June, 2011

Consultation response: ‘A competition regime for growth – A consultation on options for reform’

June 14th, 2011

Dear Mr Lawson,

We are writing in response to ‘A competition regime for growth – A consultation on options for reform’ consultation questions: “Q.2 The Government seeks your views on the potential creation of a single Competition and Markets Authority (CMA); Q.19 The Government seeks your views on appropriate objectives for the CMA and whether these should be embedded in statute; and Q.20 The Government see your views on whether the CMA should have a clear principal competition focus.

We welcome the proposals for a new CMA. We believe it is vitally important that public interest factors are explicitly integrated into the objectives of the CMA, as was the intention of the previous competition regime. A new business unit with the specialist skills to balance public interest factors, supported by guidance, tools and ways of working with other government departments, should be a core objective and function of the new CMA – potentially embedded in statute. The advantages and disadvantages of this unit’s recommendations being approved by a minister or an official should be further examined.

The CMA should focus on competition, but also have the capability as described to balance public interest factors, particularly in the case of sector wide voluntary or co-regulated agreements where positive social and environmental impact could be gained. The new approach should build on: the Office of Fair Trading’s (OFT’s) 2009/10 research in this area; balancing of public interest factors achieved by other UK and international regulators; and the OFT’s existing experience in approving ‘consumer codes’.

We welcome the Prime Minister’s commitment to deal with this problem last December and urge all stakeholders to continue to work together towards a rapid resolution of the issues. The Prime Minister’s commitment was in response to a Business in the Community consultation of 500+ businesses which identified this area as warranting further investigation in order to scale up business engagement in communities. The approach set out above would also provide the certainty that greater investment in the UK demands. Investors will know that they can secure the comfort needed before they make long-term investments in areas where self-regulation/ collaboration on environmental and social issues is required.

In response to the Prime Minister’s call last December, Business in the Community and The Cooperatition Incubator look forward to continuing to work in partnership with the Department for Business, Innovation & Skills and the Office of Fair Trading in the months ahead to better understand and resolve this barrier to business action on social and environmental issues.

Yours sincerely,

Charlotte Turner, Director of Research, Business in the Community – www.bitc.org.uk
Andrew Dakers and Tom Linton, The Cooperatition Incubator – www.cooperatition.org

Respond now to BIS Competition Consultation – Deadline: 13 June 2011

June 5th, 2011

The Cooperatition Incubator is encouraging all our campaign partners to try and submit a response to the Department for Business, Innovation and Skills (BIS) consultation on the future of the UK competition regulation regime:

Consultation document: A competition regime for growth – A consultation on options for reform

Since 2008 Business in the Community and The Cooperatition Incubator have been actively researching – with the input of a number of experts – the competition law barriers to companies collaborating through voluntary agreements/standards to internalise the often substantial external social and environmental costs of doing business.   As Andrew Dakers’ article last Friday on The Guardian Sustainable Business Blog explained, given the huge reliance today on self-regulation, this is now more important than ever.

THE PROBLEM

Unfortunately cases such as the Dairy investigation and Laundry detergents have seen companies, trying to do the right thing by society and the environment, fined many tens of millions. Clearly the system needs to be fixed.   We believe resolving this problem is an integral part of shaping a responsible marketplace as we rebuild and strengthen the British economy.

In the past 12 months the problem has been recognised by Robert Peston (BBC), Jason Clay (WWF US) and the British Prime Minister David Cameron.   Work is now underway between the Department for Business, Innovation and Skills (BIS), Business in the Community (BITC) and the Office of Fair Trading to unpack and resolve the problem – but we still need your support to ensure the necessary changes are implemented.

A WAY FORWARD

Breaking down the competition law barrier to scaling up responsible business practice comes down to resolving fundamental problems with regard to how the UK competition authorities and EU DG Competition presently interpret the legal framework.  We believe now is the time for a change in approach if degradation of our natural environment is to be stopped and social challenges, such as obesity and alcoholism, tackled head on by business, NGOs and government working together through co/self-regulatory frameworks.

To help support the campaign please send a short email to Duncan Lawson (Consumer and Competition Policy, Department of Business, Innovation and Skills): cma@bis.gsi.gov.uk by Monday 13 June 2011.

Your message could be short and simple – perhaps along the lines of:


Dear Mr Lawson, I am writing in response to ‘A competition regime for growth – A consultation on options for reform’ consultation questions: “Q.2 The Government seeks your views on the potential creation of a single Competition and Markets Authority; Q.19 The Government seeks your views on appropriate objectives for the [Consumer & Markets Authority] CMA and whether these should be embedded in statute; and Q.20 The Government see your views on whether the CMA should have a clear principal competition focus.

“We welcome the proposals for a new CMA.  We believe it is vitally important that public interest factors are explicitly integrated into the objectives of the CMA, as was the intention of the previous competition regime. A new business unit specialised in balancing public interest factors, supported by guidance, tools and ways of working with other government departments should be a core objective of the new CMA – potentially embedded in statute.  This will provide the certainly that greater investment in the UK demands.  Investors will know that they can secure the comfort needed before they make long-term investments in areas where voluntary self-regulation/ collaboration on environmental and social issues is required.

“We welcome the Prime Minister’s commitment to deal with this problem last December and urge all stakeholders to continue to work together towards a rapid resolution of the issues.  The CMA should focus on competition, but also have the capability as described to balance public interest factors, particularly in the case of voluntary agreements.  This should build on: the Office of Fair Trading’s (OFT’s) 2009/10 research in this area; balancing of public interest factors achieved by other UK and international regulators; and the OFT’s existing experience in approving ‘consumer codes’.

Yours sincerely…”


We appreciate this request is very close to the deadline, but hope you can take five minutes out to send a short email.

Thank you for your support – and if we can clarify any aspects of our research conclusions, please do not hesitate to contact us.

Why competition laws frighten firms away from co-operating on projects to drive up environmental standards – Dakers

June 3rd, 2011

Writing for the Guardian Sustainable Business Andrew Dakers, founder of The Cooperatition Incubator, said:

“Many corporations have discovered that [weak global governance] leads to a “race to the bottom”. That can be to their detriment as natural resources and the ecosystems on which they depend continue to be depleted. Filling the vacuum is a vast spectrum of voluntary corporate responsibility initiatives and standards from Community Mark to Investors in People and ISO 14000.

“These have made great strides. They provide companies with a fairly rapid return on their investment – perhaps through increased resource efficiency or better people management – and the wider community often benefits too. The same cannot be said, however, when a business has substantial external social and environmental impacts – a “non-win-win” situation.

“The latest government-sponsored voluntary agreement, the public health responsibility deal, has received a distinctly mixed response, largely due to this problem. The British Medical Association and the Royal College of Physicians complain that substantial external impacts of business, such as alcohol misuse and obesity, have been ignored.

“Research by Business in the Community and the Cooperatition Incubator over the past three years has revealed that competition law is a substantial barrier to companies collaborating on voluntary standards that would deliver greater public benefit. Given the increasing levels of regulation already around climate change – at least in the UK and EU – this is preventing new voluntary agreements that internalise external costs on social issues and natural resources.

“More meaningful agreements have the potential to increase costs to producers, suppliers and consumers. To develop substantial self-regulatory changes might involve competitors in a given sector discussing pricing and coordinating the timing of a step-change in improvements. Companies taking part in such discussions risk being accused of collusion or price-fixing by the UK Office of Fair Trading (OFT), despite the public benefit they are seeking to achieve.

“Tesco has promised to review its alcohol pricing if its rivals do the same; it believes it would be commercial suicide to act alone. But Tesco points out that it is trapped by an approach to competition law regulation that prevents competitors discussing anything to do with price…

“Despite [the Office of Fair Trading introducing Short Form Opinions], Robert Peston said on his blog in November 2010 that the problem remained: “Britain’s biggest banks are talking to each about whether and how they can reduce the total amount of bonuses they would pay in the upcoming bonus season . . . [Yet] one great fear of bankers is that they’ll be seen to be colluding on a competitive issue and could be prosecuted by the Office of Fair Trading.”

“The prime minister, David Cameron, responded: “I get the message loud and clear, and we will do everything we can to tackle those barriers head on – whether it is the red tape you face, whether it is being able to collaborate as businesses without having the competition authorities throwing you in jail. I understand the barriers. We are going to work with you to get rid of them.”

“Work is now under way on the problem between Business in the Community, the Department for Business, Innovation & Skills and the OFT.

“For too long corporate responsibility has focused on the laws governing individual company practices. By revisiting how competition authorities regulate public interest collaborations between firms, the UK has the potential to become a global exemplar. Reform in this area will build the solid foundations for the new people and planet-friendly era in capitalism we need.”

Read the full article

Jason Clay talks about ‘precompetition’ in Guardian Sustainable Business

June 2nd, 2011

Jason Clay, senior vice president of market transformation at WWF, has written on Guardian Sustainable Business the issues arising from consumer goods giants Procter & Gamble and Unilever being fined €315.2m (£280m) by the EC on 13 April 2011 for breaching competition law in the laundry detergent market in eight countries.

“Here lies the challenge in defining what is precompetitive versus what is collusion. While the companies crossed the line of the EC’s antitrust rules, they also accomplished much in reducing the impact of producing, delivering, selling, using and disposing of their products.

“The firms were motivated by shifting the market to greater sustainability, while making it easy for consumers to choose a sustainable product. The new products were better because they were concentrated and worked in cold water. But both of these traits were in conflict with consumer perceptions. Most consumers, for example, think that more detergent means cleaner clothes, and that hot water is more effective for washing laundry than cold.

“This posed a dilemma for manufacturers. The companies believed that if any one of them introduced concentrates independently they would risk losing market share. A consumer confronted with a choice between a 5kg box of powder at €10 and 2.5kg box of a concentrated version at the same price is going to be tempted to go for the big box.

“To avoid this first mover “disadvantage,” the companies co-ordinated the timing of their launches so that all the new product formulations would arrive on the market at the same time. They did this without publicly stating the virtues of one product over another.

“The moral of this story is that such initiatives are essential, but caution must be exercised. As an environmentalist, I applaud companies that work together to put better products on the shelves and take away the ones with the worst impact…

“We can better understand the complicated balance between what is precompetitive behaviour addressing legitimate sustainability issues, and what is collusion around fixing prices or market share. The key component to striking this balance is multi-stakeholder participation. The project should be inclusive of other stakeholders, including regulatory officials and perhaps even NGOs, many of whom don’t have a direct financial interest. This is how successful global sustainability round tables have avoided these issues.

“In light of more companies working together in a precompetitive fashion to improve sustainability, wouldn’t it be forward-thinking for regulators in the EU and elsewhere to invest in the creation of a legal group that defines boundaries? It would be money well spent, because precompetitive sustainability is working, and it’s essential to market transformation.”