Nat Express rail referral puts bus bids on guard

Bus companies may be put off bidding for rail franchises after yesterday's announcement by the Department of Trade and Industry that the Monopolies and Mergers Commission was to investigate the acquisition of the Midland Main Line franchise by National Express.

The company expressed "disappointment" that talks between the Office of Fair Trading and National Express which had been carrying on since last November had not resolved the competition issues. Colin Child, the group's finance director, said: "We had hoped that commonsense would prevail and a compromise have been reached."

National Express took over the franchise of the Midland Main Line which runs services from London St Pancras to the East Midlands and Sheffield on 28 April, and had been confident at that time that any problems over competition issues with the OFT could be resolved. National Express also runs coach services to the towns served by MML but argued that the coach and train markets are very different.

However, last month, the OFT asked National Express to give a set of undertakings over its coach services before it would give the Midland takeover clearance. These included withdrawing services between London and Derby, Leicester, Nottingham, Chesterfield and Sheffield and helping other companies set up on these routes. The OFT wanted to impose very strict rules on National Express to ensure that the company did not stand in the way of any new operators setting up on the routes by ensuring that timetable information was printed in NE publicity material. Stops, depots and other facilities were also to be made available to the new operators.

National Express balked at these requirements. Instead, it offered to give undertakings on service quality and frequency and on fares on its coach services which are much lower than the equivalent rail travel. The key leisure rail fare, the saver, is already regulated, and National Express also offered to limit increase in its Apex rail fares.

However, the OFT rejected this offer and National Express also refused to back down, arguing that other operators were unlikely to step into the breach and that the company could not be expected to help rival operators. Mr Child said: "We thought it better for all parties to clear the air and let the MMC look at the whole issue." The MMC will report by 22 November and in the meantime both bus and rail operations will be unaffected.

Bus operators feel that the OFT is barking up the wrong tree since the transport market is so dominated by the private car. One operator pointed out: "For these types of journeys, 90 per cent are undertaken by car, while 8 per cent of people go by rail and 2 per cent by bus. What's the fuss about?"

Nevertheless, bus companies may be reluctant to go into the rail franchise market if they are going to face such problems.

Bus companies have so far been the mainstay of the rail bidding process winning four - South West Trains, LTS, Gatwick Express, and MML - of the eight so far announced, with a fifth, Great Western, going to a management buy-out team backed by First Bus.

Stagecoach, which operates South West Trains was cleared to run the service despite the fact that it has a number of bus companies in the area.