October 13, 2010 10:29 pm

Labour’s antitrust system dismantled

With the announcement due on Thursday of a merger between the Competition Commission and its sister body, the Office of Fair Trading, the debate has begun on whether the new competition regulation regime will be more efficient or too light.

Supporters of the status quo say the time spent deciding antitrust issues is a sign of necessary rigour.

But cases such as that of BAA, where there has been a long-running court battle between the airports operator and the Competition Commission over the future ownership of some of the country’s most important infrastructure, have led some business groups to label the existing system long-winded and overdemanding.

The coalition’s proposal to combine the OFT and the commission and to devolve many consumer protection functions to local level is a comprehensive dismantling of the antitrust system entrenched by Labour’s 2002 Enterprise Act.

While many details of the new arrangements still have to be worked out, the government has decided that Britain should have a single competition body to examine corporate mergers and monopolies.

Supporters of the change, which include many big businesses and their corporate lawyer representatives, say the existing system of the OFT acting as a gateway for probes to flow to the commission is too ­cumbersome.

One competition lawyer who asked not to be named says the change will be a “long overdue” assault on an arrangement that “has a quangoish whiff about it”. Investigations are started by the OFT only for the Competition Commission to begin them all over again, rather than working from the existing case file passed on by its sister institution.

“Business [doesn’t like] the costs of dealing with the current system and the amount of time it takes to get decisions out,” the lawyer says.

Another strand of corporate criticism of the existing regime is that the authorities have grown too inquisitorial and far-reaching in their demands for information. Many of these are directed at companies that are not suspected of wrongdoing, but are under scrutiny only because of their strong position in their industries.

In 2008, Tesco accused the Competition Commission of issuing a “heavy-handed” order that forced it to trawl through hundreds of thousands of e-mails as part of a long-running grocery market investigation.

Defenders of the status quo say that having two institutional pairs of eyes helps ensure objectivity in a process otherwise vulnerable to distortion by watchdogs trying to please their political masters. The bodies are both almost independent of ministerial interference, although the last government still pushed through the rescue takeover of HBOS by Lloyds TSB in 2008 in the face of OFT opposition.

Opponents of the coalition proposals say the plan to farm out many consumer protection functions to bodies such as Citizens Advice and trading standards is also flawed, as it will undermine attempts to co-ordinate national response to businesses whose behaviour threatens the interests the public.


Assurances sought on regulation


Banks and housing associations will be seeking assurances that genuinely independent financial regulation of social landlords will remain when the Tenant Services Agency is scrapped and folded into the Homes and Communities Agency,
write Jim Pickard and Nicholas Timmins.

The move, to be announced on Thursday, will in large measure recreate a slimmed down version of the Housing Corporation, which was split in two only two years ago to ensure that economic oversight of housing associations remained separate from decisions about investment in new social housing.

Consumer Focus is to be scrapped with its responsibilities handed to local trading standards officers and Citizens Advice. It is uncertain whether its legal powers to demand information from companies in order to establish whether consumers are getting a fair deal will survive.

Francis Maude, the Cabinet Office minister, is expected to sell the package as a boost for transparency and accountability rather than a cost-saving “quango bonfire”. While some bodies will be scrapped, many more will see changes of function or parts of their role transferred elsewhere.

The arguments over the proposals so far suggest that, after years of the competition authorities retreating from the political front line, they are now squarely back on it.

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