Stagecoach set record of shame ful record of shame

Glenda Cooper on the troubled past of the new rail franchisee

Glenda Cooper
Sunday 23 October 2011 04:42

STAGECOACH Holdings, the bus company to which the government last week handed the first regional railways frachise, has been referred to the Monopolies and Mergers Commission (MMC) more times than any other British firm.

The Scottish-based group, which has just acquired the franchise for South West Trains, is renowned for its aggressive commercial tactics and has built itself up by taking over 30 other bus companies. In the course of doing so it has been investigated more than 20 times by the Office of Fair Trading (OFT).

The more serious step of a full referral to the MMC, by the OFT or the Department of Trade and Industry, has occurred eight times since 1990. The MMC has investigated the company for various reasons, including its behaviour over mergers, alleged anti-competitive practice, and alleged monopolies.

Stagecoach's actions have been described by the MMC as "predatory", "deplorable" and "against the public interest".

The company, founded by the brother-and-sister team of Brian Souter and Ann Gloag 15 years ago, now controls buses from Inverness to the South Coast. It boasts 20,000 employees, a turnover of pounds 430m and profits in the past six months of nearly pounds 20m. Its shares, now quoted on the Stock Exchange, recently hit an all-time high. It has acquired nearly 40 companies since 1987 including ones in Malawi, Kenya, Hong Kong, New Zealand and Portugal.

With its acquisition of South West Trains it is likely that in places such as Hampshire and Surrey it will have a monopoly of all public transport. John Denham, Labour MP for Southampton Itchen, said last week the OFT should investigate whether an unfair monopoly had been created.

The sort of tactics that have caused intervention in the past could be seen in the case of Stagecoach subsidiary Fife Scottish Omnibuses, which had to give undertakings about its future conduct after an OFT investigation found it had tried to remove a competitor from the market. The competitor, Moffat and Williamson Ltd, were running a subsidised service on behalf of Fife Regional Council.

Moffat and Williamson soon found themselves swamped:"They ran six buses to our one all on the same route," recalled a Moffat and Williamson spokesman who preferred not to be named. "Then they had this thing called the January sale where prices went down by about 50 per cent - and the January sale lasted until April. There was no way we could compete."

The company contacted the OFT and Fife Scottish was told to clean up its act. Fife did. But it was too late for Moffat and Williamson: "At a conservative estimate we were losing pounds 50,000 a year. We retreated from most of the areas and only work now where Fife Scottish don't operate. Our fleet has gone down from 94 to 54 buses."

The eight cases when Stagecoach and its subsidiaries were referred to the monopolies commission are as follows:

1. In July 1990 the MMC criticised Stagecoach's acquisition of Portsmouth City Buses, saying it could lead to higher fares because it had already made acquisitions on the South Coast. In 1991 it sold part of its Portsmouth operation.

2. In December 1990 the MMC looked into the Stagecoach acquisition of Formia Ltd, the owners of Hastings and District Bus Company. It was considered that the acquisition weakened competition but they were not ordered to sell.

3. In June 1993 the MMC criticised the Stagecoach subsidiary Southdown, which drove Easy Rider Minicoaches out of Bognor Regis in Sussex, for operating at uneconomic fares. The company again gave undertakings as to its future conduct.

4. In December 1993 the MMC reported on another merger, this time with Lancaster City Transport. It warned that Stagecoach might "abuse its position". The Government responded that reduced fares or increased frequency of buses would have to be maintained for three years.

5. In March 1995 the MMC reported that the acquisition of 20 per cent of Mainline Partnership, Sheffield, constituted "a significant deterrent to potential competitors". It ruled the company should not increase its stake. Jonathan Evans, the corporate affairs minister, ordered them to dispose of their stake.

6. A month later, Mr Evans told Stagecoach to sell its 20 per cent stake in SBH, a Glasgow bus company, and give up its board seat.

7. But Stagecoach's aggressive policy received most publicity for the events in Darlington in the second part of 1994, on which the MMC reported in August. The local authority put its municipal bus operation, Darlington Transport Company (DTC) up for sale in July last year. Busways, a Stagecoach acquisition, bid, but by October the Yorkshire Traction Company emerged as the preferred bidder.

Stagecoach recruited the majority of DTC bus drivers offering bonuses of pounds 1,000 and three years' guaranteed employment.

It registered on all DTC's commercial routes and began to operate on a free fares basis five weeks before its registered services were due to start. Yorkshire Traction withdrew its bid, the local authority was unable to find another buyer and DTC went into administration.

The MMC described these actions as "predatory, deplorable, and against the public interest".

8. Stagecoach have yet to give undertakings on the latest investigation into their activities. Last month the Government ordered Stagecoach to allow the previous owners of an Ayrshire bus company it bought last January to set it up in business again immediately. The MMC ruled the pounds 4.5m takeover of Ayrshire Bus Owners might operate against the public interest.

A Stagecoach spokesman said the MMC investigations were different from any situation which might result from Stagecoach acquiring the railway.

"Bus deregulation is a free-for-all," he said. "Stagecoach ... is an aggressive company. They haven't got there by sitting back in the office... Their acts were at the expense of their competitors, never consumers."

He said that the railway franchise was still highly regulated and that Stagecoach had guaranteed that 100 per cent of the timetable would be retained.

But Brian Wilson, Labour's transport spokesman said: "It will be a dereliction of duty on the part of the OFT if they do not investigate the monopoly implications of their acquiring the railway franchise before they take effect. The OFT is limping five steps behind Stagecoach."

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