Growing consolidation of the UK coach and bus sector risks weakening long-term competition, according to transport lawyer Frank Suttie. He has warned that franchising authorities could ultimately face higher costs and fewer bidders for contracts as a result.
While bus franchising may appear to reduce concerns around market dominance by awarding service packages competitively, Mr Suttie points to Greater Manchester, where smaller operators were squeezed out in the first round of franchise contract awards.
“Experience to date in Greater Manchester demonstrates that there can be impact with smaller operators removed from the market through lack of success in bidding competitions,” he notes. “Looking forward, franchising authorities must periodically retender. They will look to have high quality competition for route packages that are offered to the market. Consolidation can, over time, affect the extent of the competition for packages and this can lead to higher costs.”
While it is unclear whether there is any current monitoring of local monopolies, Mr Suttie cautiously notes that the Transport Committee’s recent report recommending regional performance metrics on frequency, reliability and passenger satisfaction “would go some way towards formal performance monitoring, particularly where there is a single or dominant operator.”
Calls for any hard caps on market share for larger operators at a local or regional level would, however, be difficult to implement. Competition law already provides checks and balances in relation to mergers and acquisitions, meaning legislative intervention may not be the likeliest outcome.
“Government policy intervention is difficult to predict at a time when the market is being disrupted through bus franchising initiatives in almost all key urban areas,” he says. “An interesting development that we can anticipate is the conferring of powers on local transport authorities to once again own bus companies. That legislative change is notable as it opens the possibility of new entrants into the market or, at least, existing entrants remaining in business through action taken by a local authority.
“Consolidation is never a great thing in any sector. At the very least, it must come with a commitment assuring consumers a share of the benefits that are derived from that consolidation, and this would be uppermost in the mind of the Competition and Markets Authority in considering any circumstances of this kind.”
