THE United States Department of Justice (DoJ) and the Attorney-General of the State of New York have started legal proceedings to break up a sightseeing business run by Stagecoach.

Twin America, a joint venture between Stagecoach North America and City Sights, was formed in 2009 and operates bus tours around New York City, carrying about two million passengers each year.

Attorney-General Eric Schneiderman said an antitrust lawsuit had been lodged in the district court for the southern district of New York to challenge the "monopoly" on the city's $100 million (£62m) bus tours market.

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The documents ask the court to order Twin America to divest certain assets or dissolve the joint venture entirely.

Mr Schneiderman said: "Forming a monopoly that overcharges consumers is illegal and will not be tolerated.

"This lawsuit against Twin America is an important step toward restoring competition and protecting New York tour bus customers.

"The iconic double-decker Gray Line and City Sights buses are seen all over New York City but few people know they are a monopoly that has led to higher prices and less competition. Visitors to New York deserve better."

The NY Attorney General's office said it had been forced to suspend the investigation it began in 2009 when Twin America applied to the federal Surface Transportation Board (STB) for approval after the formation of the joint venture.

If granted that would have meant Twin America was immune from antitrust prosecution.

When the STB rejected the application in March 2011 after more than two years of proceedings, the Attorney General resumed its investigation in conjunction with the DoJ. They estimate Twin America has more than 90% of the New York bus tour market and say no significant competitor has emerged since the formation of the joint venture.

Stagecoach, headed by Sir Brian Souter, said Twin America has to compete in a market against boat, helicopter, walking, Segway and horse and carriage tours.

The Perth transport company said it fundamentally disagreed with the allegations and intended to robustly defend the position of Twin America.

A $5 price rise introduced after the formation of the venture in 2009 was attributed by Stagecoach to increased labour and fuel costs.

Stagecoach said: "Despite the challenging macroeconomic conditions over the past three-and-a-half years, the joint venture has delivered a range of improvements and greater value to customers.

"Twin America and the joint venture parties have continued to work with the regulatory authorities with a view to reaching a resolution to the process in the interests of all parties.

"However, we do not believe all opportunities for a mutually satisfactory resolution have been fully exhausted. As a result, we are disappointed at the view taken by the authorities."

Renata Hesse, acting assistant attorney general in charge of the Department of Justice's antitrust division, said: "The formation of Twin America eliminated intense head-to-head competition between [Stagecoach subsidiary] Coach [USA] and City Sights and gave the parties an effective monopoly that enabled them to raise prices to consumers.

"This lawsuit seeks to restore the competition eliminated by the joint venture and ensure that the millions of visitors to New York City who take hop-on, hop-off bus tours each year enjoy the benefits of a competitive marketplace."

Twin America contributed £50.6m turnover and £9.7m profit before tax for Stagecoach in the 12 months to April 30 this year which is around 2% of group turnover and 4% of profit.

Analysts at RBC Europe said Stagecoach could face a financial settlement of between £15m and £20m but any payment was unlikely to be "game changing" for the company's wider outlook.

Stagecoach's shares ended the day down 2.40p, or 0.79%, at 300p.