In June, the Competition and Markets Authority (CMA) published its Phase 2 provisional findings which set out that Hitachi's €1.7 billion proposed acquisition of the Thales' Ground Transportation (GTS) business raised competition concerns in relation to both digital mainline and urban signalling rail systems. The publication of the provisional findings initiated a period of consultation in which the CMA invited responses to the findings from interested parties and continued to gather further evidence.
Having carefully considered the new evidence, together with the wide range of information gathered previously, the independent CMA Inquiry Group has updated its initial findings and reached the provisional conclusion that the merger would not result in a substantial lessening of competition (SLC) in the supply of Communications Based Train Control (CBTC) signalling systems in the UK. Today's update does not change the CMA's provisional assessment that the merger is likely to lead to an SLC regarding the supply of digital mainline signalling.
Transport for London (TfL), which oversees London Underground, is the main customer for CBTC signalling systems in the UK and its current suppliers are Thales and Siemens. Hitachi has not previously supplied signalling systems to the London Underground. The CMA's assessment focused on the likely competition to resignal the Bakerloo and Piccadilly Lines, two of the main lines on the London Underground. In its original provisional findings, the Inquiry Group had considered evidence which indicated that Hitachi was one of a limited number of suppliers with the capabilities to challenge Thales and Siemens in these future tenders. The Inquiry Group provisionally found that the merger would therefore result in a substantial lessening of competition in this market.
The new evidence obtained by the CMA, following the responses to the provisional findings, now supports the provisional conclusion that Hitachi would not be a credible bidder to supply CBTC signalling systems to the London Underground in the near to medium term.
Resignalling lines on the London Underground is regarded as being particularly complex and challenging compared to most other metro systems. TfL attaches particular importance to proven experience and capabilities when appointing signalling suppliers. Most of Hitachi's relevant CBTC projects have yet to be completed and are smaller and less complex than the upcoming Piccadilly and Bakerloo line projects. Therefore, given the likely time frame of the tendering process, Hitachi is unlikely to demonstrate the ability to meet TfL's requirements for the Piccadilly and Bakerloo line projects.
Having tested this new evidence thoroughly, the CMA has updated its provisional findings and now considers that Hitachi will not be a significant competitor to Thales in relation to future CBTC projects in the London Underground, and that the merger is unlikely to result in an SLC in the supply of CBTC signalling systems in the UK.
Stuart McIntosh, chair of the independent Inquiry Group, said:
Effective competition in the urban and digital mainline signalling markets is essential for ensuring the UK's rail transport systems are efficient and reliable for passengers who rely on these services.
Having reviewed the additional evidence, which indicates that Hitachi is unlikely to be a credible bidder for signalling projects on the London Underground in the foreseeable future, we have provisionally concluded that the merger would not harm competition in the supply of these systems in the UK.
That said, our provisional view that this merger raises concerns in the supply of digital mainline signalling in Great Britain, is not affected by today's announcement.
The CMA's investigation continues, and it remains due to issue its final report by 6 October 2023. F
