70/09    12 June 2009

The OFT today announced a consultation on the provisional findings from its market study into Isle of Wight Ferry Services.

The study found limited evidence of problems for consumers that interventions in this market could address. This may make it disproportionate to refer the market to the Competition Commission for further investigation at this time.

The main findings include:

• The service is frequent, comprehensive and generally reliable. Nonetheless, the level of complaints received by the study shows there is room for improvement in customer satisfaction. To address this, the OFT proposes operators should publish clear, consistent information which makes it easier for ferry users to track prices and service quality.
  
• In general, average prices have risen at around the same rate as the Retail Price Index in recent years. Increasingly, people who book in advance pay less than people who book on the day for car crossings. This may explain the perception of price increases for these journeys.
  
• There are barriers to entry for new competitors in this market. These barriers are primarily physical, such as limited room on the island for berthing facilities for car ferries, and not necessarily caused by the ferry operators' control of existing facilities.
  
• There is some competition between operators running alternative routes. Over time, 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.

John Fingleton, OFT Chief Executive, said:

'Isle of Wight ferries provide an essential service for local residents and visitors to the Island. Although we found the service generally reliable, we believe there are real issues around customer satisfaction which the ferry operators have responsibility to address.

'We suggest a good first step for them would be to publish clear, consistent information about their performance. As well as allowing consumers to compare prices and service quality it will also ensure a greater scrutiny of ferry operators going forward.'

The OFT will consult with key parties directly. Others can submit written views, by 5pm on 12 August 2009 to: Isle of Wight Ferry Services Market Study (Floor 2C), Office of Fair Trading, Fleetbank House, 2-6 Salisbury Square, London EC4Y 8JX or email: isleofwightferries@oft.gov.uk 

NOTES

1. Access the OFT market study findings and consultation document.

2. Access the market study launched in February 2009 which 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.