OFT recommends ticketing block exemption be extended

204/05 1 November 2005

The public transport ticketing schemes block exemption provides significant benefits to consumers and should be extended for another five years, the OFT today recommended to the Secretary of State for Trade and Industry.

Under the block exemption (see note 1), particular multi-operator travel cards and other joint ticketing schemes are exempt from the Chapter I prohibition (see note 2) of the Competition Act 1998, if they satisfy certain conditions (see note 3).

As well as extending its duration, the OFT has recommended a number of changes to the block exemption (see note 4). The main changes:

make the block exemption less prescriptive about how revenue from multi-operator travel card (MTC) schemes is distributed; and
remove the requirement that operators sell their own tickets as well as multi-operator individual tickets (MITs).

The OFT's recommendations follow a public consultation in April this year (see press release 61/05 and note 5). Responses were received from operators and groups representing operators and local authorities. These indicate that the ticketing schemes continue to satisfy the exemption conditions and provide benefits in terms of better quality services and improved transport networks which are likely to outweigh any negative effects on competition. Responses also indicate positive support for the recommended changes.

Download response to consultation (pdf file 254 kb).

If the Secretary of State accepts the OFT's recommendation, the OFT will consult on revised guidelines, making it clear how the changes to the block exemption will work in practice.

Vincent Smith, Director of Competition Enforcement at the OFT, said:
'Travelcards and other integrated tickets are beneficial to passengers. They offer flexibility and value for money and promote the use of public transport. Extension of the ticketing schemes block exemption will ensure that current and future passengers continue to benefit from these schemes.'

NOTES

1. The Competition Act 1998 (Public Transport Ticketing Schemes Block Exemption) Order 2001 came into force on 1 March 2001 (but had retrospective effect from 1 March 2000). It covers ticketing schemes that provide multi-operator travelcards, multi-operator individual tickets, through tickets and add-on tickets for local travel on buses, trains, trams, domestic ferry services.

2. The Chapter I prohibition of the Competition Act 1998 prohibits agreements between undertakings, decisions by associations of undertakings or concerted practices which have the object or effect of preventing, restricting or distorting competition within the UK (or any part of it) and which may affect trade within the UK (or any part of it).

3. An agreement that falls within the Chapter I prohibition, but which satisfies the conditions set out in section 9(1) of the Competition Act 1998, is not prohibited with no prior decision to that effect being required. To satisfy the conditions set out in section 9(1) an agreement must: contribute to improving production or distribution or promoting technical or economic progress; allow consumers a fair share of the resulting benefit; contain only restrictions which are indispensable to the attainment of those objectives, and not afford the undertakings concerned the possibility of eliminating competition in respect of a substantial part of the products or services in question.

4. The OFT has recommended making the following substantive changes to the block exemption:

to extend the duration of the block exemption for an additional five years until 2011
to replace the current condition requiring revenue distribution for multi-operator travelcard (MTC) schemes to be on the basis of 'passenger miles, as far as reasonably practicable' with a less prescriptive condition, allowing any method provided (a) it does not create an incentive for operators to set their own fares higher than they would have been in the absence of the MTC, and (b) it does not significantly reduce the incentive for each of the operators to compete for passengers, and
to remove the requirement for operators to sell their own operator tickets when they issue multi-operator individual tickets (MITs).
In addition, the OFT has recommended making three minor changes to the block exemption, principally to reflect changes resulting from the Competition Act 1998 and other enactments (Amendment) Regulations 2004 and the replacement of the Director's rules with the OFT's rules.

5. Download consultation paper (pdf file 647 kb).

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