UK: OFT Launches Consultation on Public Transport Ticketing Schemes Block Exemption

Last Updated: 17 September 2010
Article by Nick Maltby

Introduction

On 28 July 2010 the OFT announced a consultation on its recommendation to extend the Public Transport Ticketing Schemes Block Exemption for another 5 years from its current expiry date in February 2011 with the new expiry date being 29 February 2016. This will be the second time the Block Exemption has been extended with the previous extension happening in 2006. The consultation will run until 20 October 2010.

The Block Exemption

The Block Exemption automatically exempts from UK competition law, subject to certain conditions, the types of integrated ticketing arrangement specified in it. These include multi-operator travel cards (MTCs), multi-operator individual tickets (MITs) and through tickets (TTs). Without a block exemption, passengers would have to buy tickets from each operator rather than purchase tickets, which could be used on the services of several operators. The OFT views the benefits of this (cost or time savings, increased flexibility and convenience of travel) as outweighing any detriments in competition terms. The conditions attaching to the Block Exemption are both general and specific in nature with the specific ones varying depending on the nature of the ticketing arrangement with revenue sharing on a variety of bases and price fixing only being permitted in the case of a MTC. Our experience has been that the Block Exemption has not been easy to apply, particularly in the case of smartcard-led schemes given, the different treatment of the various ticket types.

Whether the Block Exemption remains appropriate

As far as the consultation is concerned, the OFT's preliminary view is that the Block Exemption remains appropriate and that the criteria for the existence of a block exemption continue to be met:

  • There is a clearly identifiable category of agreements that appear to meet the conditions for an exemption in section 9 of the Competition Act 1998. Ticketing schemes deliver benefits for passengers, operators and other consumers. The restrictions imposed are not indispensable to the benefits. In the case of MTCs, for instance, co-operation between operators on pricing is necessary to operate the scheme more efficiently than it would be in the absence of the restriction. Consumers continue to benefit from the improved quality, flexibility and convenience and potentially lower prices of transport services that flow from integrated ticketing.
  • The agreements remain "special" in the sense that there is an enhanced need for co-operation between transport operators if integrated ticketing is to be realised. Otherwise passengers would need to buy separate tickets.
  • There is a real risk that agreements will not be entered into if the Block Exemption was withdrawn. In the absence of the Block Exemption, individual operators are unlikely to join a scheme due to concerns about infringing competition law (which is understandable given the last twenty years). Benefits to consumers tend to outweigh those to operators.There are no reasonable practical alternatives to facilitate joint ticketing schemes that could deliver even greater benefits. The OFT does not consider the regimes set up under the Transport Act 2000 for ticketing schemes (as this relies on the discretion of local transport authorities) or the introduction of sector-specific guidance to assist companies to self-assess their arrangements against the competition law framework to be alternatives.

Based on this preliminary review the OFT is minded to recommend that the Secretary of State extend the Block Exemption.

Other changes to the Block Exemption

The OFT is, however, not minded to make other changes to the Block Exemption. The OFT's preliminary review suggests that categories of ticketing agreement in the Block Exemption continue to be broadly used by operators and that the conditions attaching to the availability of the Block Exemption remain appropriate.

One particular change that has been sought is the accommodation of smart ticketing. The OFT views smart cards as electronic instruments that allow for the advanced handling and use of information rather than as necessitating any particular form of ticketing. Chapter 5 of the Consultation Document proceeds to set out the OFT's thinking regarding the likely implications of new technologies for ticketing arrangements between different transport operators and whether any changes to the Block Exemption are required.

The OFT's thinking at this stage is that while the new ticketing technologies are having contractual impacts on ticketing schemes in terms of permitting more targeted pricing and revenue allocation and leading to the development of new ticketing types, such as PAYG and PAYGC and may lead to a decline in the use of some ticket types over time, it seems premature to introduce a new category of schemes in the Block Exemption until the commercial application of smart ticketing technologies has developed further. The OFT considers that the benefits of encouraging smart ticketing schemes to be entered into are presently outweighed by the possibility that better ways of providing benefits to consumers may emerge in time. The OFT does envisage that smart ticketing technologies may become widespread during the life of the extension and that the subject may be reviewed again in 2016. In the meantime, businesses can self-assess the impact of competition law for agreements that fall outside the Block Exemption. In any event, if circumstances change sufficiently, a new proposal can be made to the Secretary of State.

As was noted in a previous article in this journal (June 23, 2010 at pages 26 and 27), one of the barriers to the introduction of smart ticketing outside London is the uncertainty around the application of the Block Exemption to smart ticketing schemes and in particular the narrow categories of agreement covered by the Block Exemption. As was noted in that article, the consequences of the distinction between MTCs and MITs are severe for smart card schemes, which are as likely to be MITs as MTCs. In any event, article 7 of the Block Exemption prohibits a scheme from preventing operators from setting the price or availability of their own tickets, which is likely to be necessary if the intent is to set up a scheme like Oyster. The effect of these restrictions is that authorities and operators developing smartcard schemes are as likely to turn to the ticketing schemes provisions of the Transport Act 2000, given the vaguer description of the competition test in Schedule 10, as to rely on the Block Exemption.

It is submitted that the OFT's preliminary view regarding changes to the Block Exemption is not helpful as far as the introduction of smartcard schemes are concerned. Smartcard technologies, while having a range of benefits, tend to encourage a move to more sophisticated systems of revenue distribution and a move away from individual operators issuing their own tickets (if only because the expense involved in adopting a smart card system). Simplifying price structures necessitates some agreement on prices between operators. Lastly, smartcards involve the ability to understand passenger trends in much more depth so that the question of information exchange arises. If we are to see more smartcard schemes emerge outside London in the next five years a change is needed now.

Oyster

There is also the fact that there are now more than 35m Oyster cards in use in the UK. It is hard to explain to all those using Oyster cards that it is not possible to provide the benefits of that scheme outside the Transport for London area because bus transport in the capital was not deregulated. If the Quality Contract provisions of the Transport Act 2000 were ever implemented then this would change but the slow take up of smart card technology in the regions has to be viewed in the context of the system of competition law applying outside London.

Competition Commission Inquiry

The Competition Commission is, of course, in the early stages of its Market Investigation Inquiry concerning the bus industry. It is possible that issues relating to smartcard schemes will arise from this. However, the timing is not ideal as the OFT is due to make recommendations to the Secretary of State at the end of 2010 and the Competition Commission is only due to report in Summer 2011.

Consultation

As noted above, the consultation runs until 20 October 2010. The OFT has formulated nine questions for respondents to consider and would like as many organisations as possible to respond. A copy of the consultation document may be found at http://www.oft.gov.uk/OFTwork/consultations/current/ticketing-schemes-ex....

Conclusion

In December 2009 the Department for Transport stated in its paper, "Developing a strategy for smart and integrated ticketing", that "concerns about contravening competition law can act as a barrier to integrated ticketing" (para 7.4) and said it would engage with the OFT to tackle concerns and reduce uncertainty. It is difficult to see much sign of such engagement in the OFT's consultation document and it is to be hoped that the OFT will address the legitimate concerns of many regarding the introduction of smartcard technologies in areas of the UK subject to the full rigour of UK competition law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.