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
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 regimeprobing, 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.
9. There are some further areas where the
legal basis of OFT's powers is likely to be extended or updated,
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
1974including OFT's licensing and enforcement functions
under the Act.