National Express announced it was buying Scottish Citylink, its main rival on London-Scotland routes, last week for pounds 5.1m, and is confident that it will not be referred to the Monopolies and Mergers Commission because it still faces competition on its routes from British Rail.
Citylink was sold in August 1990 by the Government in a management-employee buy-out for pounds 265,000. It also received a substantial grant for operating Buchan bus station, which meant that the company was effectively handed over free. At the time, National Express was told that if it tried to bid it would be referred to the MMC, and therefore it stayed out of the running
Brian Wilson, Labour's transport spokesman, is demanding that the deal should be referred to the MMC: 'What has changed in the past two and a half years? The deal will create a monopoly on these routes and that will not be good for passengers.
'Citylink was sold so cheaply because it was entering a competitive market. Now it is being sold because National Express will make a lot of money as a monopoly. This is another example of privatisation lining the pockets of a few insiders while competition is actually diminished.'
Adam Mills, the deputy chief executive of the National Express Group, defended the deal, saying: 'We now face much sterner competition from the railways. They have introduced Apex fares which are in competition with us.'
He said the price paid reflected the increased profitability of Citylink: 'Three years ago, they lost pounds 2.5m. Now they are earning around pounds 1m per year.'
A spokeswoman for the Office of Fair Trading said that it was examining the deal, but no decision on whether to recommend a reference to the MMC would be made for 'several weeks'.Reuse content