Colleges may face claims of fee-fixing

March 12, 2004

Colleges and universities that collaborate on setting top-up fees for joint courses could open themselves up to legal challenges from students and to fines under competition law, college leaders have been told.

Advisers from the Office of Fair Trading have warned colleges that they could be accused of fixing fees at higher prices for courses, such as foundation degrees, that they run jointly with universities.

The warning follows an investigation by the OFT into alleged fee-fixing by private schools. Sixty schools have been forced to hand over financial documents following complaints from parents.

The introduction of top-up fees could lead colleges and universities into a situation where they face similar legal challenges from students or their parents, on the basis of clauses in the 1998 Competition Act and the 2002 Enterprise Act, which contain legislation to make fee fixing illegal.

Until now, competition regulation has affected mostly commodity companies such as cement manufacturers or ice-cream sellers.

But Julian Gravatt, director of funding and development at the Association of Colleges, said the current investigation into private schools had set a precedent, establishing that the law also applied to education.

Legal advisers have told the AoC that colleges or universities discussing fee levels with one another could be in breach of the law on the grounds that the exchange of price information may lead to fee-fixing that eliminates competition.

Mr Gravatt said: "This could apply in the case of a group of colleges and universities working in partnership or, in the case of price fixing, at subject level. Some institutions might decide, for instance, to set the price of science or engineering courses at a lower level. They might then cross-subsidise that by setting fees for all law courses, for instance, at the highest level.

"It is easy to see a situation developing where a law student then complains to the OFT," he added.

David Robertson, head of education and policy development at Liverpool John Moores University, said his research into the issue had revealed that it was a "complex and awkward" area for universities and colleges.

He said: "It is natural that colleges would want to talk to universities they are in partnership with about setting fee levels. If that then puts them in breach of the law, it is hard to know where they go from there."

Meanwhile, further education college heads have called for a review of the further education inspection system, condemning it as "unfair" and "inconsistent".

The AoC told the Commons education and skills select committee this week that many of its members were concerned that a "significant number" of Ofsted inspectors were inexperienced and that there appeared to be no common approach to inspections.

In its submission to the committee's review of the work of the government's education inspectorate, the AoC also complained of "excessive scrutiny", partly resulting from the overlap between the inspection activities of Ofsted and those of the Learning and Skills Council.

The concerns follow Ofsted criticism of standards in colleges in its annual report published last month, which rated one in ten colleges as "inadequate". They come as the LSC prepares to introduce a new funding system under which college budgets will be affected by how well they do in inspections.

College heads want Ofsted to introduce a "lighter touch" inspection regime for institutions that have a good track record and that have demonstrated that they have robust quality assurance systems in place.

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