Environmental Engineering Reference
In-Depth Information
Although bus and train companies compete amongst themselves they are of course
operating in a much bigger passenger travel market dominated by the use of the
private car. This is a further constraint on possible exploitation of local monopolies.
The significance of a wider market is illustrated by long-distance coach services which
operate under no regulatory regime as far as quantity or price are concerned and yet
are provided almost exclusively by single companies (National Express in England and
CityLink in Scotland), although in this case the competition is primarily with rail.
The behaviour of operators
Operators within a particular industry are subject to two important constraints as far
as anti-competitive behaviour is concerned. The first outlaws collusion unless formal
agreements are registered with OFT. The second outlaws predatory practices.
'Collusion' between suppliers is rightly proscribed where this limits competition to
the detriment of consumers. As a general principle the OFT expounds the virtues of
choice. However whereas this has obvious relevance in terms of goods on sale in the
High Street it is very questionable in the context of public transport. Most passengers
do not wait at bus stops contemplating the merits of the rival company services on
offer. Rather they are concerned with the overall standard of service available for their
journey, including opportunities for interchange and inter-available ticketing. Yet any
arrangement between operators to co-ordinate services in such ways is in principle
deemed anti-competitive. As we will see below, some attempts have been made to
overcome these anomalies in the form of legal 'exemptions', but the fundamental
stumbling block remains.
'Predatory practice' is another term which has peculiar interpretation in relation
to the bus industry. One company may choose to time its services on a route just in
front of another's (with the intention of creaming off its patronage), or to duplicate
a bus route where patronage has been built up over years through careful investment
by the established operator. Such actions are not deemed predatory even though they
may weaken the position of the incumbent without adding anything to the quality of
service overall. Fortunately, with the greater stability in the industry, such practices are
rarer than previously, although legally they are still possible.
In theory the charge of predatory practice could be brought against an operator
who tries to force a competitor out of business (or off his patch) by utilising methods
which cannot be sustained commercially. A notorious example of this occurred in
Darlington where Stagecoach literally set out to take over the town and bankrupted
the local company in a matter of weeks. In practice the speed with which this occurred
completely outstripped the ability of OFT to intervene to prevent it.
The behaviour of regulators and other public bodies
The principle of fair competition also applies to the behaviour of regulators and of other
public bodies in their dealings with companies. The role of regulators is as umpires of a
game, and to enjoy the confidence of its players independence is essential. This implies
that no preference can be given to the interests of any party, especially Government,
beyond that which is established in law. Their decisions may therefore be politically
inconvenient or embarrassing. One example was the Rail Regulator's decision in
favour of an 'open access' operator utilising an available track slot on the East Coast
Main Line (providing a direct service to London from places which otherwise did not
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