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ORR: Progress being made towards consumer-focused rail retail industry

The rail industry is making progress on giving third-party retailers a greater say in rules around the sales of tickets to increase competition, according to the ORR, but recommendations for an independent consumer champion-type member on TOC decision-making groups that affect this have not been taken forward.

In its ‘Retail market review conclusions’ report, the regulator reflected that TOCs (working through the Rail Delivery Group [RDG]) could engage better with third-party retailers when making decisions about the industry regime for ticket selling.

The report recommended that the engagement could be improved by providing independent oversight of its decisions affecting third-party retailers; introducing more transparency in its decision-making process; providing a formal role for third-party retailers in discussions on industry developments; and enhancing the dispute resolution mechanisms for all third-party retailers.

The ORR noted that while TOCs intend to take forward the last three options, they are “not minded to introduce any independent oversight of its decision-making”.

According to the report, the RDG say it is concerned that the independent member could undermine its accountability in managing the relationships with the third-party retail.

“Reflecting our limited powers in this area, we cannot compel RDG to adopt our recommendation for an independent, consumer-champion type role in TOC decision-making groups,” said the ORR. “However, we continue to see the merits of this idea and we suggest that RDG leaves it open as part of its future governance changes.”

In its retail market review last year, the regulator said the way TOCs, working through RDG, make decisions that affect third-party retailers “sometimes lack transparency and a clearly articulated rationale, with third-party retailers having limited access to the reasons for changes”.

But by March 2017, TOCs (working through RDG) have committed to producing guidance/change control procedures that set out the rationale for particular rules and explain how changes will be determined and implemented.

Additionally, the RDG has committed to extend the provision for independent dispute resolution to all third-party retailers, which it is seeking to have in next year.

The report has also recommended that industry simplifies processes to help innovative products enter the market more quickly.

John Larkinson, ORR’s director of railway markets & economics, said: “Our review has considered the complex industry rules for how tickets are sold. We have worked closely with the industry to identify practical improvements to benefit passengers.

“Giving third party retailers greater say in rules around the sale of tickets increases competition and choice, which is good news for passengers. We believe these changes will lead to greater choice about where and how passengers buy their tickets.”

Paul Plummer, chief executive of the RDG, which represents train operators, said the rail industry is focused on improving customer experience, and third-party retailers have an important part to play in delivering better services.

“We have worked closely with the ORR throughout its review and support its position on transparency and closer engagement with third parties,” he added.

In response to the ORR’s recommendations, Plummer said the RDG will develop an action plan to deliver improvements including:

• A new forum to increase industry engagement with third-party internet retailers
• Publishing new guidance for current and prospective third-party retailers on how the industry sets retailing arrangements, including commission rates, third-party retailers’ share of industry system costs, and changes to retail licences; and
• Exploring new ticket retailing opportunities though outlets such as convenience stores.

“We believe that our action plan and the steps we have already taken show that the industry can deliver better results for train operators, retailers and customers,” Plummer concluded.

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