National Express set for test case

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Coach operator National Express is prepared to face a Monopolies and Mergers Commission inquiry into its proposed takeover of the Midland main- line rail franchise rather than drop bus services on five parallel routes, as recommended by the Office of Fair Trading.

"This is a major public interest debate. Taking it to the MMC is the best way to get it aired," said a source close to the company. "If National Express rolls over on this, then it may act as a major deterrent for future rail franchise bids. This is a test case."

The increasingly hard line stance being taken by National Express follows Trade Secretary Ian Lang's decision last month to refer the deal to the MMC unless National Express gave undertakings to remove "competition concerns" arising from the acquisition.

Mr Lang told National Express to withdraw its coach operations on ''point- to-point'' journeys between London and Derby, Leicester, Sheffield, Chesterfield and Nottingham. The Midland main line runs parallel InterCity services between London and South Yorkshire and the East Midlands.

Third parties had until yesterday evening to make their views known to John Bridgeman, director-general of the OFT, about how appropriate these measures are.

National Express insists it has made no final decision about going to the MMC and it remains in talks with the OFT. "We are optimistic about reaching an agreement on those five routes that is both satisfactory to the OFT and to us, both operationally and commercially," said the finance director Colin Child.

Shares in National Express, which also runs the Gatwick Express rail franchise and two regional airports, have fallen 35p to 468p since Mr Lang's announcement a fortnight ago.