SUMMARY OF
SOUTHDOWN MOTOR SERVICES LIMITED: A REPORT ON THE CONDUCT OF
SOUTHDOWN MOTOR SERVICES LIMITED IN RESPECT OF ITS OPERATION
OF LOCAL BUS SERVICES ON ROUTES 262 AND 242 IN BOGNOR REGIS
In a reference made on 3 September 1992
(and varied on 12 January 1993—see Appendix 1.1)
the Director General of Fair Trading (DGFT) asked us to
investigate the registration, operation and charging of
uneconomic fares by Southdown Motor Services Limited (Southdown)
on routes 262 and 242 in Bognor Regis, with the intention
of undermining the viability of a competitor. We were asked
to consider whether this course of conduct was anti-competitive
and, if so, might be expected to operate against the public
interest.
Southdown (now called Sussex Coastline
Buses Ltd (Sussex Coastline), but referred to as Southdown
throughout) is, and for many years has been, the main operator
of bus services in Bognor Regis. In 1987, shortly after
the deregulation of the bus industry, a new company, Strikeline
Limited (Strikeline) (referred to by its trade name Easy
Rider Minicoaches (Easy Rider)), started services in competition
with Southdown on routes from the town centre of Bognor
Regis to two residential areas, North Bersted to the north
and Rose Green to the west of the town. Each company provided
two buses per hour on these routes.
In July 1990 Southdown introduced a new
service, the 262, timed shortly ahead of the Easy Rider
service to Rose Green, but this was withdrawn in December
1990. In March 1991 Southdown introduced another new service,
the 242, which ran shortly ahead of Easy Rider on its services
both to North Bersted and Rose Green. After the introduction
of the 242, Southdown was operating six buses per hour
to North Bersted, and four to Rose Green. The 242 service
made a substantial loss, but caused a significant deterioration
in Easy Rider's financial position, following which, in
May 1992, its proprietor sold the vehicles and goodwill
to Southdown.
Southdown argued that it was forced to
act as it did to defend itself in Bognor Regis. We, however,
believe that the operation of the additional services provided
by route 242, at revenues which did not cover even the
costs of drivers' wages or provide any contribution to
general expenses, with the purpose of driving out Easy
Rider, was an anti-competitive practice, and a main cause
of Easy Rider's withdrawal from the market.
Competition from Easy Rider had been to
the benefit of passengers, resulting both in lower fares
than elsewhere in Bognor Regis and in higher levels of
service than Southdown had provided previously. The loss
of competition may, in our view, be expected in due course
to result in higher fares and lower levels and quality
of service on the routes previously operated by Easy Rider,
and the corridors adjacent to such routes. We have, therefore,
concluded that Southdown's course of conduct may be expected
to operate against the public interest.
We have recommended that firstly Southdown
be required to limit fares increases on the affected routes
to the increase in the Retail Price Index (RPI) for two
years from the date of our report and, secondly, that it
should undertake for a similar period not to reduce the
levels of service on the affected routes below those operated
by Southdown and Easy Rider before the introduction of
route 242. Additionally, Southdown should submit regular
reports to the Office of Fair Trading (OFT) on changes
in fares and levels of service, and on the profitability
on the affected routes, and in the Bognor Regis area generally
for purpose of comparison.
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Full text of the report
Last revised: June 1999
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