By Isle of Wight Observer
Arcus Investment Partners (AIP), the firm aiming to acquire Red Funnel, has yet to offer assurances about fare transparency and fairness for Island businesses, should they succeed in purchasing the troubled ferry operator.
Despite multiple requests from the IW Observer, AIP’s senior investment partner, Edward Lilley, has not responded to emails seeking clarification on their intended pricing strategy for Island-based businesses. While Mr Lilley has previously approached the Island’s MPs, seeking confidential discussions about AIP’s plans, the public silence on key issues affecting local businesses remains concerning.
Currently, Red Funnel’s pricing for public passengers follows a controversial demand-led structure, with fares fluctuating based on various factors, but the rates are applied consistently across the board. However, business pricing is far less transparent. Some national hotel chains enjoy significantly reduced ferry fares for their visitors, while local accommodation providers face considerably higher costs.
Non-tourism businesses have also voiced concerns, citing a lack of clarity over who qualifies for preferential pricing and why.
However, many Island business representatives fear speaking out, fearing repercussions, including the loss of their existing discounted rates.
In properly competitive markets, such pricing strategies, would be subject to the natural forces of competition, allowing customers to choose the best available price or service. But in cases where a company holds a dominant market position, defined as controlling more than 40 per cent of the market, and entry for new competitors is difficult, it is illegal to exploit this position by offering unfair or discriminatory terms. Red Funnel has repeatedly reported, in its annual accounts, that it controls more than 40 per cent of the Solent ferry market.
The potential for abuse of a dominant market position, where similar customers are treated differently, is specifically warned against in government guidelines. Such practices could prompt further scrutiny and intervention from regulatory authorities. A pre-election commitment by the Labour Party to intervene, including a referral to the Competition & Markets Authority, is currently being progressed by West Wight MP, Richard Quigley.
Questions also remain about who would lead Red Funnel under new ownership. Stephen Ridgway, the current chairman, has a controversial history regarding competition law. Mr Ridgway, promoted by Chartwell Speakers as an authority on aviation policy, was involved with illegal price-fixing activities during his tenure as CEO of Virgin Atlantic.
In 2009, it was reported in the Guardian that Virgin Atlantic had colluded with British Airways to fix fuel surcharges, a move that led to passengers being overcharged. While Virgin escaped prosecution in exchange for whistleblowing, Mr Ridgway’s leadership during this time has raised concerns. He did not respond to our request for comment.
Mr Lilley of AIP, who was previously a director in Deutsche Bank’s Transport Infrastructure Mergers & Acquisitions team, also has a background that warrants attention. Deutsche Bank has been the subject of multiple competition inquiries in both the UK and Europe. We asked Mr Lilley whether he or his team had any involvement in these investigations, but no response was received. His LinkedIn account, which last weekend included details of his employment with Deutsche Bank, appeared to have been removed yesterday (Thursday). To be clear, there is no suggestion of any wrongdoing by Mr Lilley.
Mr Quigley said: “Red Funnel have got themselves into a position that the only way they can keep going is to sell a stake in the business to yet another private equity business. We all know how this story goes. Higher borrowings and higher fares. This is blatantly unfair as a private company arbitrarily sets fares for Island businesses and residents that are not clear or justifiable in line with competition law. They effectively decide who can afford to travel and the viability of many Island businesses.”
As Island residents and businesses await further clarity from AIP, who are reportedly under pressure to conclude the deal with Red Funnel before the end of October, concerns over the potential for continued or worsened unfair pricing practices remain at the forefront. A transparent approach to fares, especially for local businesses, will be crucial in rebuilding trust in Red Funnel, regardless of who takes the helm.
