Bus operators should be prevented from carrying out the kind of aggressive competition that has led to local monopolies, a Competition Commission inquiry has found.
The inquiry report also said it should become easier for local transport authorities to get a grip on bus routes, fares and frequencies.
Councils have long voiced concerns that their lack of powers over bus services has hampered efforts to encourage residents to switch from cars to public transport, and to promote social inclusion through better bus services to outlying areas.
The commission said five companies – Arriva, First Group, Go-Ahead, Stagecoach and National Express - held 69% of the bus market between them and enjoyed local monopolies in most areas.
Inquiry chairman Jeremy Peat said: “There are a large number of towns and cities where bus operators face limited competition and little prospect of significant change.
“There are evident risks of disadvantages for passengers when there is little to keep local operators on their toes.”
He said the commission would make its final report in November and wanted “to hear views on whether more hard-hitting measures are required”.
Mr Peat said competition between operators on routes “has resulted in destructive short-lived ‘bus wars’ and other behaviour that doesn’t benefit passengers”.
Council have long argued that competition should take place through operators bidding to run local networks, as in London, rather than by rival vehicles running on streets.
The commission will look at whether it should become easier for local authorises to use the ‘quality contracts’ mechanism that would allow them to do this.
Quality contracts have been allowed since 2008 but are beset by legal hurdles and none yet exists, although West Yorkshire Integrated Transport Authority has one in preparation.
Peter Box (Lab), chairman of the Local Government Association economy and transport board, said: “We need to break up the markets and introduce more competition in the bus industry.
“This report recognises that councils are best placed to commission services, which would increase competition locally and deliver better value for money for passengers and taxpayers.”
David Brown, who leads on bus issues for the Passenger Transport Executive Group said the report had “put the final nails in the coffin of the 1985 deregulation vision that buses outside London should be a never ending free-for-all on the streets”.
Simon Posner, chief executive of the Confederation of Public Transport, which speaks for the industry said the report had failed to recognise that the greatest completion to operators came from private cars, not from each other.