61/05    1 April 2005

The OFT has launched a consultation on proposed changes to widen and extend the duration of the Public Transport Ticketing Schemes Block Exemption.

Under the block exemption (which came into force in 2001) joint ticketing schemes such as multi-operator travelcards are exempt from the Chapter I prohibition in the Competition Act 1998, if they satisfy certain conditions.

Download consultation paper (647 kb).

The OFT has now reviewed the existing block exemption and proposes to extend its duration by five years. The other proposed substantive revisions to the block exemption are:

• replacing the current 'passenger miles' condition for revenue distribution for multi-operator travelcards with a less prescriptive approach allowing any method of revenue sharing that does not creative incentives for operators to increase fares or to avoid other ways of attracting passengers
• requiring that the price of a multi-operator travelcard must not be linked to any ticket price charged by a single operator, or smaller group of operators
• only requiring operators that offer multi-operator individual tickets on particular routes to offer their own ticket for the same journey.

These proposals are based on the OFT's review and experience of providing informal advice and liaising with the industry and passenger groups since the block exemption came into force.

Responses to the consultation can be made until 24 June.

The OFT does not propose recommending that the Secretary of State introduce a new block exemption that would allow bus operators to agree equally spaced timetabling arrangements, known as equal headways. Responses to the OFT's review suggested that 'bus-bunching' and 'leap-frogging', where bus operators offer services at the same time or just ahead of each other to gain commercial advantage, were not a large scale problem and were only temporary. They usually occur after a rival introduces a new service and only until the market naturally adjusts.

Also issued today is an updated version of answers to the frequently asked questions on competition law and the bus industry.

Commenting on the proposals, Vincent Smith, Director of Competition Enforcement said:

'The proposed extended duration and other changes to the block exemption should provide a more effective framework within which to provide joint ticketing schemes for the benefit of passengers, and reduce the burden of compliance for smaller operators.'

NOTES

1. 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).

2. 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:

• help improve production or distribution or promote technical or economic progress
• allow consumers a fair share of the resulting benefit
• contain only restrictions which are indispensable to the achievement of the benefit, and 
• not go so far as to make possible the elimination of competition in respect of a substantial part of the products or services in question.

Any undertaking claiming the benefit of section 9(1) bears the burden of proving that the conditions in that section are satisfied, though the OFT will provide informal non-binding advice to any party seeking it.

3. Article 81 of the EC Treaty prohibits agreements between undertakings that have as their object or effect, the restriction or distortion of competition within the common market, and which may affect trade between Member States. The Ticketing Schemes Block Exemption does not exempt agreements affecting trade between Member States.

4. 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), covering ticketing schemes for local travel on buses, trains, trams, domestic ferry services and covers multi-operator travelcards, multi-operator individual tickets, through tickets and add-on tickets.