(Reuters) - Britain's rail regulator on Tuesday highlighted the negative impact on competition in the railway station catering market due to protected leases, but stopped short of referring the matter to the anti-trust regulator for investigation.
The Office of Rail and Road (ORR) said it was probing the sector after its report found that station operators were not provided with sufficient incentives to invite competition for outlets, and the rail catering market was "not working effectively".
The ORR said the catering stalls are staying in the same hands for extended periods due to protected leases, and also called for more competition around tenders.
The regulator's report found that the features of the catering market might also contribute to an average 10% price premium at stations compared to the high street.
Around 2,370 railway stations fell within the scope of the ORR study, including all the mainline stations operated by Network (LON:NETW) Rail and train operators funded by the UK and Scottish governments.
Responding to ORR's statement, a spokesperson of SSP , the largest single player in station catering in the market, said it noted the regulator's decision not to make a market investigation reference to the anti-trust watchdog.
"The catering railway market has not been referred to the CMA for investigation, and we consider this to be a positive indication for the market and SSP today," Barclays (LON:BARC) analysts wrote in a note.
"However, the overhang of this review is likely to partially remain while the review is ongoing," the Barclays analysts added.
ORR said the next stage of its probe would focus on what recommendations should be made to the government, station operators, funders and other stakeholders to improve the functioning of the market.