The Office of Fair Trading has referred the supply of local bus services to the Competition Commission over evidence that limited competition may be leading to higher prices.
The OFT carried out a five-month investigation into the £3.6bn industry.
The study identified a number of features of local bus markets that could prevent, restrict or distort competition in the sector.
These relate both to commercial services and services subsidised by local transport authorities.
- a situation where the majority of local routes are operated by a small number of large bus companies
- higher fares in those areas where operators with a strong market position are not challenged by a large, well-resourced rival
- many complaints alleging predatory behaviour of incumbent firms designed to eliminate competition from new entrants
- low numbers of bids for supported service contracts in many areas, with just one bidder for a quarter of tenders
John Fingleton, OFT Chief Executive, said: “Our investigation has unearthed a range of evidence that suggests the market for local bus services is often not working as well as it should and may be resulting in higher prices for bus users.
“In addition, this is a market where an estimated £1.2bn comes from public subsidy so restricted or distorted competition can potentially have a significant impact on taxpayers.
“We believe that the issues we have identified clearly justify a full investigation and we therefore propose to refer this sector to the Competition Commission.’
Interested parties have until 15 October 2009 to submit their views.