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Review of the rolling stock leasing market competition remedies – ORR publishes its final report

  • United Kingdom
  • Commercial and IT
  • Transport - Rail


On 28 April 2020, the Office of Rail and Road (“ORR”) published the final report on its review of the remedies put in place by the Competition Commission (“CC”)[1] in 2009 to improve competition in the market for the leasing of rolling stock for franchised passenger services.

The report sets out the ORR’s recommendation that there is insufficient justification for the CMA to undertake a review of the measures previously introduced by the CC on the basis that, even though there have been significant changes in the market since 2009, the underlying competition concerns have not been alleviated.

Competition Remedies  

In 2009, following an investigation into the rolling stock leasing market, the CC put in place a package of competition remedies to address aspects of the rolling stock leasing market which were identified as having an adverse impact on effective competition[2]. The remedies required rolling stock leasing companies (“ROSCOs”) to:

  • remove the non-discrimination requirements within their Codes of Practice[3]; and
  • provide Train Operating Companies (“TOCs”) with a prescribed list of information when making offers to lease existing/used rolling stock to operate on franchised passenger rail services, with this measure implemented through an order known as the “Transparency Order”.

The CC outlined four key features of the market which warranted the introduction of these remedies: 

  1. Franchising policy – the impact of the wider franchising framework (including the Department for Transport’s franchising policy and specification for tenders) on market conditions;
  2. Barriers to entry – the factors that restrict entry into the market for new ROSCOs;
  3. Choice / availability – the range of rolling stock available to TOCs from which they can choose when bidding for a franchise; and
  4. Incentives – the incentives on the ROSCOs to compete effectively and on TOCs to negotiate effectively.

The CC’s objectives were to encourage TOCs to seek improved terms from the ROSCOs as well as to increase the range of alternatives available to them when leasing stock. In turn, the CC anticipated that an increase in demand for rolling stock resulting from these measures would stimulate healthy competition between the ROSCOs.

ORR Review

In July 2019, the ORR commenced its review into the competition remedies to identify whether there had been material changes in the market such as would alleviate the competition concerns identified by the CC.[4] If the ORR’s review found that such material changes had occurred, the ORR would then make a recommendation to the CMA to either revoke or vary the remedies.

Prior to issuing its final report, the ORR had published its provisional findings in its consultation paper of 9 January 2020 where it had invited comments on its findings from interested parties. Those provisional findings were finalised in the ORR’s final report confirming that, whilst there have been significant market developments in the last ten years which has increased transparency and negotiation between TOCs and the ROSCOs, these did not go far enough so as to require a revocation and/or variation of the remedies as competition concerns remain. In particular:

  1. the interaction between the franchising framework and leasing of rolling stock continues to influence the choice of stock in the market;
  2. whilst new ROSCOs are entering the market, the long-term impact this will have on effective market competition remains uncertain; and
  3. in respect of the availability and choice of existing stock, a number of factors continue to limit choice in certain situations. 

The ORR also took the view that amending or removing the Transparency Order would be disproportionate. It found that the Transparency Order was having a positive impact on the level of information being provided by the ROSCOs to TOCs and assisting TOCs when comparing different offers and therefore helping them to make informed decision about which package to choose. 

Next Steps

The ORR confirmed that it will continue to monitor the rolling stock leasing market and a further review into the appropriateness of the remedies will be carried out within five years, or at an earlier date if there is evidence of significant developments in the market.

The ORR has also published an industry letter reminding the ROSCOs of the continuing requirement for them to comply with the remedies.


The 2009 CC market investigation identified that the rolling stock leasing market is a unique market with intrinsic features adversely impacting competition. It is interesting to note that both possible changes to the industry structure (anticipated as a result of the Williams Review) and the impacts of COVID19 are identified by ORR as potential triggers for it to revisit the market. Accordingly this is a market quite likely to be subject to further competition law related scrutiny in coming years.

[1] The CC was replaced by the Competition and Markets Authority (“CMA”) in 2014.

[2] The CC published its report, Rolling Stock Leasing market investigation, on 7 April 2009.

[3] Each ROSCO is required to implement a Code of Practice which sets out their behavioural framework when negotiating with customers. The Codes of Practice included a requirement that the relevant ROSCO would not discriminate in the terms it offered to bidders. The effect of this in practice was that the ROSCOs offered all TOCs the same package of rolling stock and on the same terms and conditions, which provided TOCs with little incentive to seek better terms than their competitors who would also receive the same benefit.

[4] The ORR had carried out an earlier review in 2015 to ensure the ROSCOs were complying with the competition remedies. However, this review was limited due to the small number of new leases entered into as at the date of the review and, in any event, the ORR concluded that the remedies were being complied with.

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