The Cooperatition Incubator

The Enterprise and Regulatory Reform Bill will:

• Overhaul the employment tribunal system, and transform the dispute resolution landscape.
• Improve the effectiveness and efficiency of competition enforcement and the competitiveness of markets, by strengthening the regime and improving the speed and predictability for business.
• Set the purpose of the UK Green Investment Bank and ensure its independence.
• Strengthen the framework for setting directors’ pay by introducing binding votes.
• Extend the Primary Authority scheme, reduce inspection burdens on business and strengthen the legal framework for sunset clauses on regulation.
• Repeal unnecessary legislation, cutting the burden on business and citizens.

The Cooperatition Incubator and our partners will review the draft legislation closely in the month’s ahead to ensure that  public interest factors are fully addressed.

The Government has announced its response to the competition regulation regime consultation in A Stronger Markets Regime, published today.  Key extracts relevant to the work of The Cooperatition Incubator are:

• pg 6 – Opinion on proposals to enable the CMA to provide independent reports to Government on public interest issues was divided. The Government has decided that the Secretary of State will have the power to request the CMA to investigate public interest issues alongside competition issues as this can put the competition regime at the heart of inquiries currently undertaken by ad hoc ‘commissions’. This approach is designed to enable faster implementation of competition remedies than an ad hoc inquiry. This will also bring the public interest markets regime in line with the public interest mergers regime where CC panels can be required to consider certain public interest issues alongside competition issues.
• pg. 27 – The Secretary of State will have the power to request the CMA to investigate public interest issues alongside competition issues. 
• pg 30 – CMA reports to Government on competition and public interest issues 

RELEVANT EXTRACTS IN FULL…

Summary of Responses
4.10
The Secretary of State currently has the power to ‘call in’ market inquiries that affect defined public interests. In these cases, the CC reports to the Secretary of State on its findings on the competition issue but does not consider the public interest. The Secretary of State must accept the CC’s competition findings but has the power to decide on remedies in light of his own views of the public interest. Opinion on proposals to enable the CMA to provide a report to Government on public interest issues alongside competition issues was divided. Some respondents were attracted to the proposal as it would enable the Secretary of State to consider recommendations from experts on the relevant public interest issue under consideration. Other respondents considered such powers could dilute the CMA’s primary competition function and politicise it. A minority of respondents argued that the CMA will lack the appropriate expertise.

The Government’s Decision
4.11
The Government has decided that the Secretary of State will have the power to request the CMA to investigate public interest issues alongside competition issues at phase 2. By utilising the expert competition knowledge of the CMA and supplementing this with specialist public interest expertise to consider, holistically, competition and public interest issues, the Government considers this can put the competition regime at the heart of market inquires currently undertaken by ad hoc ‘commissions’. This approach is designed to enable faster implementation of competition remedies than an ad hoc inquiry.

4.12
This will bring the public interest markets regime in line with the public interest mergers regime where CC panels can be required to consider certain public interest issues alongside competition issues. The merger regime does not provide for the appointment of further public interest experts for this purpose, but the Government considers that such experts may need to be appointed to advise on public interest matters in market investigations because the issues in these can be wider than in merger inquiries.

4.13
The Government is committed to preserving the independence of the CMA and wants to ensure that it retains a strong focus on competition. The Government believes that appropriate checks will preserve the independence of the CMA and guard against excessive use. Specifically:

• The scope of public interest issues that may be considered in a markets case is not being widened by this reform. An affirmative Order from Parliament will be required to add a new public interest consideration to the current list (national security is currently the only public interest consideration specified in the markets regime).
• As now, the competition test will need to be met for the CMA to be able to carry out a market investigation.
• The role of the public interest experts will be limited to providing advice on the public interest issue under consideration.
• The Secretary of State will retain his current decision-making role on remedies where he considers the public interest consideration affects these.

On 26 October 2011 the Environmental Audit Committee discussed barriers to co-operation among supermarkets:

Q246 Katy Clark: The Food Ethics Council said that competition law may be preventing co-operation among the major supermarkets to use their buying power to support more sustainable products being developed. Do you recognise that as a problem?

Jane Bevis: Certainly in terms of their impact on the supply chain, supermarkets do need to be very cognisant of competition law and be careful about the way they go about things. In areas where they have relatively little influence, then coming together and agreeing with other partners in the supply chain that there is a better way of doing things and moving forward so that everybody feels this is a win-win situation, you can still make progress, but yes, there will be times where they feel they can’t come together to do something precisely because they would risk being in breach of competition law.

Bob Gordon: I would just add that I sit on the steering group of the Product Research Forum with a number of retailers, brands, WRAP and Defra. We talk very openly about what the issues are, what potential opportunities there are, and we talk about that in a pre-competitive context, so we are understanding the context and then, if any voluntary commitment is established as a result of those conversations, the individual businesses that sign up to that commitment will compete vigorously to achieve it in a way that not only gets them to achieve those sustainability goals, but also improves their market share.

[Ed - The key word in Bob Gordon's analysis is "if".  As a result of competition law regulation too many agreements are being scuppered.]

On 7 December 2011 this issue was further explored by the Environmental Audit Committee:

Q362 Zac Goldsmith: The Food Ethics Council-I am just checking it was them-has said the competition law could be preventing co-operation between the supermarkets in relation to pursuing sustainable food consumption. Is that a problem that you recognise?

Mr Paice: I recognise that the supermarkets are extremely nervous about competition law. You may be aware that a few years ago most of the major supermarkets were fined pretty heftily by the OFT for collusion on the issue of milk prices. It is not for me to judge the rights and wrongs of the case, but that is what has happened, and a consequence of that is that they are extremely wary about even being in the same room together. We do have periodic meetings with the senior chief executives of the supermarkets, but it is on a very clear agenda that makes sure that there is nothing-we can’t talk about price or anything that could be construed as collusion. I can see the argument that they would be very nervous of it, yes. You would need to ask a lawyer whether in reality there is something in competition law that says they should not work together on sustainability. I don’t know. That would be for a lawyer to judge, but I am very conscious of their sensitivity over anything like that.

Two recent pieces of media coverage questioning the effectiveness of the present design of Responsibility Deals/ voluntary agreements are worth reading.

A story that headlined the Daily Mail on 1 August 2011 revealed how the usage of plastic bags has once again start to rise despite the WRAP-coordinated Responsibility Deal.  In follow-up Marks & Spencer acknowledged on 9 August that charging for plastic bags was the only effective way of tackling the problem.  However as our Plastic Bags case study explains, under the present competition law framework supermarkets can only co-ordinate on charges, and their timing, if an exception is made by the Competition Minister at BIS.   The 2008 Defra-led Impact Assessment (see pages 103-4) sets out why the Competition minister needs to use his powers.  Alternatively legislation will be required, which would miss out on benefits available through business cooperation, such as increased flexibility of solutions and drawing more fully on businesses’ on-the-ground knowledge.

In the same week, criticism has also been mounted in the BBC’s Panorama programme ‘Dying for a drink’ regarding the effectiveness of the Public Health Responsibility Deal and government advisory groups.  Again many of the complaints come back to pricing controls and the present inability of the coregulatory initiative to use this tool.

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.

Rt Hon Andrew Lansley MP: “We have learned over the last decade that state interventions alone cannot achieve success. We need a new sense of collective endeavour-a partnership between communities, businesses and individuals that transforms not only the way we deliver public health, but the way we think about it. Through the public health responsibility deal, the Government will work with industry to help people make informed decisions about their diet and lifestyle, to improve the environment for health, and to make healthy choices easier. Through greater use of voluntary and community organisations, we will reach out to families and individuals, and develop new ways to target the foundations of good health. Reflecting the framework in the ladder of interventions developed by the Nuffield Council on Bioethics, we will adopt voluntary and less intrusive approaches, so that we can make more progress more quickly and resort to regulation only where we cannot make progress in partnership…”

“The right hon. Gentleman asked about the responsibility deal. Let me give him an example. In 2004, the last Labour Government said that they would introduce front-of-pack food labelling. They wanted to introduce a single traffic-light system. All that fell apart in utter confusion. There was never a consistent front-of-pack food labelling system. The last Government never worked with industry; they worked against industry, and what was the result? A variety of different systems, and nothing consistent for the public to look at.

“Only by working together on a voluntary approach will we start to make progress more quickly, whether it is on labelling, reformulation or activity with employers in the workplace. We will make progress, we will do it more quickly, and we will regulate only when necessary, rather than resorting to regulation and, as the Labour Government did, failing to make any progress and failing to regulate. That is not a basis on which we can deliver the public health improvements that we need.”

Source: http://www.theyworkforyou.com/debates/?id=2010-11-30b.669.0

Who is taking part?