Examination of Witnesses (Questions 280-299)
MR JOHN VICKERS, MR JUSTIN COOMBS AND MR GOVER JAMES
WEDNESDAY 15 MAY 2002
280. So you say now that you have the power to act, looking at the local situation, not looking at market share in a wider area?
(Mr Vickers) If the appropriate frame of reference for looking at the competitive effects of the merger is local, as well it might be, then that is the frame of reference that we would adopt. For example, to echo an earlier comment, if it were an issue, say, in the West Midlands, it would be foolish for us and the bus industry to say, "Let us just look at it in terms of national market share" because if you are the public in the West Midlands that does not measure the relevant competition effects for you.
281. Is it not the case that you would act against Arriva and First regarding the three bus routes so that instead of competing they actually had a monopoly position on each route? Would that happen?
(Mr Vickers) That was a case under the Competition Act where there was an anti-competitive market sharing agreement in relation to those routes between employees of those companies. There had been meetings in a hotel and so on and that was a breach of the prohibition in the Competition Act against anti-competitive agreements, so we did indeed make that finding and imposed a financial penalty.
282. Have there been any similar cases?
(Mr Vickers) There have been other infringement decisions under the Competition Act. That is the only case of its particular kind so far. We are in early days as far as the Competition Act is concerned.
Chairman
283. With the greatest respect, it is not the only monopoly supplier on a route, is it? This is the point. There is Bristol, there is Bradford, there is Calderdale. I find it very difficult because it would appear that the Office takes action when there is one very narrow set of circumstances but does not take account of what happens in reality when bus companies take over a monopoly route elsewhere. What consistency of thought is there when you take action against two companies for this kind of thing but you ignore exactly comparable circumstances elsewhere?
(Mr Vickers) The case at hand was one where two companies that should have been competing agreed to share out routes. It was an anti-competitive agreement.
284. Yes, I understand that, and they met in a hotel which obviously added to the enormity of the crime.
(Mr Vickers) It is not a crime at present.
285. Mr Vickers, forgive me. Let us put it in these terms. Does it not seem at least possible to you, given the number of monopoly routes there are in the United Kingdom at the present time, that some other companies might come to some kind of arrangement?
(Mr Vickers) We would be delighted to know of any evidence which suggests that. Our job is to apply the law. The law prohibits anti-competitive agreements. We applied it in the case at hand.
286. You should get the tourist industry to notify you of meetings.
(Mr Vickers) If there is a case where a company has 80 per cent of a local market and behaves entirely lawfully in that market, then it would be wrong for us to apply the law against them because they are behaving lawfully. I would say that with the Competition Act provisions the deterrent against such a company excluding rivals from that area is a much stronger deterrent than was the case in years past, but I do not think it is comparable between a firm that has 80 per cent and goes about its business lawfully on the one hand but on the other hand firms that get together and agree to share out routes or fix prices.
Andrew Bennett
287. But you have failed to convince us that you have done anything useful for the bus industry. We have got fewer companies across the country operating now than there were in the past. We have got fewer bids for tendered services and yet you have made joint ticketing, particularly where it is rail, bus and tram as in Greater Manchester, more difficult. You will not allow timetabling that joins up so that people who want to transfer from one service to another can do it, and you are making life difficult for disabled people. Come on. Convince us that you have done something useful.
(Mr Vickers) I do not understand that last comment.
288. As I understand it, it is very difficult for local authorities to require people on a particular service to have low floored vehicles so that only those buses can run on that service so that someone who is disabled can guarantee that when the bus turns up they can get their wheelchair on to it. Generally, tell us something that you have done that is useful.
(Mr Vickers) Our job, as I said at the outset, is to apply the law.
289. Let us stop at that point. Are you telling us that the law is stupid and that it is our fault rather than yours?
(Mr Vickers) Certainly not.
290. So you are justifying the law? You think the law is a good law?
(Mr Vickers) I do.
Chairman
291. You would not suggest a change in the Act?
(Mr Vickers) It is for legislators to legislate and of course there is an Enterprise Bill before Parliament. As the OFT our job is to apply the law and the Competition Act was a major advance in UK competition law and the deterrent effect on collusion, the deterrent effect on exclusionary behaviour, was much weaker after liberalisation in the mid eighties in the bus industry when there were many examples and allegations to that effect and I think the Competition Act is a much more vigorous framework for that. We cannot create competition.
292. Competition exists in London and it is done because the tendering is bid for rather than on-street competition. Is there not a far better service provided in London than there is anywhere else in the country? Is not passenger usage of buses growing faster in London than anywhere else? Would it therefore be better for you to have to operate a model that is fair competition in London rather than for the rest of the country?
(Mr Vickers) I will make two general remarks in response to that. It is very dangerous to generalise from conditions in London, which in terms of congestion and so forth is of an order of magnitude of scale which is different from elsewhere in the UK. It is also our role in relation to the legislation to apply what I believe to be good law. It cannot create by magic competition on the road throughout the UK. I do believe that through its striking at cartel activity, at exclusionary behaviour, at bid rigging and the like, the prospects for competition and for lower costs for local authorities who are tendering and so on are positive ones. There was a point about disabled passengers which I feel uneasy about leaving in the air.
(Mr James) There is no reason at all why local authorities should not put in place a quality partnership under the Transport Act 2000.
293. So they can stop anybody who does not have a low floored vehicle using the routes where they have put in special bus stops to make access easier?
(Mr James) Whatever infrastructure they put in place, yes.
294. And they can actually stop that?
(Mr James) Yes.
(Mr Coombs) I think you mentioned three things in your question. Unless I misunderstood none of those three things are prohibited under competition law.
Chairman
295. Why is it then, Mr Coombs, that the great clarity of which we have heard this afternoon does not seem to get a lot further than your outer office?
(Mr Coombs) We are trying to overcome these difficulties by talking to people in the bus industry. We have produced draft guidance both on the block exemption and on the Transport Act competition test to make clear where they apply and where they do not apply. We recently gave an interview to a trade journal in order to explain the position and we try to overcome these misconceptions.
Andrew Bennett
296. Let us be clear. In Greater Manchester all the bus operators, or the big ones, can put in things which will take a smart card as people get on and off the bus and that is not anti-competitive in your view?
(Mr Coombs) It is not clear to me why it would be anti-competitive for them to install—
297. Because it stops entry, does it not?
(Mr Vickers) If that were, for example, part of a Travelcard scheme, then that is something catered for by the block exemption.
298. And you can have a Travelcard that runs across tram, rail and call buses?
(Mr James) Yes. It is the Clippercard in Manchester.
299. There are problems with the Clippercard because it has to be a card, not an electronic device, so I am told.
(Mr James) The scheme itself will fall within the block exemption. The mechanics of doing it may not necessarily be covered by the block exemption but it may not be relevant anyway as far as competition is concerned.
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