[ARCHIVED CONTENT] department of trade and industry [SECTION TITLE]

Introduction

A consultation document which requested comments on the proposed changes to the structure the Office of Fair Trading was published in September 2000. The deadline for responses was 26 January 2001.

The following summary of the responses received covers the main areas of the proposals on which comments were made.

NB: It should be noted that not every consultee who replied to the consultation document made detailed comments on every section of the document. The comments of consultees which are reported cannot therefore necessarily be taken as representative.

Forty-five written responses were received by the due date and divided into the following categories:

� Regulatory Bodies 9%

� Employers Organisations 29%

� Law Firms 13%

� Academics/Others 16%

� Consumer Organisations 11%

� Former Civil Servants 11%

� Local Authority/Central Govt 9%

� Trade Unions 2%

The percentage of responses from each of these interest groups is illustrated above.

A list of respondents is given at Appendix 1. The responses are available to view by appointment at the DTI Library, Tel: 020 7215 5006/5007, [note: one respondent wished their response to be treated as confidential and this is therefore not available to view].

A majority of the responses (3-1) was in favour of the proposals for a board structure for the Office of Fair Trading (to be renamed the Fair Trading Authority). However, a number commented on the composition of the Board preferring that the Director General of Fair Trading in his new role as Chairman of the Board should be the sole official representative on the Board. There were some concerns about the effect a Board structure might have on the speed of the decision making process and a number of claims for board representation including from the devolved administrations and special interest groups.

Despite these concerns, there was support, particularly from those respondents engaged in business for the collegiate aspect and greater breadth of experience that would be applied to decisions made by a board. On the question of the size of the board, the general view was for around eight non-executive members who possessed varied business experience, with expertise in matters of competition and consumer protection.

On the question of whether board members should be full or part time, of those who supported the proposals and expressed a view on this issue, there were more who favoured the idea of there being part time members, as this would provide greater flexibility and a larger number individuals eligible to be members. Opinion was divided 2 to 1 in favour on the question of publication of the board�s programme, minutes of meetings, attendance records and opinions, provided confidential material is not released.

Lord Borrie QC

Alexander Falconer

Martin Howe

Independent Committee for the Supervision of Standards of Telephone Information Services (ICSTIS)

Joint Working Party on Competition Law of the Bars & Law Societies of the UK

Simkins Partnership

UNIFI

SUMMARY OF REPLIES TO CONSULTATION PAPER ON PROPOSED NEW STRUCTURE FOR THE OFFICE OF FAIR TRADING (OFT)

A total of 49 written responses had been received by 9 February. The replies fall into the following categories:

Thirty respondents from a variety of backgrounds, companies, business interest organisations, regulatory bodies, law firms and academics, welcomed the proposals, although some had concerns on various points of detail.

Six responses mostly from the legal profession or former civil servants were not in favour of the proposals. The principal concern was that there was no overriding need to change current arrangements and that the new proposals might introduce delay.

Three respondents were particularly critical of the proposals, one being a former DGFT. All three doubted the ofgem model was a valid comparison; all doubted the reforms would lead to the desired objectives and there was concern about introducing delay into the decision-making process.

There were four respondents whose comments were neutral or who had little or no comment; i.e. the Takeover Panel indicated it had �no comment�.

Some responses were brief, no more than a paragraph or sentence expressing support for the reforms but some responses were papers analysing various points in detail (whether for or against). Below is a more detailed synopsis.

1) According to the proposals for the Authority for the Office of Fair Trading, the powers of the Director General of Fair Trading would be transferred to the Board of the new Authority.

There was majority support for this proposal, with respondents favouring the idea of a collegiate structure with a breadth of expertise, strengthening the role of the body and bringing it into line with other regulatory bodies, in the light of the authority�s increased powers and responsibilities. �Depersonalising� the role of DGFT and increasing the breadth of experience on which decisions were based were felt to be important, as was reducing excessive �political� input from Government.

These arguments were echoed in some detail by the CBI, ofgem, ICSTIS, Confederation for Passenger Transport UK, centrica, Consumers� Association, Scottish Consumer Council, Transco, TESCO and academics (Twigg-Flesner, Macleod and Macdonald), the CBI stressing how the reforms would avoid excessive power resting with an unelected individual.

Those who were not in favour of reform, for example Lord Borrie QC, a former DGFT, and Aidan Robertson, a law firm, argued that the OFT in its present form is sufficiently accountable and independent to deal with its responsibilities current and future. They doubted the validity of comparisons with utility regulators (OFT has been in existence far longer and its work is more varied). Lord Borrie QC felt a board structure could lead to a weakening in decision making. H H Liesner, a former civil servant, argued that the current system leads to greater consistency in decisions. ONdigital, a commercial digital TV operator, considered the consultation paper did not demonstrate how the proposed arrangements would improve on current practice and did not offer alternative models for the authority.

2) Members would be appointed by the Secretary of State, in consultation with the Chairman through the usual Nolan procedures.

Only two respondents commented. Simkins Partnership, a law firm, criticised the proposals, suggesting that Ministerial appointment of members might compromise their objectivity. Allen and Overy, another law firm, pointed out the DGFT is currently appointed by the Secretary of State.

3) The Authority would be a Non-Ministerial Government Department and its staff would be civil servants.

There were concerns that OFT staff lack practical business experience. These came from the National Consumer Council and from Combined Merchants (UK) Ltd, from the cement industry, who supported the reforms. Two respondents with a legal background who were not in favour of the reforms, the Simkins Partnership and Aidan Robertson, argued that recruitment and training of more expert staff would contribute to the achievement of the desired objectives without the need for a board.

� encompass a broad mix of interests and skills within the decision making process;

� be fully accountable through working arrangements which are open and clear;

Independence in terms of the functioning of the Board was explained in the consultation paper as the role and functioning of the Board not being too closely defined in legislation.

Of those who supported reform, ICSTIS, centrica, and the Consumers� Association endorsed this view whilst Powergen and CMS Cameron McKenna, a law firm, felt all functions of the board must be clearly defined, a view strongly supported by the CBI, who suggested the board�s functioning be laid down in secondary legislation. Centrica agreed with legislation to specify which powers and duties could be undertaken by staff, along the lines of the Utilities Act 2000.

Of those who were not in favour of reform, Allen and Overy doubted whether reform would lead to more independence, a view shared by the Bar and Law Societies. ONdigital thought the decisions of the present OFT were just as independent and transparent as those of other regulatory bodies.

Of those who supported reform, the National Consumer Council indicated it was right the board should concentrate on strategy. Martin Howe, a former OFT Director of Competition Policy, queried whether much significant material would escape the board�s attention, a view echoed by the British Retail Consortium, who wanted specific statutory guidelines to cover this. This view was shared by the CBI who stated that, in addition to being involved with strategy, the board should oversee the activities of the Fair Trading Authority. Ofgem considered that for the board to be independent, the Director must avoid consulting Ministers about board functions.

Of those not in favour of the proposals, H H Liesner commented this area was not properly explored in the consultation.

This aspect also attracted considerable comment. Responses from both those in favour and those against the proposals favoured a �mixed� board of around eight experienced individuals with a majority of non-executive members, although the CBI wanted legislation to specify both a maximum and a minimum number of board members.

LACOTS and the Trading Standards Institute felt it was important for Local Government to be represented on the board. The Consumers� Association and CAMRA felt there must be some consumer representation. UNIFI, the bank and financial services employees� union, felt there must be a member to represent the interests of trade unionists. The Scottish Consumer Council stressed the need for a Scottish member to respect devolution and Scottish interests.

The CBI were opposed to officials, apart from the Director serving on the board, as they doubted they would take up a position different from that of their managers. The CBI also recommended that members have extensive business experience, a view shared by others, notably Combined Merchants (UK) Ltd. In addition the CBI felt there was a risk that members might have a �partisan� attitude towards their own area of industry or business.

Small Business Service, a DTI agency, recommended that there should be a member to represent small business interests.

Of those who were not in favour of the proposals, H H Liesner; and Allen and Overy agreed with the idea of a �mixed� board but, like the CBI, were concerned about members favouring business interests with which they had previously been associated. The Bar and Law Societies, like the CBI, did not want FTA officials, other than the Director, on the board as the officials� expertise might not necessarily be pertinent to particular issues being considered. DETR favoured representation of Local Government and Scottish and Welsh interests. Alexander Falconer, a former Member of the European Parliament, favoured representation of trade unions and Scottish interests.

Of those who were in favour of reform, ICTSIS, the Consumers� Association and one academic, James Macdonald, favoured transparent systems to avoid conflicts. Two academics, Macleod and Twigg-Flesner, favoured the idea of a �panel� of individuals qualified to sit on the a board. Having a large number of eligible individuals would, in their opinion, help to avoid conflicts of interest arising. BRC suggested there should be a specific mechanism for redress, in cases where conflicts of interest were believed to have affected board decisions. This view was endorsed by the CBI who proposed Judicial Review for such cases. Centrica had confidence in the Nolan procedures if these were applied strictly but considered it inevitable that conflicts of interest would arise. The National Consumer Council considered that if members withdrew from meetings as a result of potential conflicts, it might lead to decisions being taken by too few people. It is worth noting that both the CBI and Tesco were concerned about how �personal interest� might be defined or interpreted.

Of those not in favour of the proposals, Allen and Overy suggested the option of a �panel� to form a board and the Bar and Law Societies stated it would be difficult to avoid conflicts of interest, especially if part-time members were employed. This, they suggested, would create difficulties for the board�s operations.

Of those in favour, Martin Howe was concerned about the effect on the speed of decision making and whether members would cope with the board�s workload. The CBI and Freshfields Bruckhaus Deringer, a law firm, were also concerned about the possibility of delay.

This was echoed by those not in favour of the proposals. Lord Borrie QC and ONdigital felt the reforms would lead to delays in decision-making. The Bar and Law Societies doubted decisions would be made more quickly.

Accountability. The Authority must be accountable to the Secretary of State, Parliament and the public.

This aspect also attracted considerable comment. Of those who were in favour of reform, ICSTIS were concerned about how quickly members� opinions might be published. Professor Macleod disagreed with publication of members� opinions, as this would undermine the �collegiate� spirit of the board. CMS Cameron McKenna also took this view, whilst supporting reform, they were against the idea of publishing members� opinions. They believed publication of such opinions might lead to legal challenges to decisions. Ofgem were strongly against publication of minutes, opinions and records of attendance as this would be difficult for reasons of confidentiality and because it might inhibit frank discussion by board members.

In contrast to this, the Radio, Electrical & TV Retailers Association (RETRA), centrica, and the Consumers� Association, favoured the publication of minutes and opinions, as well as records of attendance. The CBI and Tesco both agreed with this, providing commercially sensitive information was not disclosed.

Of those who supported the proposals, ten respondents stated specifically that they wanted publication of minutes, opinions and attendance records and only four said this would be undesirable (one favoured publication of minutes only).

The CBI and BRC favoured the idea of the board�s annual report being submitted to Parliament for debate, as well as being given to the Secretary of State. This view was taken a step further by the National Consumer Council who argued that in the annual report, non-executive board members should draw the attention of Parliament and the public to issues of concern. The Consumers� Association and centrica wanted an annual report to a committee of the House of Commons.

Of those not in favour of the proposals, H H Liesner and Allen and Overy noted that publishing details of why members had voted in a particular way could lead to problems if commercially sensitive information were involved. The Bar and Law Societies felt that it would be simpler to achieve accountability with an individual DGFT, than with a board of members, by publishing the reasons for the DGFT�s decisions. They were also concerned about how quickly minutes and records of members� opinions might be published.

A majority of the responses were in favour of the idea of a board structure for the FTA, although some had concerns about individual points of detail. For example, ofgem considered that for the board to be independent, the Director must avoid consulting Ministers about board functions and the CBI were concerned about the effect a board might have on the speed of decision making. Despite these concerns, there was support, particularly from those respondents engaged in business for the collegiate aspect and greater breadth of experience that would be applied to decisions made by a board.

On the question of the structure of the board, the general view was for around eight non-executive members who possessed varied business experience, with expertise in matters of competition and consumer protection. Members should be appointed on the basis of merit and business experience but should not represent any particular interest faction. Some respondents, for example the Trading Standards Institute, considered that exceptions should be made for sectors whose interests would be affected by board decisions, such as trade unions, consumer representatives and local government. Some, for example the Scottish Consumer Council, also considered it was important for Scotland and Wales to have representation to take account of devolution.

This view was supported by Tesco. A number of respondents shared the CBI�s view that the DGFT should be the only FTA official to sit on the board or to have voting rights.

Opinion was divided 2 to 1 in favour on the question of publication of the board�s programme, minutes of meetings, attendance records and opinions, provided confidential material is not released. Both Tesco and the CBI, for example, took this view, in contrast to Allen and Overy and the Bars and Law Societies who were against this particular proposal.

A few respondents considered substantive reform of the organisation�s role and functions to be more important than reform of its structure and operation. For example ONdigital, who did not support the proposals, considered changes in the OFT�s organisation should not be undertaken until after the proposals in respect of the merger control legislation are implemented.

There were four late responses. Of those who supported the proposals, British Sky Broadcasting Ltd favoured a mix of executive and non-executive members, with outside members being in the majority. The International Underwriting Association of London also supported the proposals but emphasised that appointments to the board must be made on an impartial basis.

Two late respondents, both from the legal profession, were critical of the proposals. Travers Smith Braithwaite were concerned about impartiality in the appointment of board members and the possibility of conflicts of interest arising. Slaughter and May were not convinced of need for change and concerned about the possibility delays.