Memorandum submitted by the Competition
COMMUNICATIONS BILL: APPEAL PROVISIONS FOR
CERTAIN DECISIONS TAKEN BY OFCOM
1. When I gave evidence to the Joint Committee
on the draft Communications Bill on 27 May 2002 I drew to the
Committee's attention my serious concern about one element of
the Bill's provisions and its implications for the consistency
of the overall scheme of UK regulation. I thought the Committee
might find it helpful if I reiterated this concern.
2. Under the existing regime the reporting
side of the Competition Commission (CC) investigates and reports
on references made by regulators where the regulator and a company
licensed to provide regulated goods or services are unable to
agree between themselves a modification to the licence under which
the company operates. A good example of such a reference is that
made in January 2002 by Oftel, which is currently before the CC,
concerning the termination charges made between mobile phone operators.
3. The CC investigates each reference through
a well established procedure and analyses the issues that arise
via the application of consistent methodologies. The members of
the CC who comprise an inquiry group are chosen specifically to
represent a balance of expertise relevant to the sector under
investigation and to the types of issues that are likely to arise.
In most cases the chairman and/or members of an inquiry group
have experience of previous regulatory inquiries. Each inquiry
group is supported by a team of experienced economists, accountants,
business advisers, statisticians and lawyers. On any regulatory
inquiry, the members of staff involved have extensive experience
of regulatory inquiry work. The CC can also employ market research
companies to carry out surveys, and instruct consultants where
there is a gap in its own knowledge.
4. During an inquiry the members and the
staff meet the parties to the inquiry on a regular basis. There
are formal hearings at which questions are put by the inquiry
group to the company and the regulator, as well as meetings at
which members of the CC and members of the staff of the CC discuss
issues with the company and the regulator. The process by which
the CC reaches its conclusions is based upon a series of constructive
dialogues. This has proved to be a very effective approach to
resolving regulatory disputes.
5. At the conclusion of a CC inquiry, the
regulator and company receive a report based on clear analysis
of relevant data and well established methodology. The validity
of the CC's methodology is recognised throughout the regulatory
sector and promotes consistency and certainty for both regulator
and company. In recent years the CC has been given investigatory
powers in relation to an increasing number of sectors, such as
postal services, air traffic and rail traffic.
6. In my personal view the CC should continue
to investigate price regulation disputes between the regulator
and regulated companies in sectors such as telecommunications,
once responsibility for these sectors is transferred to OFCOM.
It seems to me to be counter-productive to lose the wealth or
expertise accumulated by the reporting side of the CC in these
matters over many years. The CC has built up considerable expertise
in matters such as price regulation. The CC's multi-sector responsibilities
have put it in an effective position to provide a consistent influence
on the regulation of utilities and hence on vital public services.
7. This consistency of approach would be
put at risk if one sector's price regulation were handled separately
from those of the other regulated sectors. If decision making
on a range of generic issues, such as acceptable levels of profit
is divided and put into the hands of other bodies with effectively
a parallel jurisdiction, then there might be inconsistent decisions.
Consequently, regulators and businesses could face unwelcome uncertainty.
8. I add two further points:
(a) it has been suggested that the Competition
Appeal Tribunal would be able to consult the CC when it hears
appeals on price regulation cases. That however would be difficult
given that the CAT will hear appeals from the CC under the Enterprise
(b) my understanding is that there is nothing
in the "Framework Directive" which would prevent a price
regulation appeal being made to the CC, as opposed to a court
or the Competition Appeal Tribunal, but this will need to be checked.
9. In making these points I do not wish
to imply that bodies such as the Competition Appeal Tribunal (the
successor to the Competition Commission Appeal Tribunal which
is still formally part of the CC) are anything other than highly
competent and able. I am simply making the point that in my view
there is a policy issue here, which needs to be discussed.
10. I am copying this letter to Melanie
Johnson and Tessa Jowell, and also to Sir Christopher Bellamy
(the President at the Competition Commission Appeal Tribunal which
is shortly to become the Competition Appeal Tribunal).