Tag: deregulation

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Fair fares?

In many parts of the UK, bus services are run by a single operator. In other parts, it is little different, with the main operator facing competition on only a very limited number of routes. Over the whole of England, Scotland and Wales there are 1245 bus operators, but the ‘big five’ (Arriva, FirstGroup, Go-Ahead, National Express and Stagecoach) carry some 70% of passengers. Generally these five companies do not compete with each other, but, instead, operate as monopolies, or near monopolies, in their own specific areas. On average, the largest operator in an urban area runs 69% of local bus services.

Given this lack of competition and potential abuse of monopoly power, the Office of Fair Trading referred local bus services in Great Briatin (excluding London) to the Competition Commission (CC) in January 2010. The CC has just published its final report. Paragraph 5 of the summary to the report states:

We concluded that there were four features of local bus markets which mean that effective head-to-head competition is uncommon and which limit the effectiveness of potential competition and new entry. These features are the existence of: high levels of concentration; barriers to entry and expansion; customer conduct in deciding which bus to catch; and operator conduct by which operators avoid competing with other operators in ‘Core Territories’ (certain parts of an operator’s network which it regards as its ‘own’ territory) leading to geographic market segregation.

And paragraph 8 states:

We decided on a package of remedies with three main elements to address the AECs [adverse effects on competition] that we found. First, the remedies include market-opening measures to reduce barriers to entry and expansion, thereby reducing market concentration and providing an environment in which competition is likely to be sustained. By reducing barriers to entry and expansion, we also expect it to become harder for operators to sustain a coordinated outcome. Second, the remedies include measures to promote competition in relation to the tendering of contracts for supported services. Third, we made recommendations about the wider policy and regulatory environment, including emphasizing compliance with and effective enforcement of competition law.

The following articles look at the findings of the report and at the potential for improving the service to passengers, in terms of quality, frequency and price.

Articles
Competition regulator outlines bus market shake-up The Telegraph (20/12/11)
Bus market not competitive, Competition Commission says BBC News (20/12/11)
Passengers ‘need more bus rivalry’ Press Association (20/12/11)

Competition Commission publications
CC sets out Future Destination for Bus Market Competition Commission News Release (20/12/11)
Bus Market Inquiry: Final Report, Case Studies and Appendices Competition Commission (20/12/11)
Local Bus Services: Accompanying Documents Competition Commission (20/12/11)

Questions

  1. What are the barriers to entry in the market for local bus services?
  2. In what circumstances are local bus services a natural monopoly? Is this generally the case?
  3. In a non-regulated bus market, how could established operators use predatory pricing to drive out new entrants?
  4. How may offering reductions for return tickets reduce competition on routes where there is a large operator and one or more smaller ones?
  5. What practices can established large operators use to drive out smaller competitors?
  6. Go through the four reasons given by the CC why head-to-head competition in local bus markets is uncommon and in each case consider what remedies could be adopted by the regulator or by local authorities.
  7. Which of the remedies proposed by the CC involve encouraging more competition and which involve tighter regulation?
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The crisis of neo-liberalism

The article linked below is a blog article by George Monbiot looking at the rise of neoliberal economic views and discussing whether these are simply an intellectual justification for the rich and powerful to reinforce their position.

How the neoliberals stitched up the wealth of nations for themselves Guardian (Comment is free) (28/8/07)

Questions

1. Write a brief summary of the neoliberal views of the founder of the Mont Pelerin Society – Friedrich Hayek.
2. Explain the neoliberal argument that “….. we are best served by maximum market freedom and minimum intervention by the state. The role of government should be confined to creating and defending markets, protecting private property and defending the realm.“
3. Discuss the view espoused by George Monbiot in the article that neoliberal policies like “minimal taxes, the dismantling of public services and social security, deregulation, the breaking of the unions” serve to make the elite even richer and simply act as a “wealth grab“.
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The World Bank has the perfect standard bearer

The World Bank and the IMF are no strangers to criticism. Both organisations have pursued controversial policies in their attempts to improve the lot of people in developing countries. Recent events at the World Bank have heightened criticism of the organisation and in the first article below Naomi Klein (author of No Logo – nologo.org) argues that the behaviour of Paul Wolfowitz is symptomatic of a wider hypocrisy in the behaviour of the World Bank around the world. In the second article George Monbiot writes a criticism of the behaviour of the IMF and its approach.

Questions

1. Use the web sites of the IMF and the World Bank to write a summary of their roles.
2. Assess the validity of the arguments of (a) George Monbiot with respect to the IMF and (b) Naomi Klein with respect to the World Bank.
3. Discuss possible changes in World Bank policies that would help address Naomi Klein’s criticisms.