Antitrust Law Daily Wrap Up, ANTITRUST NEWS: UK competition authority recommends allowing more passenger rail operators, (Mar 9, 2016)

By Edward L. Puzzo, J.D.

Concluding a project first launched in January 2015 to evaluate competition in the passenger rail services market, the United Kingdom's Competition and Markets Authority (CMA) is recommending that other operators be allowed to compete with existing rail franchise operators. The recommendation is contained in its recently announced policy statement entitled “Competition in Passenger Rail Services in Great Britain.”

Citing as examples the competition between passenger rail operators in other European countries and in other Great Britain transportation markets in such as rail freight, air transport, and airports, the CMA stated that an increase in competition between operators ('on-rail' competition) could result in (1) lower fares and growth in passenger numbers; (2) greater incentives for operators to improve service quality and innovate; (3) greater efficiency by train operators; and (4) more effective use of network capacity.

CMA Chief Executive Alex Chisholm stated: "We’ve found that there is strong evidence, both here and abroad, of the benefits that the introduction of competition on mainline intercity routes can bring. Where competing operators have been given the opportunity, the need to attract passengers who have a choice can mean lower fares, new routes and destinations, more innovations, and flexible ticketing. Not only does this offer a better deal for existing travelers but it can increase overall passenger numbers by attracting new customers to the railways."

Increasing the number of open access services or splitting franchises would offer the most immediate benefits from increased competition, the CMA report states. In the future, a system of multiple licensed operators replacing franchises would also be worth considering. The report says that the potential for such competition exists predominantly on the three main intercity routes in Great Britain—the East and West Coast main lines and the Great Western route—which carry over 90 million passenger journeys per year.

In order to cover any fall in the premiums paid to the government as a result of increased competition, the CMA proposes that competing open access operators should be able to make more of a contribution than at present in terms of track access charges and through a Public Service Obligation (PSO) levy to contribute to the funding of important but unprofitable services, such as those in rural areas.

Although the proposals would not affect current franchises and imminent franchise awards, in the view of the CMA, action is needed now given the steps required to implement the options for reform.

News: Antitrust