7 January 2010 | Jake Kanter

The Office of Fair Trading (OFT) has referred UK local bus services to the Competition Commission (CC) over pricing concerns.

Following an investigation, the OFT alleged that limited competition between bus operators was resulting in higher prices and lower quality for passengers.

It said single operators were dominating deregulated services in certain areas, while publicly funded transport routes were not attracting enough suppliers.

Commenting specifically on supported services contracts - put out to tender by local transport authorities on routes that are not commercially viable but considered socially necessary - the OFT said competition was weak.

It argued many deals have attracted only one bidder and as the number of publicly funded routes has grown, the cost to the taxpayer has risen.

“Given the size and importance of this industry, with at least £1.2 billion coming from the public purse every year, the OFT believes that it is appropriate for the CC to investigate how, in its various forms, competition can be harnessed to deliver what passengers want and the best value for money for the taxpayer,” said OFT senior director Heather Clayton.

The Confederation of Passenger Transport UK, which represents the bus industry, said in a statement: “Bus companies operate in highly competitive local markets and it is always in our interests to keep prices competitive to attract passengers out of their cars and on to our services.

“There is a great deal of competition between bus operators, large and small, but the biggest competitor for the bus industry is the car.”

The CC will now carry out a full inquiry into local bus services, excluding London and Northern Ireland where services are largely franchised.