Bus Fares Competition Probe Revealed

The local bus sector has been referred to the Competition Commission (CC) by the Office of Fair Trading over higher fares for passengers.

In a five-month investigation into the £3.6bn industry the OFT found evidence to suggest that limited competition may be leading to higher prices for bus users.

The study has identified a number of features of local bus markets that could prevent, restrict or distort competition in the sector.

These relate both to commercial services and services subsidised by local transport authorities.

Issues include:

• A situation where the majority of local routes are operated by a small number of large bus companies.
• Higher fares in those areas where operators with a strong market position are not challenged by a large, well-resourced rival.
• Many complaints alleging predatory behaviour of incumbent firms designed to eliminate competition from new entrants, low numbers of bids for supported service contracts in many areas, with just one bidder for a quarter of tenders.

John Fingleton, OFT Chief Executive, said: "Our investigation has unearthed a range of evidence that suggests the market for local bus services is often not working as well as it should and may be resulting in higher prices for bus users.

"In addition, this is a market where an estimated £1.2bn comes from public subsidy so restricted or distorted competition can potentially have a significant impact on taxpayers.

"We believe that the issues we have identified clearly justify a full investigation and we therefore propose to refer this sector to the Competition Commission."

The OFT is seeking comments on its provisional decision to refer these markets. Interested parties have until 15 October 2009 to submit their views.

If a reference is made, the CC will conduct a detailed public investigation and reach its own conclusions.

The CC can compel parties to submit particular evidence, and also has the power to impose remedies which go beyond the outcomes available from an OFT market study.

(GK/BMcC)