Joint Committee on The Draft Communications Bill Appendices to the Minutes of Evidence


Memorandum submitted by the Competition Commission


  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 Bill;

    (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).

June 2002

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