Select Committee on Constitution Minutes of Evidence

Memorandum by the Department of Trade and Industry in relation to the Office of Fair Trading

  1.  The DTI has seen the OFT's submission to the Committee. We believe that it addresses the most relevant questions among those set out by the Committee in its Call for Evidence. We are happy to endorse it and simply provide a short supplementary submission from DTI.

  2.  The OFT is right to emphasise that it is a competition and consumer protection authority, with responsibilities across the whole of the UK economy, and is therefore a different sort of body from the regulator of a particular sector.

  3.  The OFT submission provides a valuable snapshot of its position (on matters that concern the committee) as it will be when the Enterprise Act is fully implemented in the summer. However, the position on the OFT's independence, governance, transparency and accountability will have been reached as a result of considerable recent change, and DTI believes it is worth briefly describing those changes in order to provide context.


  4.  Strengthening the powers of the competition authorities to take independent decisions has been a continuing strand of Government policy. When new prohibitions against anti-competitive behaviour were put in place in the Competition Act 1998, decisions on their enforcement were made a matter for the OFT, without any Ministerial involvement. The Enterprise Act 2002 now removes Ministerial involvement from the vast majority of merger and market investigation cases, and gives decision-making powers to the OFT and the Competition Commission.


  5.  The Enterprise Act transfers OFT legal powers from a single statutory office-holder, the Director General, to the new board that is described in the OFT's submission. The Government had concluded that a corporate structure was desirable, both to enhance further the independence of the OFT and to provide a stronger governance model in recognition of the greater powers it was being given.

Transparency and Accountability to the Public

  6.  First the Competition Act, then the Enterprise Act, have extended requirements for publication of guidance and of reasons for decisions. Each Act in turn has provided new or extended rights of appeal. The Enterprise Act has introduced rights of consumer bodies to make supercomplaints (with the OFT required to publish a reasoned response), the requirement on the OFT to publish an annual plan, and to report against it in its annual report. We believe that these changes and OFT's own initiatives are leading to much greater transparency, and hence accountability to the public, often via the media.

Accountability to Parliament

  7.  The Government has expressed its desire to see strong Parliamentary scrutiny of the competition regime, including OFT's role. In the DTI white paper "A World Class Competition Regime" (July 2001) it said: "Competition is a matter of crucial importance to the economy. Government wants to see Parliament play a more active role in scrutinising our competition regime—probing, in particular, the extent to which the various players are delivering against their promised missions. The Government invites Parliament (the Trade and Industry Select Committee under existing arrangements) to actively scrutinise our competition regime."

  8.  We believe that the new requirement in the Enterprise Act for an OFT annual plan, reported against in the annual report, along with the statement of purpose that the OFT has already published, provide a good basis for such scrutiny. We welcome the recent exposure that the OFT has had to the PAC and other Parliamentary Committees, as set out in its submission.

Further Change?

  9.  There are some further areas where the legal basis of OFT's powers is likely to be extended or updated, notably:

    —  Implementation in the UK of reforms to the EU competition regime will see the OFT enforcing EU competition law in the UK alongside similar domestic rules in the Competition Act 1998 (which will need to be amended).

    —  DTI's current consumer credit review is focused on reform of key elements of the Consumer Credit Act 1974—including OFT's licensing and enforcement functions under the Act.

March 2003

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