124/09    14 October 2009

Following a two-month consultation on the findings of its market study into Isle of Wight ferry services, the OFT today confirmed it will not be referring the market to the Competition Commission at the present time.

The OFT's study found limited evidence of problems for consumers that interventions in this market could address, but found room for improvement both in customer satisfaction levels and the amount of information available to users on the performance of the ferry operators.

During the consultation, the ferry operators have told the OFT that they will voluntarily introduce a range of measures aimed at communicating and improving the service they offer their passengers. This includes publishing punctuality, reliability and some pricing information as well as undertaking customer satisfaction surveys.

The final findings of the study include:

• In general, average prices have risen at around the same rate as the Retail Price Index over recent years, and overall fares are not obviously out of line with other commercial ferry services across Europe.
  
• However, better fares are available to passengers who book in advance. Passengers who use the ferry services on a 'turn up and go' basis are likely to have experienced higher than average price increases in recent years.
  
• Overall, the service is reasonably frequent, comprehensive and reliable.
  
• There are some barriers to entry for new competitors. These barriers are primarily physical, such as limited room on the island for berthing and marshalling facilities for car ferries.
  
• There is some competition between operators running alternative routes. In the last two decades, both Red Funnel and Hovertravel have taken some market share from Wightlink.
  
• There is little same-route competition. However same-route competition is unusual in ferry markets and typically sustainable only on busy routes, such as those across the Channel.

Heather Clayton, OFT Senior Director of Infrastructure, said: 'Although we have not found competition issues that warrant further investigation, there are concerns around passenger satisfaction that the ferry operators should address. We welcome the fact that they have taken some steps by agreeing to publish information that will help passengers hold them to account.'

Download the OFT's final decision: Isle of Wight Ferry Services - Market study findings (pdf 2.06mb)

NOTES

1 Read the OFT's provisional market study findings and consultation document from June 2009.

2 Read the market study launched in February 2009 and specifically examined the nature of competition between operators and potential barriers to entry.

3 OFT market studies are carried out under section 5 of the Enterprise Act 2002 (EA02) which allows a market-wide consideration of both competition and consumer issues.

4 Market studies involve an analysis of a particular market with the aim of identifying and addressing any aspects of market failure from competition issues to consumer detriment and the effect of government regulations. Possible results of market studies include; enforcement action by the OFT; a reference of the market to the Competition Commission; recommendations for changes in laws and regulations; recommendations to regulators, self-regulatory bodies and others to consider changes to their rules; campaigns to promote consumer education and awareness; a clean bill of health.

5 Under section 131 of the Enterprise Act 2002 (EA02) the OFT may make a market investigation reference to the Competition Commission where it has reasonable grounds for suspecting that any feature, or combination of features of a market in the United Kingdom for goods or services prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the United Kingdom or part of the United Kingdom. The OFT's guidance sets out four criteria, all of which must, in its view, be met before it can decide to make a reference:

• Appropriateness of a reference: the scale of the suspected problem, in terms of its adverse effect on competition, is such that a reference would be an appropriate response to it.
  
• Availability of remedies: there is a reasonable chance that appropriate remedies will be available.
  
• Undertakings in lieu: it would not be more appropriate to address the problem identified by means of undertakings in lieu of a reference.
  
• Alternative powers: it would not be more suitable to deal with the competition issues identified by applying the CA98 or using other powers available to the OFT.