CONSULTATION ON STEPS TO INCREASE OPENNESS AND TRANSPARENCY
Introduction
On 1st April 1999 the Competition Commission
assumed responsibility for the inquiry work previously undertaken by the
Monopolies and Mergers Commission.
In response to the Government’s Green Paper ‘A
Fair Deal for Consumers – Modernising the Framework for Utility Regulation’,
the Competition Commission is currently evaluating its procedures with
the aim of increasing their openness and transparency.
This leaflet seeks to summarise the key changes that
are currently being evaluated and invites comment from interested parties
as part of a widescale consultation.
Criteria for change
There are six key criteria against which changes will
be assessed:
- Respect for the law
- Effectiveness
- Fairness
- Timeliness
- Minimising the burden on parties involved
- Containing costs and providing value for money
The recent Green Paper acknowledges that, whilst it is
desirable to improve the openness and transparency of inquiries, there
are likely to be various associated difficulties which need to be fully
considered:
- The possibility of the Commission’s procedures becoming more
legalistic and taking longer
- The possibility that open hearings would deter some third parties
from giving evidence
However, the Green Paper reached the view that the benefits
of greater openness probably outweighed the risks and encouraged the Commission
to give serious consideration to proposals for increasing the transparency
of procedures.
The consultation programme
The consultation programme has several components:
- The Competition Commission is consulting with Members and other relevant
parties
- The Competition Commission has contracted Opinion Leader Research
to conduct a consultation with key stakeholders to explore attitudes
towards, and perceptions of, greater steps to openness
- The Competition Commission is publishing this leaflet and a fuller
consultation document to encourage interested parties to comment on
plans and proposals
It is planned that the consultation will be completed
by September 1999 and the Chairman of the Competition Commission will
after further consultation with Members issue guidance on procedures to
Members.
Proposed modifications to Competition Commission procedures
The Commission has recently introduced a number of modifications
on a pilot basis with the aim of establishing greater openness:
- Publication of a statement of the issues that the Commission needs
to address before reaching conclusions. This has taken place in six
inquiries
- Publication of a statement of hypothetical remedies for addressing
the identified issues. This has taken place in three inquiries
- A joint hearing of the main and principal third parties including
the relevant statutory consumer committees. This has taken place in
one inquiry
Additionally, the Commission plans to conduct a further
trial early in July:
- An open hearing on an inquiry in which there are a large number of
interested parties
The Commission already publishes, on its website, and
in relevant newspapers, an open invitation to submit evidence to any inquiry.
The Commission is currently considering a number of other
initiatives to increase transparency:
- To publish an outline timetable for each inquiry
- To encourage parties to submit written evidence in a form that enables
the non-confidential components to be made public, and to encourage
parties to publish their non-confidential information
- To list on the Commission’s website the names of those who have
provide evidence and who are willing to make that evidence publicly
available
- To publish, as a matter of course, statements of the issues under
consideration and the options for remedying possible detriments
- To hold joint or open hearings where it appears to help the inquiry
process. It is not, however, intended to hold hearings at which commercially
sensitive material is discussed in the presence of other parties or
the public
- In the case of regulatory inquiries, the regulator and regulated company
would be expected to exchange copies of all written evidence. Transcripts
of hearings would also be shared with both parties. This would be considered
routine unless the Commission is satisfied there are good reasons for
not doing so
The Commission’s point of view
The Commission believes that these developments are likely
to be beneficial in improving the effectiveness of its own work and in
increasing accountability. However, there could be implications for the
Commission and interested parties in terms of time and cost. The Commission
consequently believes that these proposals should be carefully evaluated.
The Commission welcomes comments on all these proposals.
When you respond, please complete the pro-forma comments form attached
as well as, if relevant, submitting separate comments. All responses will
be carefully considered and made publicly available on request, unless
respondents indicate to the contrary. Please submit your responses by
10 September to Peter Radley, Room 338, Competition Commission, New Court,
48 Carey Street, London, WC2A 2JT.
5 July 1999
Last revised 07/99
CONSULTATION ON REPORTING SIDE PROCEDURES AND PRACTICES
A. INTRODUCTION
1. On 1 April the Competition Commission assumed responsibility
for the inquiry work previously undertaken by the MMC. This consultation
paper invites comments on the procedures and practices used by the Commission
in carrying out these functions. It particularly seeks views on ways
in which present procedures and practices, described at paragraphs 20
to 28 below, might be made more open with better flows of information
to all those interested. This consultation is undertaken in the belief
that greater awareness of the issues, arguments and background information
of an inquiry on the part of the parties and the public generally is
likely to lead to the Commission being better or more quickly informed,
with the result of improving the effectiveness of the Commission’s
investigations.
2. Paragraph 19(1) of Schedule 7 to the Competition
Act 1998 provides that each group of members selected by the Chairman
to carry out an investigation may determine its own procedure, subject
to any special or general directions given by the Secretary of State.
No such directions have been given. However, paragraph 19(2) of Schedule
7 provides that, in determining its procedure to carry out an inquiry,
the group of Commission members concerned must have regard to any guidance
issued by the Chairman. It is the intention that changes in procedure
resulting from this consultation will be reflected in that guidance.
Relationship with other exercises
3. This consultation is not concerned with the rules
of procedure for the new Appeals Tribunals within the Competition Commission.
This will be the subject of a separate consultation exercise conducted
by the DTI later this year. Nor is it concerned with the actual content
of Commission reports. Later this year, the DTI will be consulting about
possible changes to merger control: the current exercise relates to
inquiries under the present regime. Separately, the OFT is also conducting
its own exercise about the way it operates.
4. Those wishing to respond to this consultation paper
should do so by 10 September and should write to Peter Radley, Room
338, Competition Commission, New Court, 48 Carey Street, London, WC2A
2JT (tel: 0207-271 0230 and fax: 0207-271 0367) who will also answer
any queries. This consultation paper has also been published on the
Internet. Details of how to access the paper electronically can be found
on the Commission’s website www.Competition-Commission.gov.uk.
Electronic mail responses to the consultation should be sent to info@competition-commission.gov.uk.
B. BACKGROUND
5. There are several reasons why now is a good time to
review procedures:
- there has been no formal review since the Commission’s earliest
predecessor body (the Monopoly and Restrictive Practices Commission)
was set up in 1948;
- with the DTI’s forthcoming consultation on rules of procedure
for the appeal tribunals (see paragraph 3 above), it means that all
the Commission’s procedures will be the subject of thorough evaluation
based on the widest possible range of views; and
- there is a growing consensus in favour of greater openness in the
working of public bodies and greater disclosure of information generally,
to which the Commission wishes to respond.
C. OBJECTIVES WHICH PROCEDURES MUST FULFIL
6. Procedures have to serve aims and objectives. They
are not ends in themselves. The Commission’s procedures reflect the
nature of the Commission’s functions, which are to carry out investigations
as opposed to deciding a dispute between parties on the basis of evidence
provided by those parties. Accordingly, the Commission’s procedures
and practices have evolved to enable three main aims to be met:
- to carry out thorough investigations and to produce, accurate and
rigorously argued reports within the deadlines specified (or any extensions
that may be agreed);
- to operate within the powers conferred by legislation; and
- to act in accordance with the rules of administrative law.
7. In considering changes, there are six key criteria
against which proposals will be measured:
- respect for the law;
- effectiveness;
- fairness;
- timeliness;
- minimising the burden on parties;
- containing costs and providing value for money.
These objectives are considered further below.
8. Respect for the law. The reporting side of
the Commission exists to carry out investigations and make reports on
matters referred by the Secretary of State for Trade and Industry, the
Director General of Fair Trading and the sectoral regulators. Present
procedures are designed to enable the Commission to fulfil these duties
and to operate in accordance with administrative law and the relevant
legislation. This, for example, requires the Commission to take into consideration
any representations made by persons having a substantial interest in the
subject matter of an investigation and to protect the confidentiality
of information provided in the course of an inquiry. The procedures must
also take account of the European Convention on Human Rights (ECHR). When
the proposed Freedom of Information legislation is enacted, this will
also need to be taken into account, but this paper is not intended to
address that issue.
9. The effectiveness of the Commission’s
procedures requires information to be gathered and its quality tested
in a way which allows the best possible understanding of the issues in
the time available. This is central to the Commission’s functions.
The Commission’s reports must above all be thorough, and their conclusions
and recommendations robust and soundly based.
10. Fairness. In addition to the points at paragraph
8 above, for the Commission’s conclusions to carry weight, it is
essential that the Commission is perceived to act fairly.
11. Timeliness is an important aspect of the Commission’s
work and is a major concern for the parties to an inquiry who wish to
minimise the uncertainty for their businesses. It is also important to
enable measures required to remedy matters that are contrary to the public
interest to be taken as quickly as possible. All references are made with
a deadline set by those making the references. Normally, three months
are allowed for a merger reference, two months for a newspaper reference,
six months for a utility reference and nine to twelve months for a monopoly
reference. In certain circumstances, the Commission can seek an extension.
The pressure of work involved in carrying out a thorough investigation
against a tight timescale is already considerable; and we believe the
proposals for greater openness should not add significantly to the time
taken for inquiries.
12. Inevitably the Commission’s procedures place
a considerable burden on the parties to an inquiry, and it is important
that this burden should be kept to a realistic minimum. Companies
supplying information to the Commission and providing representatives
at hearings have to continue to run their businesses while responding
to the Commission’s requests. Consumer organisations have limited
resources and competing priorities. The burden placed on participants
in the inquiry process needs to be both proportionate to the public interest
and consistent with the likely importance of their input to the inquiry.
13. Costs. All public bodies have a duty to be
cost effective and to keep their demands on the Exchequer, and ultimately
the taxpayer, to a minimum. Changes in procedure designed to achieve greater
openness may well involve additional costs. It will be important to ensure
that any extra costs are kept to a realistic minimum and are in proportion
to gains from the openness they are designed to achieve.
D. FUNCTIONS
14. The reporting side of the Competition Commission
has a large number of different functions (called in the Competition Act
1998 ‘the general functions of the Commission’). These are largely
derived from the Fair Trading Act 1973 and privatisation statutes.
15. These functions broadly give rise to three different
types of inquiry:
- monopoly inquiries;
- merger inquiries; and
- regulatory inquiries.
16. In a monopoly inquiry, the Commission is asked to
establish whether a monopoly situation (either scale or complex) exists,
whether action is being taken to exploit or maintain the monopoly situation
or which is otherwise attributable to the monopoly situation and (normally)
whether any matter operates or may be expected to operate against the
public interest. If there is an adverse public interest finding, the Commission
may recommend remedies for the Secretary of State’s consideration.
17. In a merger inquiry the Commission is asked to investigate
and report on whether a merger situation exists or is in contemplation
and, if so, whether it operates or may be expected to operate against
the public interest. If there is an adverse public interest finding, the
Commission may recommend remedies for the Secretary of State’s consideration.
18. Special provisions apply to newspaper mergers. The
public interest criteria that are applied here include the need for accurate
presentation of news and free expression of opinion.
19. Regulatory references under the privatisation statutes
usually arise from proposals for licence changes by a regulator which
are disputed by the licensee. They often involve price controls. Licence
modification references are made by the regulator concerned. The issue
referred to the Commission is whether a particular matter operates or
may be expected to operate against the public interest. If the Commission
finds that there is an adverse effect on the public interest which could
be remedied or prevented by a licence modification, the regulator is required
to make a licence modification.
E. PRESENT PROCEDURES
20. The circumstances of individual references vary widely
and give rise to very different types of investigation. Thus for example
a monopoly reference may involve a large number or just a few parties
and may or may involve specific allegations of misconduct, while a regulatory
inquiry may give rise to complex technical issues. It is therefore necessary
for the detailed procedure adopted by the particular group undertaking
an inquiry to take account of the particular circumstances of the case.
Although procedures are therefore flexibly applied, they are broadly common
to all types of inquiry. They are designed to enable the Commission to:
- collect evidence, including holding hearings;
- identify and consider public interest issues;
- formulate conclusions, and where appropriate, recommendations; and
- produce the report.
These are not separate stages in an inquiry, but overlap
to a large extent.
21. At the outset the Commission identifies parties likely
to have an interest in the matter under investigation, eg the parties
to a merger, customers, consumer bodies, trade associations, trade unions
and public bodies with relevant responsibilities, and invites them to
provide evidence. It is normal practice to place advertisements in the
press (national, regional and/or trade specific as appropriate) inviting
interested parties to comment. Also at an early stage the group conducting
an inquiry will often make site visits to see the industry concerned at
first hand.
22. The main parties to an inquiry, ie those most directly
affected by the outcome, such as the parties to a merger, will be asked
to provide detailed information about their activities, often by means
of a questionnaire. Questionnaires may also be sent to other interested
parties. In some inquiries expert consultants may be commissioned to undertake
surveys or other work relevant to the investigation and the main parties
are consulted when this is done.
23. In all inquiries close regular contact on progress
is maintained between staff and the main parties through correspondence,
telephone and informal meetings. These exchanges enable the Commission
to obtain and clarify information and views.
24. At an early stage the group undertaking an inquiry
will hold oral hearings with third parties. Hearings with main parties
will be later. Those attending are given notice of the issues that are
to be explored and the procedure to be followed. They may be legally represented
at hearings if they wish but this is not necessary. Shorthand writers
attend each hearing and it is standard practice to send to those attending
a copy of the full transcript of the hearing, asking them to confirm its
accuracy and to make any additional points they wish.
25. In the light of evidence which has been collected,
the group identify the public interest issues which they consider may
arise. These issues are then canvassed with the main parties at one or
more hearings. In advance of hearings with main parties the Commission
sends an ‘issues letter’ giving notice of the issues that the
group propose to raise at the hearing. This will also include any information
that the parties may need to have in order to respond properly to the
issues raised. From time to time, matters may be raised at a hearing that
were not referred to expressly in the issues letter. In such circumstances
the person concerned will be invited to add to their oral answer in writing.
26. The Commission usually raises with the main parties
not only public interest issues but also hypothetical remedies to possible
public interest detriments. Often these are raised at the same hearing
as the issues, but this does not mean that the group has reached any conclusions
on the public interest issues. Where this happens the issues letter sent
to the party concerned before the hearing will inform the party of the
intention to discuss hypothetical remedies and these will be set out in
the letter. When hypothetical remedies are discussed at a separate, later,
hearing details are provided in advance to the party concerned in a separate
‘remedies letter’.
27. As an investigation proceeds, draft material for
inclusion in the report is produced. Extracts of the draft factual material
relevant to a party and the material summarising a party’s views
are sent to the party concerned to confirm its accuracy. Also at this
‘put back’ stage parties are invited to identify material which
they consider should be excised either from the Commission’s report
to the Secretary of State or industry regulator concerned, or from the
published version of the report.
28. In producing its reports the Commission is required
to give definite answers to the questions asked in the reference and it
must also give reasons for the conclusions drawn. The conclusions chapter
may also include recommendations to remedy any adverse effects that have
been identified. The report will also include the background information
on which the conclusions and recommendations are based.
F. PROPOSALS
29. In its Green Paper ‘A Fair Deal for Consumers
– Modernising the Framework for Utility Regulation’, Cm 3898,
which was published in March 1998, the Government raised the question
of introducing greater openness into the Commission’s procedures
for handling licence modification references. At paragraph 7.51 it suggested
that
30. The Green Paper identified (paragraph 7.52) a number
of possible ways of increasing the openness of the Commission’s procedures
in regulatory inquiries which are equally applicable to all forms of inquiry
undertaken by the Commission:
- the introduction of ‘open hearings’ which could be attended
by the main parties only, or a wider invited audience, or could be
open to all, but with the Commission retaining the option of going
into closed session to receive confidential information;
- the disclosure of written evidence to the regulator, the regulated
company and the relevant consumer body, and possibly more widely;
- requiring the Commission to publish its draft conclusions, and to
invite comments on them in advance of publication of its final report.
31. In putting forward these ideas, the Green Paper acknowledged
various difficulties associated with greater openness:
- the possibility of the Commission’s procedures becoming more
legalistic and taking longer. It recognised that requiring the Commission
to publish and consult on draft conclusions would extend the time
required for licence modification references; and
- the possibility that open hearings would deter some third parties
(particularly smaller companies or customers) from giving evidence.
32. Nonetheless, the Green Paper reached the view that
the benefits of greater openness probably outweighed the risks, and the
Government’s policy statement in July 1998 concluded (conclusion
7.13) that
33. These conclusions, though put forward in the context
of regulatory inquiries, apply equally to all forms of inquiry undertaken
by the Commission. Following publication of the Government’s policy
statement, the Commission set up a small internal working party to consider
what measures to improve the openness of its procedures it might adopt.
Following informal consultations with those most closely involved, the
working party set in hand a number of experimental steps described at
paragraph 34 below and also put forward various proposals for change within
the existing framework (described at paragraph 35 below). The Commission
has also considered the impact of the ECHR. Our present view is that it
does not require any fundamental changes to existing procedures. The various
measures outlined at paragraphs 34 and 35 are subject both to the results
of the present consultation, including the parallel exercise being undertaken
on the Commission’s behalf by Bell Pottinger Good Relations in which
the consultants are exploring the in-depth views of those most closely
involved with the Commission’s work, and to any further evidence
that may emerge. However, for all inquiries currently underway and for
those starting after the publication of this paper, it is proposed to
give effect to the changes and continue with the experiments described
below.
34. The Commission’s recent experiments with greater
openness have covered:
- publication of a statement of the issues in six references (Underwriting
Services, BSkyB/Manchester United, Rockwool/Owens-Corning, BA/CityFlyer,
Mirror Group, and Ice Cream);
- publication of the remedies letter or of hypothetical remedies in
three references (Underwriting Services, Milk, and Mirror Group);
and
- a joint hearing of the main and principal third parties including
the relevant statutory consumer committees (Mobile Phones).
35. For some time the Commission has published on its
website an open invitation to submit evidence to each inquiry and it has
also published the names of the members undertaking each inquiry. The
further steps that it now proposes to increase the openness of its procedures
are that it should:
- publish an outline timetable for each inquiry;
- request parties to an inquiry to provide written evidence in a form
that would enable the non-confidential component to be made publicly
available. Thus, confidential and non-confidential information would
be kept distinct as far as possible by, for example, the use of confidential
annexes;
- encourage parties to publish their non-confidential information;
- list on the Commission’s website the names of those who provide
evidence, together with contact names and details of how to request
copies of evidence from the party itself which the party is willing
to make publicly available (but excluding from the website the names
of parties that request anonymity);
- normally publish a statement of the issues under consideration and
the options for remedying possible detriments;
- hold joint or open hearings where this would appear to assist the
inquiry process; the Commission might for example consider a hearing
at which issues of principle were discussed with all main parties,
or at which consumer groups were represented, and where it might be
thought desirable to admit members of the public. It is not the intention,
however, to hold hearings at which commercially sensitive material
is discussed in the presence of other parties or the public; and
- in regulatory inquiries the regulated company concerned and the
regulator would be expected to provide to the other a copy of all
written evidence submitted to the Commission. Transcripts of hearings
with one would also be sent to the other. Both these would apply unless
the Commission was satisfied there were good reasons for not doing
so.
36. The Commission believes that on balance these developments
are proving beneficial, in improving the effectiveness of its own work
and in providing extra opportunities for the parties involved to respond
to points of potential importance to them. However, the preparation costs
of the joint hearing in the Mobile Phones reference were substantial,
not only for the Commission but also for the parties. Consequently the
Commission’s preliminary view is that joint hearings should be held
only where the issues are exceptionally complex. The Commission would
welcome comments on all these proposals and on the experiments that have
taken place both from the parties and also from those who were not directly
involved, including those who read the issues and remedies statements
when they were published.
37. Details of how to respond to this consultation paper
are set out at paragraph 4 above. All responses will be carefully considered
and made publicly available on request unless respondents indicate to
the contrary. A list of all respondents will be published on the Commission’s
website (details at paragraph 4). Respondents are invited to publish their
responses themselves on their own website and to establish a link with
the Commission’s website to allow direct access to interested parties.
Respondents prepared to set up such a link should contact Kim Horwood,
the Commission’s Press Officer on 0207–271 0242 or by e-mail
to arrange this.
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