Watchdog ruling puts Scottish coach routes at 'serious' risk

The coach operators Stagecoach and Scottish Citylink lashed out at the Competition Commission yesterday, after the regulator said it was considering imposing a number of conditions on the pair's recently formed joint venture.

Responding to the provisional findings of the Commission's investigation, published yesterday, Tom Wileman, the managing director of the joint venture, warned that the future of coach services in Scotland could be put at "serious risk" if the regulator pushed ahead with its proposals.

Stagecoach agreed to take a 35 per cent stake in Scottish Citylink last autumn, with a view to establishing its Megabus and Motorvator-branded coaches on several of Citylink's routes in Scotland. The remaining 65 per cent of the Scottish company is owned by Braddell.

The Office of Fair Trading referred the deal to the Competition Commission in March. Publishing its provisional findings yesterday, the regulator said it was concerned that the joint venture would lead to a "substantial lessening of competition" on the Edinburgh to Inverness and Glasgow to Aberdeen routes.

The Commission has proposed a series of remedies of varying severity for the companies to consider, believed to include the imposition of price restrictions, or possibly forcing Stagecoach to withdraw from the partnership on the affected routes.

"It is a bizarre decision, which is out of step with the majority of evidence presented to the Commission by a range of independent parties," said Mr Wileman. "While we welcome the Commission's findings on the Edinburgh-Glasgow corridor, they have completely misunderstood the inter-city transport market in the rest of Scotland.

"The fact is that the joint venture has delivered the biggest improvement to the inter-city coach network in Scotland in decades, offering better links, faster services, and value-for money fares. It has signalled the return of the coach as a real alternative to the train."

But John Baillie, the chairman of the Competition Commission's inquiry, said he believed the joint venture had "removed constraints on ... fares and service levels", dismissing the suggestion that other forms of transport could be counted as competition. "There are significant barriers that would prevent other firms from entering this market and other forms of transport act as only weak constraints on coach fares," he said. "In the absence of competitive threat, it seems likely that passengers could face higher fares and reduced service levels. Following the joint venture, we have seen evidence of fares increasing more than costs on these routes."

The companies are seeking a meeting with the Commission to discuss its findings. The parties have until 4 September to make their representations. The report will be published by 24 October.