The Transport Act 2000 and the Transport (Scotland) Act 2001 - The Competition Test: Response by the Scottish Region of the Institute of Logistics and Transport to the Office of Fair Trading Consultation Paper of August 2002

Strict application of competition legislation has led to restrictions being applied to bus operations and related initiatives which have not been in the interests of the general public or operators. The proposed guidance relating to a competition test which will be applied to the formation of Quality Partnerships, Ticketing Schemes and Tenders is welcomed. In particular the emphasis to be given to proportionate benefit whereby the benefits to bus users from a scheme will be balanced against the effect of the restriction on competition represents a sensible pragmatic development.

The following comments relate to the need for further clarification and/or amendments to the proposals to obtain full benefit and reduce the potential for misunderstanding.

1. The covering letter makes it clear that the draft does not provide guidance on the general provisions of the Transport Acts. To reinforce this it should be made clear that if action or proposals are thought to be contrary to such legislation it is not for the competition test to determine this but for other statutory provisions to be utilised.

2. Efforts have been made to cater for differences in Scotland compared with England and Wales but further detailed consideration is required. The following are highlighted.
Para.1.6, last bullet point: The restriction to England and Wales is queried.
Para. 18: The Transport Act (Scotland) 2001 imposes a duty to prescribe schemes.
Clarification is required of the reference to voluntary ticketing arrangements.

3. Para.2.8: The threshold of 25% of market share, below which significant adverse effects on competition are unlikely would appear generally to be low, and could lead to unnecessary referrals. An increase to say 33% or even 40% might be acceptable subject to recognising the potential for exceptional circumstances.

4. Para.2.14: The Justifications to pass the competition test are supported but the degree of betterment in many cases will largely be subjective. Clear guidance to assist in assessment together with readily available bus operational expertise will be necessary if inconsistencies are to be avoided and there in to be confidence in the validity of findings.

5. Para 2.16: The two-stage approach in assessment of the proportionality of schemes is supported but much of this will also be subjective and a sensible consistent professional approach will again need to be demonstrated. Careful consideration will also need to be given to safeguards which overcome the possibility of error in the provision of information or predicted effects by interested parties'. It would be helpful to make clear that the proportionality principle will apply for both potential and existing bus users.

6. Para. 4.1: Clearer guidance on the circumstances when an application would be expected would be helpful. Without this some authorities may decide to risk proceeding in the knowledge that the OFT might only become involved if there is a complaint from another party. The potential for a penalty to be imposed on those who do not act within the spirit of the competition test deserves consideration.

7. Para 4.5: The proposed fee of £5,000 payable for an application under the competition test could deter small operators. Conversely this amount is unlikely to deter frivolous applications by large operators who may perceive a benefit in delaying implementation. A combination of a lump sun and a sliding scale which refects ability to pay might deserve consideration.

8. Para 5.2: The Director General should not be inhibited by any limitations on the resources at his disposal when deciding if he should exercise his discretion to commence an investigation. This includes both staff numbers and expertise as referred to earlier.

9. Para.6.1: The Director General should be required to reach decisions timeously, if possible within a defined maximum period. This will again, of course have resource implications but is essential if the competition test approach is to be supported and beneficial initiatives are not to be prejudiced.

10. Para 6.2: When deciding that a scheme does not meet the competition test the Director General should be required to give his reasons in a readily understandable manner. This will help in ensuring a consistency of approach and will inspire confidence in those involved in the process.

11. Para.6.4: Lack of a mechanism for appeals against the Director Generals decision is regretted. The lack of such provision reinforces that need for satisfactory explanations to be given regarding decisions reached.

It is hoped that these comments will be helpful.