CMA and rail competition

[Mike@Raileasy]

Anyone understand this?

This policy project will examine whether the current industry framework can be adapted for the future. It will not be a commentary on how the current framework is applied at present, and has no bearing on, for example, the government’s current programme of franchise awards or the ORR’s assessments, within the current framework, of open access applications that are made to it.

https://www.gov.uk/government/news/cma-to-examine-scope-for-greater-rail-competition-for-passengers

The CMA is to undertake a project to examine the scope for increasing competition in passenger rail services in Great Britain, and to see whether this could lead to better value for money and improve service quality. This will be a policy project, and not a formal investigation or market study.

Currently, the benefits of competition in passenger rail services are secured primarily by the competitive award of franchises. This franchising system – in essence, competition ‘for’ the market – was recently reformed and the process of competitive bidding for these franchises appears to be working well. There is, in addition, a degree of competition within the market as some franchisees compete against each other on routes where franchises overlap, and also where a franchisee faces competition from services provided by a non-franchised passenger train operator which has been approved by the industry regulator the Office of Rail Regulation (ORR); so-called ‘open access operators’. There is some evidence that such competition within the market has yielded benefits for passengers and for the industry, but in the current industry framework the scale of in-market competition is relatively limited. ...

 

[WatcherZero]

Essentially rather than an investigation into allegations or suspicions of unfair competition practise its a review to set the CMA's stance on whether increased competition (open access operators) in the rail industry is a good thing or not and if/how it could actually be achieved. From the sound of it is CMA that instituted the policy review rather than ORR and likely in response to the recent OAO application refusal.

 

[EAD]

For my sins I am a competition lawyer.

This is unusual in that it is only a policy review - not a formal market review (which takes 18-24 months and causes the industry a lot of work and costs). As such my take is the ORR has asked for help in reviewing the current functioning of the market. The ORR itself has concurrent competition review powers along with the CMA and government wants industry regulators to do more of them - the ORR for example has an ongoing investigation around an FOC using such powers.

As Watcher has said - the idea is to see if the market can take more open access or route competition (in market competition) rather than competition for the award of franchises (competition for the market).