The agreement, announced by John Taylor, the corporate and consumer affairs minister, comes after more than a year of tough negotiations with the Department of Trade and Industry in the wake of the collapse of the 90- year-old Darlington Bus Company. The collapse was blamed on a price war initiated by Busways, a Newcastle-based subsidiary of Stagecoach.
The failure of Darlington Bus prompted a Monopolies and Mergers Commission inquiry which, in August last year, slammed Busways' actions in Darlington and South Shields as "predatory, deplorable and against the public interest".
The MMC demanded undertakings from both Stagecoach and Go-Ahead Group, another quoted bus operator which also commands more than a quarter of the North-east market.
Yesterday's agreement commits Stagecoach not to raise prices or reduce bus services for three years on any route where its price cuts have forced a rival to abandon a service. It comes after around 25 MMC reviews into the group's activities and is similar to undertakings demanded by the DTI in others areas of the country where Stagecoach has acquired bus operators, including Ayrshire last November and Lancaster in June.
There was no news yesterday on the position of Go-Ahead, which sources say has been less willing to give ground in the negotiations with the DTI.
John Conroy, managing director of Busways, said the company had not agreed with the conclusions of the Monopolies Commission report, but it had "willingly" given the undertakings required. "And I can assure you that we will continue to compete both fairly and effectively in the future despite the guarantees."
He claimed that competition in the North-east was now sustainable. "There is active competition. There aren't an awful lot of small operators in our area, but there are a number," he said.
Shares in Stagecoach, boosted recently by an upgrade in profit forecasts by UBS, its broker, gained another 22.5p to 577.5p yesterday. Analysts said the deal would be good for sentiment but would not make a big difference to the shares.