The Competition Commission’s come forward with four “theories of harm” around which its market investigation of the bus industry will coalesce. Remember, the CC is investigating why there appears a lack of competition. The CC is at pains to point out it’s made no conclusions (and won’t do so till January 2012).
These theories do outline the rationale for the CC’s belief that there’s a lack of competition in the bus industry. The four “harms” are:
- What they call the “intrinsic features” of the industry that limit competition. This might include economies of scale that give an incumbent an advantage, and the benefits one operator with a large network might accrue regarding network ticketing.
- Geographic market segregation. An operator in area X would not wish to compete in area Y lest the operator in Y retaliates. This may lead to stable geographic separation.
- Exclusionary conduct. This means predatory activity including setting fares low to deter new entrants.
- Impact of the regulatory environment. Does any aspect of the regulatory environment prevent, restrict or distort competition. This might include free travel.
- Markets that simply cannot support competition.
10 comments:
Markets that simply cannot support competition.
Yes, the most important one of all!
Having seen the document that operators are supposed to respond to I wonder what the CC is actually seeking to achieve. The lengthy document is written in legal and technical gobbledegook. Major operators will find it difficult to answer the questions posed correctly and as for the little man without much back office or legal support he will at best struggle and worse may fail the task completely. What happened to the plain English campaign?
And a variant of your suggestion - markets that don't want competition to come along and ruin what is a perfectly decent bus service.
Having looked at the CC's criteria I just struggle to comprehend what they think they are going to achieve with all this. If I look at Newcastle upon Tyne there are three large groups running services plus some smaller outfits. The broad division of service coverage has not changed for decades although there is the odd "intrusion" by Go Ahead / Stagecoach / Arriva into each other's areas. However there is nothing on a large scale and the loony days of Tyne & Wear Omnibus, Welcome, Michael Franks Coaches, North Eastern Buses and Redby Travel are long gone. Is anyone shedding any tears about this? I don't think so. Has Nexus just boasted that bus ridership is showing decent levels of growth? - yes it has.
This "investigation" really is a monstrous waste of time and money.
By 2012,even more 'competition' may have been removed as operators fold thanks to the weight of other stupid government legislation.
Does the industry needs a trade association with some real teeth to fight against all this nonsense.
The time and costs of dealing with all these head-in-the clouds demands must be very frustrating.
Anon at 12:38 said : 'The time and costs of dealing with all these head-in-the clouds demands must be very frustrating.'
Quite. I know of one big operator's Commercial Department that will be shut down in order to complete this work. That means the entire department will not do normal work for the duration of this latest round of questions.
Essentially they are people performing back room functions within a big operator for a number of depots. School Holidays are approaching. I'd say over a 12 month period one of their depots would see all bus movements revised in some way to react to commercial changes.
At least big operators have the ability to pull people off normal tasks for this nonsense, unlike smaller operators. What I don't understand is why the big group solicitors are making representations as to a lack of time to do these things.
I agree that the CC's fantasies about lots of companies vigorously competing are ... fantasies.
But the industry is monopolistic, and that can lead to excessive pricing and profits - one of the CC's intentions is: 'We will also consider whether there is evidence of persistent high profits for local bus operations.'
Which sounds like a good idea.
I agree with some of the Competition Commission's assessments of likely "harms", in particular the intrinsic features and exclusionary practices. I think anyone would have a difficult job arguing that these things are not present in the bus industry in some abundance.
I do also agree with the Omnibuses 'extra theory', that some - or even most - markets simply cannot support competition (or at least not direct on-street competition), but TBH I do not agree that this observation is the over-arching, unchallengeable endorsement of the status quo that some seem to be hoping. At the end of the day, the status quo (in many areas) is a deregulated private monopoly - an undesirable thing in any market, and especially so in one involving a public service, notoriously inelastic demand, and large quantities of public money. And I don't think the CC will have to look very far for evidence of where this market structure is indeed having a detrimental effect.
So overall I do support the CC carrying out this inquiry (indeed I'd say it would be hard to find a more textbook example of the kind of situation competition authorities were intended for). However I do also worry that they might come to a boneheaded and out-of-touch conclusion that more bus wars etc. are the way forward, which would obviously do far more harm than good.
Hurrah for the last two comments.
Why should the bus industry be above the law or indeed treated in a more favourable manner? There's a whiff of double standards about those trying to defend private and cosy monopolies while always decrying the old public NBC monopoly-days.
More power to the CC.
Other than a return to the destructive bus wars how else do those advocating the CC inquiry suggest more competition is established in the industry?
Do some not realise competition within the transport industry isn't just a big bus group vs Joe Bloggs minibuses but about other forms of transport?
You miss the point Margaret.
You can't 'make ' businesses compete where there is simply no room for a second set of the high overheads that the industry carries, or where the duplication of cost doesn't make operation for competitors viable.
The whole investigation is a nonsense because the debate is never about competition. It is about whether private commerce or government should determine bus networks.
You can have either, in a number of forms:
Government planned networks and provision
Government planned networks, with contracts competitively provided, although here the government needs to control the infrastructure (buses, depots) too
Commercially planned privatly operated networks
What you cannot do is to sell bus networks and operations to the private sector, take the sale fees, then expect them to provide what the state wants.
If the government wants to take back control of either the networks, then it should buy back the operators.
This investigation is a nonsense. If the UK wants European style government set networks then it can and should say so. You can't have it both ways!
This government won't make that decision because it knows that European Human Rights legislation requires it to compensate operators who are 'disenfranchised' by the loss of their businesses. If they want the buses back then they can quite easily nationalise the companies that own them and pay them for theior businesses.
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