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Eurotunnel will be given six months to stop operating ferry services from Dover to Calais after a decision by the Competition and Markets Authority today, putting 600 jobs at risk.
The Channel Tunnel operator has been told its ownership of MyFerryLink breaks monopoly rules and could force one of its competitors to exit the market.
It launched the service in August 2012 after acquiring three ferries which previously belonged to SeaFrance, before the company went into administration.
Today's decision confirms an original ruling by the Competition Commission in June, which has been subject of a lengthy legal challenge.
Eurotunnel will also be allowed to find another owner for the MyFerryLink business, if that made it completely independent of Eurotunnel.
Competition and Markets Authority (CMA) panel deputy chair Alasdair Smith said: "With two of the operators on the Dover to Calais route making substantial losses, it remains our view that the current level of competition on the route is unsustainable and likely to lead to the exit of a competitor.
"Eurotunnel's purchase of the ferries means it now has over half the market and its share will rise further if competitors exit..." CMA's Alasdair Smith
"That will leave Eurotunnel, which is funding MyFerryLink's current losses, as one of only two ferry operators in addition to owning the competing rail link.
"Eurotunnel's purchase of the ferries means it now has over half the market and its share will rise further if competitors exit.
"It would be much better for passengers and freight customers to have three competing cross-Channel operators – with Eurotunnel running the rail link and two independent operators on the ferry route.
"We will stop MyFerryLink running services out of Dover while it is owned by Eurotunnel but we would not prevent Eurotunnel from finding a suitable purchaser that was completely independent of Eurotunnel to operate the ferry service."
Eurotunnel has criticised the decision for effectively creating a duopoly between Dover to Calais operators P&O Ferries and DFDS, which it says will lead to an increase in prices.
The decision bans the company from running the MyFerryLink ferries Berlioz and Rodin from the Port of Dover for 10 years, a length of time the firm says it "is astonished by".
It is planning another appeal.
Chairman and chief executive Jacques Gounon said: "The decision by the CMA is a denial of the reality of the situation. It penalises the consumer and puts 600 people out of work without any real justification."
In a statement, MyFerryLink said: "We continue fundamentally to disagree with the CMA on a number of critical points.
"First and foremost we do not consider that the CMA has jurisdiction to review the transaction as a matter of UK merger law.
"It is also manifestly the case that the CMA's decision, which will reduce choice, is bad for consumers, bad for competition and bad for all those involved in cross-Channel operations (staff, employees, customers and the wider regions in both Dover and Calais).
"Given that any appeal is unlikely to be finally determined until much later this year at the earliest, we would like to reassure our loyal customers that we will continue to operate our full schedule throughout the summer season and beyond."
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