A LEADING North-East transport company last night expressed disappointment after the Office of Fair Trading (OFT) referred local bus services to the Competition Commission.

The OFT claimed that limited competition was pushing up prices for bus users, with the big five operators, including Sunderland-based Arriva and Newcastle-based Go- Ahead, alongside FirstGroup, Stagecoach and National Express, accounting for about two-thirds of the local bus market.

The OFT was concerned that a live-and-let-live attitude among major firms left some areas with only one large operator.

The Competition Commission is now likely to launch a lengthy probe which Arriva and Go-Ahead both said last night they would cooperate with.

But Arriva spokesman Francis King added: “We are disappointed at the OFT’s decision.

The market for local bus transport has a healthy level of competition between bus operators, private cars and other transport.”

Mr King said that in a recent survey of 19,000 Arriva customers 91 per cent said they were satisfied with the company’s services.

He added: “There will be no immediate change to services as a result of this announcement, as the Competition Commission will start afresh and decide what aspects of the bus market it wishes to look at.

“It’s likely to be a lengthy process with which we will cooperate fully.”

Local bus services gain at least £1.2bn in public support each year but this could represent poor value for money for taxpayers, the OFT said.

Heather Clayton, a senior director at the OFT, said: ‘‘One of the concerns that we think the Competition Commission should take a look at is the tendency for local areas to become dominated by a single operator.”

The OFT study of the £3.6bn market found more than a third of local transport authorities outside London were predominantly served by only one major industry player.

The OFT’s concerns include a live-and-let-live attitude among major firms in local bus markets, where the threat of retaliation elsewhere means operators may tend to respect each others’ territories rather than seek to compete in new areas.

Many large areas and counties have one very large player with a high market share, while several cities, including York, only have one provider of any size.

It estimated that bus fares in areas where only one large national group offers services are nine per cent higher than in regions where two or more big players operate.

With high levels of regional concentration, smaller bus firms which come up for sale may be unattractive to any purchaser other than the dominant local operator and act as a barrier to entry, the watchdog added.

Ms Clayton said: “The OFT believes that it is appropriate for the Competition Commission to investigate how, in its various forms, competition can be harnessed to deliver what passengers want and the best value for money for the taxpayer.”

Services in London and Northern Ireland are excluded from the probe.