The Block Exemption exempts certain forms of agreements between transport operators from the usual prohibition on anticompetitive agreements in the Competition Act 1998. With public transport ticketing schemes rapidly transforming in response to technological developments, the CMA will be considering whether the Block Exemption is fit for purpose in this new digital era or whether it needs some radical changes to allow maximum efficiencies and consumer benefits.
Background - The Public Transport Ticketing Schemes Block Exemption
The Competition Act 1998 (“the Act”) prohibits agreements which restrict, distort or prevent competition within the UK (“the Chapter I prohibition”). Agreements which infringe this prohibition are void and unenforceable, and parties to such an agreement may be subject to fines. However, certain categories of agreement can be exempt from this prohibition if they produce benefits which are seen to outweigh their impact on competition.
The Public Transport Ticketing Schemes Block Exemption (“the Block Exemption”) expressly exempts agreements which allow operators to integrate their ticketing systems, meaning that consumers can buy a single ticket for use on the services of multiple operators, rather than having to buy multiple separate tickets for each leg of their journey. Examples include multi-operator travel cards, through tickets, short and long-distance add-ons. Such systems are common in major cities like London in particular.
These arrangements are exempted from the Chapter I prohibition because such agreements are generally seen as beneficial to consumers: without these schemes, passengers would be inconvenienced by having to buy separate tickets from each operator they use. The existence of the block exemption has provided legal certainty to enable transport operators to cooperate in this space and deliver such systems with confidence.
Therefore, whilst public transport ticketing schemes may prevent, restrict or distort competition, as they rely on a degree of cooperation between competitors to operate, the Block Exemption encourages the use of such arrangements due to the perceived benefit for consumers. In the absence of the Block Exemption, transport operators may decide not to enter into ticketing scheme agreements, because they wish to avoid breaching competition law and/or are insufficiently clear that they would avoid doing so.
The Block Exemption was first adopted in 2001, and was recommended for renewal by the CMA in 2015 for a ten-year period until 28 February 2026. Previously, the Office of Fair Trading, between 2003 and 2005 and in 2010, reviewed and recommended that the Block Exemption be renewed.
The CMA’s review
The CMA is reviewing the Block Exemption in order to make a recommendation to the Secretary of State for Business and Trade (the "Secretary of State") on whether it should be renewed or varied. This review will begin with an initial evidence gathering and stakeholder engagement phase, with the goal being ascertaining whether the Block Exemption continues to meet its intended purpose and will take account of the interests of businesses and consumers, as well as considering the impact of recent developments in technology and industry business models. The review will also cover the Block Exemption’s associated guidance.
Given the age of the Block Exemption and the rapid and unprecedented developments in technology which have occurred since its introduction – with so much of public transport ticketing now virtual - we anticipate that a key concern for the CMA will be investigating whether the Block Exemption is still fit for purpose in this digital age.
It is anticipated that the CMA will consult on its proposed recommendation to the Secretary of State in summer 2024, with a final recommendation expected to be made in December 2024. The Block Exemption would then, depending on what is recommended, be varied or replaced before its expiry in February 2026.
Next Steps
The recommendation to the Secretary of State, and any resulting variation or replacement of the Block Exemption has the potential to greatly affect both stakeholders across the public transport sector and consumers who purchase public transport tickets. Ensuring that they reflect concerns and developments in the sector, particularly in relation to the use of technology, is therefore key.
Stakeholders who are interested in the Block Exemption and wish to share their views may range from transport operators to local authorities, trade associations, and consumer groups.
If you would like to provide views on the Block Exemption, please get in touch with us and we can help you engage with the CMA. Whilst a public consultation is not expected until the summer, reaching out to the CMA to share your thoughts now appears to be a valuable opportunity to have your voice heard, and may help to facilitate and prepare for any further engagement with the CMA during the consultation stage.
