Universities should face more scrutiny over competition, says OFT

The Office of Fair Trading wants further scrutiny of English higher education to judge if some rules for students may breach consumer protection law

March 14, 2014

The OFT published today the outcome of its call for information on higher education in England, launched in October 2013 to see “how choice and competition were working” in the sector.

The report recommends that the Competition and Markets Authority - the OFT’s successor body which takes over on 1 April - undertakes a “compliance review” of the sector. The OFT warns that hidden charges for students and increases in fees for international students during their courses are among practices that “might breach” consumer protection regulations.

It also recommends that the CMA “inform the design of the regulatory regime”, saying the current regulatory framework is “overly complex, outmoded and unfit to support current and future policy ambitions” – such as a sector driven by student choice and open to alternative providers.

However, the OFT does not call for the CMA to undertake a “market study” – the type of thorough investigation of the sector called for by Which?, the consumer organisation.

The CMA could, though, still opt to undertake a market study after its own investigations.

Significantly, the OFT said it had “received no complaints or evidence” of fee setting, after the organisation examined the clustering of universities around the £9,000 maximum.

But the report adds that the CMA “considers allegations of anti-competitive behaviour that it receives seriously, and encourages anyone with specific evidence of this type of behaviour taking place to come forward”.

Sir Christopher Snowden, the Universities UK president, said: “We welcome the fact that the OFT, having considered the information, has found no evidence of collaboration on pricing and that they do not recommend any competition enforcement.”

Speaking of the “unique” relationship between university and students, he said it is “essential to ensure that we do not end up applying wholesale consumer protection rules to higher education in a way that undermines that relationship, to the long term detriment of students”.

Which? has the power to trigger a CMA market study by putting in a “super complaint”. However, that is not thought to be on the agenda at present.

Richard Lloyd, executive director of Which?, said: “We’ve found worrying signs the HE market is not working to promote value for money for students, and evidence of students lacking key information about the academic experience. The Competition and Markets Authority must take swift action to tackle these issues.” 

The OFT said it would not pursue any further action over two specific areas it looked at in regards to potential anti-competitive behaviour: the Ucas rules that stop undergraduate applicants from applying to both Oxford and Cambridge, and that limit applicants to five choices of university.

But the report does say that information for prospective students contains “significant gaps”, including that “in relation to specific long term prospects (such as future income and employment) that result from their choice of course and institution”.

The OFT also says there are concerns over “whether the regulatory system treats all higher education institutions in a fair and equitable manner”. It notes that private providers “were particularly vociferous in their view that regulation is heavily biased” towards supporting traditional providers, with the report noting the lower £6,000 fee cap in place for private providers.

The report also criticises the lack of an “exit regime” that protects students in the event of an institution being closed down. The OFT says “exit needs to remain a possibility for competition to work in a sector”.

Alex Chisholm, CMA chief executive, said: “It is one of the CMA’s key strategic priorities to ensure that, where there is competition in a market, it is working well, and we will look at the most appropriate ways to take forward these recommendations when we start work on 1 April.”

john.morgan@tsleducation.com

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