An Office of Fair Trading preliminary investigation has been unable to reach a clear determination on whether the gov’s ConnectPorts commercial service is benefiting from state subsidies, in what would amount to a breach of gov policy.
Officers from the OFT were tasked with investigating whether the ConnectVillages and ConnectPorts were competing with existing taxi firms on an anti-competitive basis.
ConnectVillages was set up as an on demand bus service in the north of the island as a way to save money on uneconomical bus routes without cutting the services entirely.
ConnectPorts on the other hand, was created as a standalone service which was designed to be used by people who wanted to travel on early morning flights, but had no bus service to get there. It was later described by politicians as a service to take people to and from the airport or sea terminal when travelling off island for hospital appointments.
Now, however, its website doesn’t mention Patient Transfer and just says: ‘ConnectPORTS is a flexible door-to-door minibus service that enables multiple passengers, who are travelling in the same direction, to share their ride without having to wait at bus stops or travel on a pre-designed route. It is a premium service that takes you to/from the north of the island to/from the Airport.’
In its summary conclusion, the OFT said that ConnectVillages ‘has not shown a material increase in passenger numbers following the replacement of previous off-peak bus routes’. However, it added that there may be a greater case to argue that ConnectPorts benefits from state support and unfair competition.
It added that CV ‘achieves a social-economic policy goal of providing more accessible transport options to consumers in the North of the Island (whilst reducing costs from the previously less efficient traditional bus services);and addresses the likely negative consumer impact in the counterfactual scenario, which would see the discontinuation of the previous off-peak services regardless of whether or not ConnectVillages was implemented’.
In relation to the service set up to provide a link to the airport, the OFT said it was ‘unlikely that Bus Vannin’s ConnectPorts demand response service could form part of the same relevant product market as the private taxi industry, whilst also holding a position of dominance at the same time’.
It added: ‘In the absence of additional information from the taxi industry, based on evidence collected as part of the ConnectVillages assessment, it also appears that demand response services and private taxi services may not form part of the same relevant product market as they are not considered to be substitutes. This may be due to a range of factors, such as cost, convenience and comfort, albeit additional data would be needed to conduct a detailed assessment.’
While saying it was unlikely that CV or CP was part of the same relevant product market as local taxis, the OFT said it hadn’t seen evidence to suggest that ConnectPorts service was initiated with predatory intent, rather was ‘originally implemented to provide passengers with additional means of travel to the airport or sea terminal, whilst also allowing more efficient use of Government resources’.
As such, the report said it was unlikely that CP was anti-competitive as there was no evidence of abuse of a dominant position.
However, and it is a big however, the OFT did say that it did not have the full financial figures to definitively rule anything out, including whether Bus Vannin did have a dominant position in the market. The OFT noted that it had ‘not been provided with any financial information to confirm that the patient transfer service does not subsidise the commercial service, nor that charges are in line with those that a normal market operator would charge’.
It added: ‘We have not been provided with financial information for ConnectPorts to establish whether this is operating within the agreed budget of £125,000 and at a comparable price to a market operator. We therefore cannot conclude that there is no cross subsidisation.
‘In addition, whilst non-urgent care patients are given priority, spare seats are then available to paying passengers at £10/adult and £5/child, we have not been provided with any financial information on the rationale for the charges to the paying passengers and therefore cannot conclude whether they are in line with the fees a market operator would charge. Overall, without such support, there could be cross- subsidisation of the commercial services from the PT ConnectPorts Service into the commercial ConnectPorts service.’
While there is no relevant state-aid regulation in the Isle of Man, the OFT said it did consider that the commercial aspects of the ConnectPorts service ‘could carry a risk of being funded by the state, which appears to contravene the Government Report, Recommendation 1, Principle 5’.
For those who don’t know, which is probably everyone, the gov report, Recommendation 1, Principle 5, states that ‘where possible, if public services are to compete with the private sector, competition must be fair, with special care being taken to avoid cross-subsidisation of commercial activities from revenue funded budgets’.
The OFT said: ‘If information was available to support the claim that these demand response services were providing a service of general economic interest, and the total level of state support was within the EU/UK thresholds, by reference to these thresholds as an appropriate measure, the state support for the demand response service may not be deemed as an issue which would, therefore, address the complaint.’
In short, it means that if further info was available, it would be better placed to conclude on both the market definition and whether or not Bus Vannin holds a dominant position within each product market. The OFT said that this extra info ‘would be a key determinant in concluding whether or not Bus Vannin has engaged in anti- competitive conduct’.