Megabus Won’t Take No for Answer on Pleas Over BoltBus

(Corrects first paragraph of story published Dec. 27 to show effect of legal filings.)

Stagecoach Group Plc (SGP)’s Megabus, the largest U.S. curbside bus carrier, is trying to get a U.S. regulator to do what its $1 fares on the East Coast haven’t managed: to slow down its top competitor.

Megabus has filed at least three challenges with the U.S. Surface Transportation Board since May 2010 contending that BoltBus, operated jointly by Peter Pan Bus Lines Inc. and Greyhound Lines Inc., the largest U.S. bus company, should be restricted from adding certain routes.

Greyhound and closely held Peter Pan are exploiting a joint operating arrangement approved by regulators 11 years before they started BoltBus, Dale Moser, chief executive officer of Coach USA Inc., Megabus’s U.S. parent, said in an interview. If they want to compete with Megabus on northeastern U.S. routes, they should do it separately, he said.

“When the decision to pool was agreed upon, it was totally different times,” Moser said. “The whole business environment with intercity buses has changed. It isn’t the 1990s anymore.”

The legal dispute has heated up as the bus has become the fastest growing mode of U.S. transportation. Daily U.S. intercity curbside bus departures, led by Megabus and BoltBus, increased to 778 from 589 a year ago, or 32 percent, according to a DePaul University study published Dec. 21.

Passengers board a Megabus to New York in Washington, D.C. Megabus has filed at least three challenges with the U.S. Surface Transportation Board since May 2010 contending that BoltBus should be restricted or broken up. Photo: Jay Mallin/Bloomberg Close

Passengers board a Megabus to New York in Washington, D.C. Megabus has filed at least... Read More

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Passengers board a Megabus to New York in Washington, D.C. Megabus has filed at least three challenges with the U.S. Surface Transportation Board since May 2010 contending that BoltBus should be restricted or broken up. Photo: Jay Mallin/Bloomberg

Megabus Petitions

“This is purely an attempt by Megabus to minimize competition within the industry,” Timothy Stokes, a U.S. spokesman for Aberdeen, Scotland-based FirstGroup Plc (FGP), Greyhound’s parent company, said in an e-mail. Competition has led to increased bus ridership and has been good for consumers, he said.

Dennis Watson, a Surface Transportation Board spokesman, declined to comment.

Scheduled departures for the bus industry, curbside and station-based, increased 7.1 percent to 2,693. That compares with a gain of 1.5 percent for airline seat miles and 1.2 percent for rail seat miles, according to the study.

Megabus and BoltBus offer a limited number of seats for as little as $1 with advanced booking. Typical one-way New York-to- Washington Megabus fares range from $17 to $26, according to its website. BoltBus tickets range from $15 to $27.

Congress deregulated the intercity bus industry in 1980 and eliminated the Interstate Commerce Commission in 1995. The Surface Transportation Board, the commission’s successor, retains some power to break up anticompetitive practices, though it’s rarely done so with buses.

‘Astonishing Misuse’

In May 2010, Megabus petitioned the STB, saying it shouldn’t have allowed Greyhound and Peter Pan to start BoltBus two years earlier. The 1997 agreement allowing Greyhound and Peter Pan to pool operations was approved when overcapacity plagued the intercity bus industry, Megabus said in its petition.

Ending the agreement would increase competition by forcing the BoltBus partners to run separate services, David Coburn, a Megabus lawyer, wrote.

Megabus was trying to “maneuver the board into eliminating one of the company’s main rivals on Northeast Corridor bus routes,” Daniel Barney, a lawyer for Greyhound, wrote in a rebuttal, calling the challenge “an astonishing misuse of the regulatory process.”

Greyhound’s decision to go against Megabus on routes in the Midwest with its Greyhound Express unit proved the company could compete without a pooling agreement, Megabus wrote to the board in December.

Protecting Competition

This past March, Megabus petitioned the board to end BoltBus’s service between Newark, New Jersey, and Washington, saying it wasn’t authorized by the 1997 agreement. BoltBus set up a hub in Newark last year, with 40 daily buses to Baltimore, Boston, Philadelphia and Washington.

The STB, in an April 20 decision, ruled against Megabus’s initial appeal. The emergence of extensive competition on the East Coast suggests “many other new and expanded companies providing curbside service in these corridors appear to be able to compete successfully,” it said in its decision.

“The purpose of the antitrust laws is the protection of competition, not competitors,” it wrote.

That didn’t stop Megabus, backed by Perth, Scotland-based Stagecoach Group Plc (SGC), from pressing on. In June, it filed a request for expedited action on its March petition, prompting Timothy Wiseman, a Greyhound attorney, to reply that Megabus had “simply ignored the very existence” of the April decision.

The board has yet to rule on the March petition.

‘Tailing Behind Us’

As it competes with BoltBus on the East Coast, Megabus has opened hubs in Pittsburgh, with 38 departures, and Atlanta, with 29. Its Chicago and New York hubs appear to now be profitable, according to the DePaul study.

As ridership on curbside buses has increased, so have fares, said Joseph Schwieterman, director of DePaul’s Chaddick Institute for Metropolitan Studies. Routes where fares of $20 or less were once common now have tickets priced at $35 or $40, he said.

“They’ve been tailing behind us everywhere we’ve gone,” Moser, the Coach USA chief executive, said of BoltBus. “I don’t have a problem if Peter Pan wants to run it, or if Greyhound wants to run it, but pooling them into a consortium is not a level playing field.”

To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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