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Legal opinion: OFT should clarify bus competition rules

8 October 2007
Competition law should be applied so that bus companies can work together to give passengers good service and the Office of Fair Trading should clarify its advice to bus operators, a top competition lawyer said [1] in a legal opinion published today by the Campaign for Better Transport [2].

Stephen Joseph, the group’s executive director, welcomed the opinion from former rail regulator John Swift QC and his colleague Gerry Facenna of Monckton Chambers:

“It’s obvious the Government needs to clarify competition law. We urge the Government to use the upcoming Local Transport Bill to make clear that cooperation amongst bus companies that is in the passengers’ interest is welcome. If bus services are better coordinated, so that for example the same tickets can be used with all operators and there is a regular-interval service, more people will use them, which will help to tackle traffic problems.”

Neil Scales, the chief executive of Merseytravel, welcomed the opinion’s ‘green light’ for greater bus cooperation. He said, “This legal opinion makes it clear there can be cooperation to coordinate operational issues such as timetables, routing and ticketing to the benefit of the passenger. In the past, bus operators have been worried that any cooperation between companies might infringe competition law.”

The opinion says:

 

  • Cooperation amongst bus companies is in fact allowed under competition law

“There is scope under the present law to establish that agreements [between operators] do not appreciably restrict or distort competition”
 

 

 

  • The application of competition rules is hurting the industry

“There does appear to be a disconnect between the application of the competition rules and the promotion of economic activity in the bus services market. One problem is that agreements between actual or potential competitors that involve some pooling of capacity and agreement on how that capacity is to be allocated, and at what price, may automatically be regarded as illegal”
 

 

 

“How competition rules are being applied may stifle beneficial cooperation”
 

 

 

  • The application of competition rules should be made clearer

“There is a strong argument” for saying that the OFT’s booklet about competition law and the bus industry “should be redrafted to provide clearer guidance to operators and to focus more clearly on the likely economic effect of an agreement and questions of passenger benefit. There should be no presumption that necessary coordination must exclude certain forms of behaviour (eg agreements on timetabling or prices)”
 

 

 

  • Cooperation amongst bus companies can benefit passengers, and the industry

“If passengers are able to get new bus services that meet their demands at prices they are willing to pay, that is prima facie in the public interest (so far as having a sustainable transport policy is concerned), and any rule that stifles such activity, even in the name of protection competition, works contrary to that interest”
 

 

 

Stephen Joseph said his organisation would work to ensure this legal opinion is seriously considered by decision-makers. “We want the Government and the OFT to take notice of this. If the competition authorities continue to take actions that are clearly against passengers’ interest, we will look at the legal options available to us.”

 

 

Notes to editors

[1] The opinion was written by John Swift QC and Gerry Facenna of Monckton Chambers, instructed by Leigh Day & Co. The opinion was paid for by Merseytravel, the passenger transport executive for Merseyside. The full opinion is available online and from the press office.

[2] Campaign for Better Transport is the new name of Transport 2000, which has been securing better transport policy and programmes since 1973.

[PR 059/07]