TRANSPORT operator Arriva's main rival to take over rail services in Scotland has been given permission to bid for the Scotrail contract.

The Competition Commission had been investigating First Group's bid for the Scottish rail franchise and last night said it had found a takeover by First could result in a substantial lessening of competition.

But the commission said conditions could be imposed on First Group to offset the disadvantages.

First, Arriva and current Scotrail operator National Express have submitted bids for the franchise, which runs Scottish regional services and sleeper trains to London.

The Office of Fair Trading referred First's bid to the commission amid concerns that the company already has extensive bus operations in Scotland, particularly around Edinburgh and Glasgow.

The commission said First would not have to sell any of its bus operations to proceed with its rail bid, though "behavioural" remedies were likely to be necessary.

The company said that it welcomed the commission's findings and was due to meet commission officials to discuss potential remedies.

It said: "First hopes it will be able to engage constructively with the commission to find a workable solution."

The commission is consulting on ways to limit First's ability to raise prices, cut service frequencies, change last and first bus times or launch other anti-competitive practices in Scotland if it won the contract.

First already runs the First Great Western, Transpennine Express and North Western rail franchises.