Bus market liberalisation’s a winner

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Bus market liberalisation’s a winner

Liberalising bus markets, Bill Wirtz argues, means consumers can travel more cheaply and efficiently, which in turn reduces social inequality. 

One of the principles of the EU’s common transport policy is the freedom to provide services in the field of transport. This freedom includes access to international transport markets for all EU carriers without discrimination on grounds of nationality or place of establishment. The second Mobility Pack is encouraging the liberalisation the inter-city bus market and is, therefore, attempting to replicate that which has been a success in countries like Germany (and subsequently France after the Macron labour reforms).

In Germany, the coach usage has sextupled between 2012 and 2016, while ticket prices are simultaneously falling from €0.11 to €0.089 per kilometre in the same period, with discount prices going down from €0.05 to €0.036 per kilometre. This evolution is absolutely crucial for the development of improved transport services, and most importantly, for the living standards low-income households. The competition of buses in the inter-city transport business has increased competition between air travel, rail, and car-sharing, to the extent that consumers see themselves with increased choices and reduced prices on all fronts. Instead of giving in to interest groups in one sector or the other, which profit from restricted market access, allowing for competition is the real way to improve the quality of consumer services.

Protecting a local provider for the sake of protectionism would negate the spirit of free trade within the Single Market. This will ultimately be the challenge if liberalisation of the coach market is settled as a desirable goal by the EU: market entry costs will be crucial in determining if the system actually works. Allowing for bus travel between city A and B is all well-intended, but if city B requires a special permit, paid in the local currency and subject to administrative approval, we’ll soon find ourselves once again with increased prices in favour of a state-owned rail company or a subsidised airline. In fact, market entry costs cannot only be unfairly advantageous to local providers but may very well turn against them. Large coach-providers have the capabilities to comply with local market regulations and are able to figure out rules and regulations, while small start-ups might not be able to do the same. Once again, market entry costs would then limit the supply and give a certain provider preferential treatment. In the interest of the consumers, member states should therefore commit to not only liberalise the routes but to make it easy for new companies to enter the market and to compete on it.

Bus transport providers will be aware that price increases will experience the price-elastic nature of the market, meaning that consumers respond swiftly to higher prices. This is, of course, related to the fact that the market provides alternatives such as air travel, car sharing, rail, or simply using your own car. The fact that all options remain on the table is crucial for the price development in this sector.

As long as local regulators respect this principle, the fear that the current market landscape, or even a more concentrated market in which a handful of companies take over their competitors, would become predatory, is highly unlikely. In this instance, consumer choice isn’t only an argument of principle for the freedom of consumers, but it represents a guarantee against a market controlled by a handful of people or companies.

Ultimately, bus market liberalisation means that consumers can travel more efficiently and cheaply than ever before. It offers low-income households the opportunity to benefit from the same opportunities as everyone else.  It helps reduce social inequality. 

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    Bill Wirtz
    Bill Wirtz is a policy analyst for the Consumer Choice Center. He has written for Newsweek, the Washington Examiner, City AM, RealClear, The Daily Caller and CapX.
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