Select Committee on Business and Enterprise Thirteenth Report

5  Companies House and the market

49. In 2002 the Office of Fair Trading (OFT) reported on the fees charged by Companies House. It had been alleged that Companies House was subsidising prices for its dissemination activities through revenue earned from the registration of companies. Moreover its subscription based services were seen as competing with the work of dissemination agents. The OFT concluded that it had:

found no evidence that CH had: engaged in predatory pricing by setting prices for the competing commercial side of its operations that failed to recover its costs; overcharged for basic information sold to competitors in order to subsidise the price of its competing commercial products, which would have anti-competitively squeezed the margin on the products of its competitors.[89]

50. The Committee has received submissions from organisations which are still worried about Companies House's perceived "monopoly" position. 7side said that there was a "fine line between providing an effective service and providing an unfair competition".[90] Bisnode considered that the "Companies House internal decision to deliver information via its own website quicker" added competitive pressure onto the dissemination agents (see paragraph 18) and commented that "Companies House seems to be oblivious to the fact that a monopoly supplier ought not to behave like this".[91] Bisnode was also concerned that Companies House had imitated the way dissemination agents arrange and display documents on their websites. They feared that Companies House would imitate other data products, from dissemination agents, and charge lower prices for their service.[92] Bisnode highlighted the example of the Companies House monitoring service "Monitor" (see paragraph 44), which the website says allows you to "keep an eye on any company on the public register, including your own company and 'monitor' what information has been sent to Companies House".[93] They believed this was "a commercial product, designed to compete with products also offered by dissemination agents" and that it should therefore be a non-statutory service charged for at a market rate.[94]

51. Companies House denied that it was competing with the dissemination agents. Mr Jones told us "I do not want us to get into the business of competing for a market share." In response to claims about the website, Mr Jones said:

There is a question about whether or not providing that raw information in unusable formats is acceptable or not, and I would argue that my responsibility is to move with the times in terms of how we provide that information to people. So, for example, our website is constantly improved and modernised so that we are providing information in a very readable format. […] I would still argue that that is raw information that we are providing. We are simply providing it in a more digestible form.[95]

52. Mr Jones told the Committee that the only non-statutory work Companies House was involved in was helping customers understand the services, how they will change in the future and encouraging customers to use electronic filing. This involved information days, exhibitions, focus groups and web filing seminars.[96]

53. We understand that the border between providing core services to the public and unfairly competing with the private sector is not crystal clear. However, we do not believe this means a public organisation should never seek to improve its services or that it should be deterred from introducing facilities to reduce fraud. We believe that Companies House has currently got the balance broadly right, but it must be exceptionally careful, as it strives to make its payments to the Treasury, that it does not abuse its position. The Treasury, it follows, must not make unreasonable financial demands of Companies House.

INCORPORATION

54. 7Side and the Association of Company Registration Agents were concerned about a proposed 'citizen's company registration service'. Currently an organisation can be incorporated:

• through an incorporation agent by paper or electronically; or
• directly with Companies House by paper.

Incorporation agents are the only people who can access the electronic incorporation service offered by Companies House as to do so requires specific software: 90% of companies incorporate this way.

55. A citizen's company registration service would allow electronic incorporation of a company directly with Companies House instead of going through an incorporation agent. The Association of Company Registration Agents said:

The public could be seduced by a [Companies House] service of providing new companies at a price no private service provider could match, imagining that because it is government-backed they will receive the company they need. But that may well not be the case.[97]

Mr Jones said that he has told the incorporation agents that Companies House will not compete with them "in terms of ongoing relationships with companies"[98] by, for example, advising a company on how it might be structured and operate. However, he also said "I am not in business to provide a living for incorporation agents, I am there to provide a service to companies in the UK."[99]

56. Companies House facilitates "do-it-yourself" incorporation if paper is used: it is logical for it to offer this service electronically as well. Here, again, the issue is transparency for those who use the services of Companies House. The advantages and disadvantages of using the service offered by Companies House should be made clear.

57. The other issue highlighted by 7side is that the Money Laundering Regulations 2007 oblige incorporation agents to carry out "due diligence" when forming companies. Companies House is not covered by this and 7side believe that money launderers can therefore "go direct to source to form their fraudulent company with no questions asked".[100] It also noted that the Money Laundering Regulations do not extend to foreign company formation agents and, unless Companies House precludes such organisations from registering companies, this would also create a clear path for any potential money launderer to abuse the system.[101]

58. The Committee understands the frustrations for incorporation agents of having to carry out "due diligence" when incorporating when Companies House does not. Nonetheless we do not believe that Companies House's role should be extended to scrutinise the businesses they are incorporating. However the register should show where an incorporation agent had been used as opposed to an "off-the-shelf" incorporation and also indicate the different levels of assurance that this provides.

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89   Competition Act 1998, Decision of the Director General of Fair Trading, Companies House, the Registrar of Companies for England and Wales, Press release, 10 October 2002 Back

90   Ev 42 (7side) Back

91   Ev 18 (Bisnode) Back

92   Ev 19 (Bisnode) Back

93   Companies House website: http://www.companieshouse.gov.uk/toolsToHelp/findCompanyInfo.shtml Back

94   Ev 27 (Companies House) Back

95   Q 21 Back

96   Q 23 Back

97   Ev 17 (Association of Company Registration Agents) Back

98   Q 38 Back

99   Q 38 Back

100   Ev 42 (7side) Back

101   Ev 42 (7side) Back

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Prepared 21 November 2008