Local bus industry faces Competition Commission probe

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The Office of Fair Trading (OFT) is referring the local bus industry to the Competition Commission over concerns about high prices and poor quality of service.

Nearly two-thirds of the £6.3bn industry is dominated by five national players – FirstGroup, Arriva, Go-Ahead, National Express and Stagecoach – and bus fares in areas with only one major supplier are 9 per cent higher than in regions where there is competition, says the watchdog.

The OFT's preliminary inquiry has found signs of unhealthy market distortion. The major national operators largely respect each other's territories, a quarter of all new tenders only attract one bidder, and there are complaints of predatory behaviour to quash new entrants. Only London and Northern Ireland are exempt from the Competition Commission investigation, which is expected to run for between 18 months and two years.

The OFT does not want a return to the "bus wars" that followed deregulation in the 1980s, but it is concerned that the £1.2bn-worth of public subsidies are not good value for money for taxpayers. "The Competition Commission should take a look at the tendency for local areas to become dominated by a single operator," said Heather Clayton, a senior director at the OFT.

The bus industry was quick to deny the allegations. "Bus companies operate in a highly competitive market and it is always in our interests to keep prices competitive to get passengers out of their cars and onto our services," said the Confederation of Passenger Transport.