Damning report finds Deregulation fails to bring competition to bus market

On the day that rail fare increases of 5.9 per cent are announced,more bad news for public transport commuters as the Competition Commission (CC) report that twenty-five years after bus services were deregulated areas bus operators face little or no competition.

The report out today says that passengers are facing less frequent services and, in some cases, higher fares than where there is some form of rivalry.

The report also states that the way some local authorities tender for supported services—necessary bus services which would not be provided without public support—can also restrict competition.

Despite there being about 1,245 bus companies in England, Scotland and Wales carrying 2.9 billion passengers a year, the five largest operators (Arriva,FirstGroup, Go-Ahead, National Express and Stagecoach) carried 70 per cent of those passengers.

The CC also found that head-to-head competition between operators is uncommon and that—on average—the largest operator in an urban area runs 69 per cent of local bus services.

It has identified a number of factors that restrict entry and expansion into local areas by rivals and otherwise stifle competition

 Jeremy Peat, Chairman of the local bus market investigation Group, said:

" Competition and potential competition can drive standards up for passengers—that was the intention behind deregulation. We have seen evidence how competition can, for example, increase service frequencies but the reality is that in too many areas of the country, competition has stagnated and the incumbent providers know that they face little in the way of serious challenge."

 He added:

" As such, the incentive to increase services, innovate and even lower fares is absent. On the occasions when there are outbreaks of rivalry, they don’t tend to last and passengers are quickly returned to something like the status quo without any enduring improvement in services."

Oyster style ticketing for buses says commission

Hidden away today from the main agenda is the news that the Competition Commission says that competition in the regional bus market should be encouraged by local transport authorities introducing tickets valid across the services of rival operators and opening up access to bus stations run by one company.

Back in May its initial report suggested that passengers in many local areas faced less frequent services compared with areas where there was more competition.

"We believe that greater competition between operators is the best way to rectify the problems we have identified and ensuring fair access to bus stations, tackling 'over bussing', opening up the tendering process, close scrutiny of bus mergers, and encouraging 'competition-friendly' partnerships will all help achieve this," Jeremy Peat, the chairman of the local bus market investigation group, said in a statement.

The Commission though recommended against franchising of those routes because it addresses the symptoms of the problems we have found rather than the cause.
The Office of Fair Trading was urged to prioritise investigations of bus mergers and to take a cautious approach in exercising its discretion not to refer small mergers.

The Competition Commission will consult on the latest proposals before publishing its final report later this year.