The UK commercial bus industry faces what amount to its biggest ever challenge with a likely reference to the Competition Commission by the OFT following an initial study into the local bus market. This includes operators such as Arriva, FirstGroup and Stagecoach, all of whom currently operate bus services in South Yorkshire.

The OFT proposes to refer the bus industry for a detailed competition investigation since it believes that there are a number of features in the market "that could prevent, restrict or distort competition in the sector."

The OFT specifically excludes London and Northern Ireland from its proposed reference to the Competition Commission. Since these two areas are the only ones outside the deregulated bus framework, the OFT's action is thought likely to hasten the move towards quality contracts and tendering regimes across the UK's major conurbations. This will include South Yorkshire and be operated and maintained by the local South Yorkshire Passenger Transport Executive, working on behalf of the South Yorkshire Integrated Transport Authority, if this does indeed press ahead.

Among the OFT's assertions are that the level of fares in areas where there is only one major operator are around nine per cent higher than areas where two or more of the major groups operate. The OFT also alleges that the industry has an incentive to increase fares because of the concessionary fares reimbursement system.  Its report states: "Our analysis suggests that the concessionary fare regime distorts the market by creating an incentive for bus operators to raise fares. Competition between bus operators would usually be expected to help hold commercial fares down towards competitive levels but the concessionary fares regime will give operators an incentive to increase fares above the competitive level.

The OFT names the recent Cardiff Bus inquiry as one of the triggers for its concerns about the local bus market. Cardiff Bus was forced to apologise for what the OFT called "predatory behaviour" against 2Travel in 2004 - 2005 following an OFT ruling last year.

In excluding London and Northern Ireland, the OFT says: "None of the concerns that we have about local bus services relate to the markets in London or Northern Ireland and so we have excluded them from the scope of our proposed reference."

Meanwhile representing the metropolitan transport authorities, Passenger Transport Executive Group (PTEG) lead director general David Brown says that the OFT's findings of higher fares and smaller operators being subject to anti-competitive behaviour by larger operators, is "symptomatic of all that has been wrong about twenty years of bus deregulation. However this is an area where the Competition Commission's cure could be worse than the disease - if they seek to promote more on-road competition as a solution. The best way forward is to use the powers in the Local Transport Act to ensure that local authorities have more influence over local bus services in order to protect passengers' interests."

Bus operators and other interested parties have until 15 October 2009 to respond to the OFT, although the likelihood of it changing its mind appears small at this stage.

The question on everyone's lips now will be, "will this competition inquiry hasten the arrival of quality contracts in metropolitan areas, such as South Yorkshire?"

The first planned corridor for quality contracts in South Yorkshire (which makes use of the 2008 Transport Act) will be the A638 corridor in Doncaster. This would mean that the local PTE/ITA would have direct control over fares, frequencies and timetables. They would also have a greater say on what routes would operate along the selected corridors and also have a greater say in future service revisions.

For further information, please visit the OFT website by Clicking Here.

Thanks,
Staff at South Yorkshire Transport