CC Order Completes Work on Bus Investigation

July 28, 2012 /

The Competition Commission (CC) is requiring local bus operators that manage bus stations to provide access to bus stations for rival operators on fair, reasonable and non-discriminatory terms, following the completion of all its work after the two-year investigation into the local bus industry.

The CC carried out an extensive investigation of an industry that carries 2.9 billion passenger journeys a year and has 1,245 different operators.

The investigation held hearings and received submissions from a wide variety of parties in England, Wales and Scotland (which each have transport policies and funding set by their respective governments) including bus operators, trade associations, passenger groups, LTAs, national and local government and regulators.

It also carried out detailed passenger surveys, and various economic and accounting analyses, as well as case studies on local bus markets.

The members of the local bus market investigation Group were Jeremy Peat (Chairman), Ivar Grey, Thomas Hoehn, Katherine Holmes and Michael Waterson. Jeremy Peat took over as Group Chairman from previous Chairman, Diana Guy, when her term as a CC member and as CC Deputy Chairman ended on 30 November 2010.

The report, Local Bus Services Market Investigation (Access to Bus Stations) Order, will enable rival operators to compete fairly and give confidence to potential entrants that their entry plans are not at risk due to difficulties in securing access to bus stations.

The CC is giving those bus operators who manage bus stations six months to develop and consult on new conditions of use for these stations, so that the Order will be fully in force by the end of January 2013.

The CC has already made a number of recommendations to the Department for Transport (DfT), Scottish and Welsh Governments and the Office of Fair Trading (OFT) on measures which will ensure that bus passengers benefit from greater competition in future. The CC looks forward to continuing action on these recommendations in the months ahead.

The CC published its final report in December 2011, stating that in many areas of the UK bus operators face little or no competition, leading to passengers facing less frequent services and, in some cases, higher fares than where there is some form of rivalry. The CC identified a number of factors that restrict entry and expansion into local areas by rivals and outlined a package of measures to tackle these factors and open markets up in future.

Jeremy Peat, Chairman of the local bus market investigation Group, said: “The publication of this order completes our work following a long and complex investigation. Ensuring that operators can get fair access to bus stations addresses just one of the factors restricting competition but we made a number of other recommendations for actions by others to tackle the issues we identified which tend to constrain competition.

“We therefore urge the DfT, Scottish and Welsh Governments and the OFT to press ahead with related measures which will bring real improvements for bus passengers across the country. We have been encouraged by the generally positive response to our report and by the progress already being made by some local transport authorities (LTAs) towards implementing our recommendations on multi-operator ticketing schemes. It is imperative that other local authorities follow this lead and indeed that progress is maintained across all of our recommendations. Follow-up of our report provides a real opportunity to enhance competition and provide an improved service for passengers.

“As our report showed, enabling greater competition and opening up the market to new operators will help deliver what passengers most want from their bus services—a reliable, frequent, high-quality and good value service.”

The report also proposes to increase the number of effective multi-operator ticketing schemes, by giving LTAs additional powers to introduce and reform schemes on terms that make them effective and attractive to passengers. We are recommending changes to the Ticketing Block Exemption to assist this process.

It also introduces restrictions on bus operators making changes to service frequency—to discourage ‘over-bussing’ and other short-term actions to destabilize competitors, recommending that Traffic Commissioners introduce and enforce a Code of Conduct to prevent unacceptable behaviour.

“We have also recommended that Traffic Commissioners be given powers to introduce temporary restrictions on service changes when municipal operators are subject to a sales process to preserve future opportunities for competition,” said CC.

Ensuring that new entrants and competing operators can get access to bus stations managed by other operators on fair, reasonable and non-discriminatory terms, also formed part of the Order.

In addition, the Order recommends that the DfT update its best practice guidance for LTAs on tendering for supported services and that the Scottish and Welsh Governments develop suitably tailored guidance to enable LTAs to maximize the value for money obtained through the tendering process. LTAs are to be given power to obtain information about services being deregistered and the right to disclose information in such detail as they consider appropriate, having regard to its nature, to potential bidders for subsequent tenders.

The report recommends that the OFT applies a high priority to identifying bus mergers between competing operators, takes a cautious approach in exercising its discretion not to refer small mergers and updates its competition guidance for the industry.

The report stated: “We also expect, following publication of this report, that local bus operators will review their competition compliance training, making use of the guidance available to them, and impress upon their employees that real competition compliance is an important part of the culture of their organization.”

The report urges LTAs to consider the potential for tailoring partnerships between LTAs and operators as a means of increasing competition within their local areas. The OFT is to establish a regular forum with LTAs and other stakeholders to ensure that such partnerships are subject to effective competition scrutiny.

The DfT, as part of its review of the Bus Service Operators Grant in England, is urged to look at ways to incentivize operators to participate in the above measures. This recommendation may also be of interest to the Scottish and Welsh Governments should they decide to undertake a similar review.

 

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