the traffic figures needed to make such an assessment would not be available until next autumn.