When Scotland-based bus company FirstGroup acquired Strathclyde
Buses (SB Holdings) in the summer of 1996, the matter was referred to
the Mergers and Monopolies Commission (MMC). At the end of January 1997,
the MMC published its findings that such a merger ’could act against the
In other words, FirstGroup’s dominance in central and south-east
Scotland was almost certain to deter competition from other
In line with the MMC’s recommendations, the then Tory minister for
corporate and consumer affairs at the DTI, John Taylor MP, ruled that
FirstGroup should sell one of its Glasgow bus depots and divest itself
of its subsidiary, Midland Bluebird within six months.
Six weeks later, completely contradicting the conclusions drawn by MMC,
transport operator Stagecoach, entered the Glasgow market with a fleet
of 150 buses.
FirstGroup wanted to persuade the DTI to revise its decision on
divestment on the back of Stagecoach’s entry into the market, which it
argued disproved the claim that a merger would create a monopoly.
In May 1997, the company approached GJW for strategic input and
Bristol-based solicitors Burges Salmon, for legal advice. In June, with
the new Labour government in place, FirstGroup made a formal submission
to the DTI for the findings of the MMC’s report to be reviewed, which it
copied to the Office of Fair Trading.
As the matter not only affected passengers but also employees, it then
set about gaining support from local authorities, MPs, consumer
associations and trade unions, such as the TGWU and Unison. These
lobbied the new Labour competition and consumer affairs minister, Nigel
Griffiths MP, the Scottish Office and the Department of Environment,
Transport and the Regions.
Throughout this period FirstGroup met the interested parties, with the
exception of the DTI, and reported on developments such as Stagecoach
expanding their Glasgow operation.
Last month, the DTI announced that before leaving her post as Secretary
of State for Trade and Industry, Margaret Beckett had decided to vary
the undertakings required by FirstGroup. Rather than following the
renewed advice of the MMC for divestment of Midland Bluebird, she had
settled on a package of behavioural undertakings, covering such areas as
minimum service levels and restrictions on fares.
As this campaign resulted in the first ruling to be overturned by the
Department of Trade and Industry against the advice of the Mergers and
Monopolies Commission, there is no doubt that it was a success. The
reasons for this were three-fold.
First, the company made a strong case that the market in Glasgow had
changed significantly, immediately following the first ruling.
Second, FirstGroup drummed up a broad spectrum of support from the trade
unions to the Strathclyde Passenger Transport Executive.
Finally, it could be argued that the January 1997 decision was
advantageous to Stagecoach. While in opposition, Labour MPs such as
Griffiths were openly critical of some of Stagecoach’s activities in
other areas. Indeed the MMC itself had described past actions as
’predatory’ and ’deplorable’.
With the change of government last May, GJW argued that Taylor’s ruling
could sit uncomfortably with the new administration.
Campaign: To overturn the DTI divestment decision on the merger of
FirstGroup and SB Holdings
Team: GJW Government Relations
Timescale: May ’97 - July ’98