Andrew Turner the Island’s MP has said that although he is disappointed that the Office of Fair Trading (OFT) have indicated they are not ‘minded’ to take the investigation into the cross-Solent ferry markets further at this stage he is ‘certainly not giving up’. His comments came after a report from the OFT released last Friday make clear that although a number of tests have been met that would enable them to refer the matter for a full investigation by the Competition Commission they have provisionally decided to use their discretion against doing so. There is now to be a further period of consultation on the provisional findings with comments invited from interested parties before 12th August.
The report is the outcome of a market survey by the OFT following a campaign by Mr Turner seeking an investigation into whether the Island’s ferry services are working well for consumers. He decided to act following a rise in the number of complaints he received about rising prices and declining services following the multi-million pound takeovers of Wightlink and Red Funnel by financial institutions.
The OFT’s report makes clear that both service frequency and punctuality have decreased in recent years and points out that because the pricing system is very complex it is difficult to compare prices for similar journeys over time. The report also says that service frequency is expected to fall in future years.
A central argument of Mr Turner’s submission is that the high prices paid for both companies had led to substantial levels of debt and would lead to even higher prices in the future. The OFT expressed disquiet about Wightlink’s levels of profit since 1991 and make clear that Mr Turner’s concerns appear ‘justified’ and ‘have merit’ but believe it is too early to tell what the repercussions might be. The report specifically says that this could be revisited in the future when more evidence is available.
Both ferry companies have changed to ‘yield management pricing’. The OFT has concluded that this has led to Islanders who use the ferries as a lifeline service experiencing higher price rises than tourists and other groups who are more able to plan their journeys in advance.
The report suggests that greater transparency from the ferry companies on service and price levels would be of benefit and enable greater scrutiny of the ferry companies in the future.
Mr Turner said :
“I would like to thank the OFT for the work they have done so far. They have accepted my arguments on most of the important points but say that they are ‘minded’ not to take further action. Although they have identified clear concerns about price, quality, choice and innovation they say they have found only ‘limited evidence’ that this has damaged consumers. They are also clearly having trouble finding a suitable remedy to address the problems they have identified.
“I am certainly not giving up on trying to secure a full investigation. I will be meeting the OFT to discuss what information they would need in order to change their provisional findings.
“This report certainly does not give the ferry operators a clean bill of health – far from it. Instead it puts them on notice that there needs to be changes in the way they operate. They have recommended that the ferry operators should provide greater transparency on pricing and service standards. I welcome that. Currently the ferry companies hold all the information, so it is very difficult to challenge them. That was certainly one of the problems I encountered in preparing my case. We need to discuss what can be done to make the operators work harder to deliver value for money services whether there is eventually a full investigation or not.
“The OFT have pointedly not commented on whether a ‘yield management’ pricing strategy is appropriate for a lifeline service. I will be pressing them to come to a view on this.”
Mr Turner went on to say :
“I am perplexed that the OFT have decided it is ‘too early’ to take a view on whether the high prices paid for the ferry companies in recent years will lead to long-term damage to the consumer. I am afraid that is avoiding the issue. My constituents are clearly suffering now and have been for a number of years – I am not sure how long the OFT think that should continue before they will act. That is something I will be following up on.”
END Contact : Andrew Turner’s office 01983 530808
