The ORR published the emerging findings from its review of the rail retail market on 23 June 2015. The report finds that whilst the market works well in some respects, there is limited innovation and competition when compared to other sectors.

The Retail Market Review

The review is considering whether the current market for selling train tickets is operating as efficiently as possible. It is focussing on who sells tickets, what tickets are sold, where and how tickets are sold and the ticket format.

The ORR wants passengers to be confident that they have bought a fare that best meets their needs and to encourage greater efficiencies in retail market which benefit the industry and tax payers.

The contractual and regulatory framework

The regime established at privatisation was designed to enable industry-wide products for travel on an integrated network to continue to be made available to passengers by train operators and third party retailers.

It is a licence condition for all train operators to comply with the Ticketing and Settlement Agreement, which governs the setting of fares, the retailing of train tickets and revenue allocation and settlement.

In recent years, the Department for Transport has encouraged franchised operators to develop more flexible fares and innovative ticket formats through the franchising process.

Areas where the retail market works well

The ORR identifies that passengers:

  • can use inter-available and through fares to access an integrated national rail network
  • can access a range of information on fares from a choice of retailers
  • have some choice in where to buy tickets and the format of the ticket that they use.

Areas for improvement and recommendations

A balance needs to be achieved between train operators working collaboratively to deliver an integrated network and the need for competition to drive innovation and efficiencies in the rail retail market.

To make the market more efficient, the ORR has a number of recommendations, which include the following:

  • Incentivising train operators to introduce new flexible products (such as part-time season tickets) – through the franchising process and by streamlining and accelerating the industry processes that need to be followed to introduce new products.
  • Harnessing technological developments – to encourage innovative ticket formats (such as smartcards, contactless payment cards and mobile phone ticketing which work on inter-operable flows), to improve the functioning of ticket vending machines making them more user-friendly and to drive better capacity management across the network (eg by showing passengers in real-time which passenger services have spare seats).
  • Retailers providing greater assistance to passengers when purchasing fares – to help passengers select the fare type that best meets their needs.
  • Assisting third party retailers – by considering the requirements for new retailers to enter the market, by encouraging smaller retail outlets (such as newsagents) and new online third party retailers to sell fares and by enabling third party retailers access to sell the full range of fares (eg including season tickets and carnet tickets).
  • Considering allowing differential pricing by sales channel – encouraging third party retailers to charge different prices through different sales channels to reflect their relative costs of sale may incentivise those retailers to identify efficiencies in the retailing process.
  • Government continuing to play a role in developing a long term ticketing strategy – which drives industry parties to develop innovative solutions for the rail retail market.
  • Ensuring that an independent body oversees the industry regime affecting third party retailers – the body would consider significant changes to the requirements on potential third party retailers and improve transparency around retailers' costs and commission.

Next steps

The ORR welcomes stakeholders' views on its emerging findings and recommendations and requests that responses are provided by 14 September 2015. The ORR will publish its final recommendations in spring 2016.