The OFT referred the local bus services (excluding London and Northern Ireland) to the Competition Commission. This is the result of a surprise enquiry which the OFT started in March last year. The OFT issued its report in August 2009 and publicly consulted on its proposal to refer. Today's decision concludes the OFT stage of the enquiry.
 
What are the issues?
The OFT has identified a number of concerns including: (i) polarisation of the UK with many single operator areas which seemingly have higher prices; (ii) low level of competing bids in local authority tenders and the way LTAs manage competition and tenders; (iii) targeted competition aimed at  foreclosing competitors; (iv) absence of multi-ticketing arrangements.
 
What happens next?
The Competition Commission has two years to conclude its investigation. Over the next few days it will publish a provisional timetable with key steps in the inquiry. These include (i) initial information gathering and hearings; (ii) identification and publication of key issues in a so-called "issues statement"; (iii) further hearings; (iv) publication of emerging thinking; (v) consultation on provisional findings (and possibly remedies).
 
The Competition Commission is likely to start with those identified by the OFT. However, they are not constrained by the OFT's finding (other than the geographic scope). The Competition Commission has wide ranging powers to remedy any adverse effect on competition (including the break up of large companies, e.g. it recently forced BAA to sell some of its airports).
 
What does it mean?
Market investigations tend to be long and detailed. For the industry this means not only ongoing regulatory scrutiny but also a degree of uncertainty pending the outcome of the investigation. It is also likely that the OFT will be more critical when looking at mergers in the industry, particularly where larger groups are acquiring smaller independents. Indeed, the OFT has already referred a completed acquisition by Stagecoach of a small company in Preston to the Competition Commission. For smaller groups and independents there may be opportunities, particularly in areas where there is currently only one national supplier.
 
For more information please feel free to contact:
 
John Schmidt - Tel: 020 7429 4967
John has close to 15 years experience in a range of complex competition cases in a variety of industries including transport, pharmaceuticals and fast moving consumer goods. John has represented companies in OFT and Competition Commission investigations as well as merger and non-merger investigations by the European Commission. In 2003 John also qualified in Germany and has represented companies in competition cases before the Bundeskartellamt.

Guy Harvey - Tel: 020 7429 4948
Guy has many years experience in contentious issues across a range of industries. His most recent experience includes handling competition disputes in the transport sector (both rail and bus), construction and pharmaceuticals. In addition to defending successfully a claim of abuse of dominant position against one large transport company he has dealt with judicial review within the rail industry, dawn raids, and issues of cover-pricing in connection with the formal OFT investigation into the construction industry, acting in both the High Court and CAT.

Sebastian McMichael - Tel: 020 7429 4961
Seb gained significant competition law experience in Brussels and the City of London. He has been involved in a number of high profile cases over the last year, including the EC Commission investigations in the pharmaceutical sector as well as a number of energy cases. Last year he returned from a 7 month secondment within the Cartels and Criminal Enforcement branch of the Office of Fair Trading.

08 January 2010

« Back to Article index