Page last updated at 10:25 GMT, Thursday, 20 August 2009 11:25 UK

Bus industry competition queried

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Local bus services are given an estimated 1.2bn in public subsidy

The local bus sector has been referred to the Competition Commission by the Office of Fair Trading amid complaints of "predatory tactics" by companies.

The OFT said evidence suggested limits on competition may be leading to higher prices for users in England (except London), Wales and Scotland.

The move follows a five-month investigation into the £3.6bn industry.

An OFT spokesman said the issues it had identified "clearly justify a full investigation".

Findings include:

• The majority of local routes are operated by a small number of large bus companies

• There were higher fares in areas where operators with a strong market position are not challenged by a large, well-resourced rival

• Many complaints alleged "predatory" behaviour by incumbent firms designed to eliminate competition from new entrants

• There were few bids for supported service contracts in many areas, with just one bidder for a quarter of tenders.

'Crowding out'

The OFT said it had received some 30 complaints of behaviour designed to exclude rivals from the market since March 2000 - about one every four months.

So-called predatory tactics can include upping the frequency of buses to "crowd out" rivals or timing buses to run just in front and sometimes also just behind a rival's buses.

It also said bus groups could hit competition by cutting fares significantly or running buses for free, or by refusing to take part in multi-operator ticketing schemes to limit the scope for entry or expansion by smaller operators.

OFT chief executive John Fingleton said the investigation had unearthed a range of evidence which suggested the sector was "often not working as well as it should".

"This may be resulting in higher prices for bus users," he said.

"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.

There is a great deal of competition between bus operators, large and small, although the biggest competitor for the bus industry is the car
John Major
Confederation of Passenger Transport UK

"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."

John Major, of the Confederation of Passenger Transport UK, which represents the bus industry, said they would be studying the report.

"Bus companies operate in highly competitive local markets and it is always in our interests to keep prices competitive to attract passengers out of their cars and onto our services," said Mr Major.

"There is a great deal of competition between bus operators, large and small, although the biggest competitor for the bus industry is the car."

The OFT is asking for comments on its decision, to be received by 15 October 2009.

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