Competition between universities probed by regulator

Out-Law News | 22 Oct 2013 | 5:11 pm | 3 min. read

The Office of Fair Trading (OFT) has launched an information gathering exercise in a bid to understand whether competition between universities is effective.

The regulator said that it wanted to review the market for undergraduate higher education in light of recent Government reforms to the sector's tuition fees and regulatory structure. Universities in England can charge undergraduate UK and EU students up to £9,000 a year to take courses, but this ability is subject to a number of regulatory constraints and levers.

The initial introduction of higher fees led to some unintended consequences when nearly all universities chose to charge £9,000 or close to that figure according to Nicola Hart, a universities law expert at Pinsent Masons, the law firm behind Out-Law.com. A series of modifications followed, designed to change that behaviour and these may have an impact on competition, she said.

The OFT said it wants to find out whether universities can compete "effectively" with one another and "respond to students' expectations", as well as understand whether students are sufficiently well informed before making choices about where, and what, to study. The call for information is scheduled to run until 31 December and the OFT is due to report back on its findings in March next year.

"Universities in England enjoy an enviable reputation across the world," OFT chief executive Clive Maxwell said. "We want to ensure that choice and competition between universities play a positive role in underpinning their success in future, and encourage students, universities, employers and others to respond to our call for information."

The OFT said it would like to understand how universities compete with one another for students, "including how they go about setting fees, deciding what courses to offer and how they should be delivered".

Information on whether the regulatory system helps or hinders competition between universities is also being sought, along with details about whether universities are being clear enough with students about the nature of the courses they are offering. In addition, the OFT wants to know if students have access to "appropriate channels" through which to raise complaints, as well as "access to redress", if their expectations are not being met.

Competition law expert Guy Lougher of Pinsent Masons said that it was important for universities, and other stakeholders in the market such as businesses, to express their views to the OFT.

"This is another example of the OFT proactively looking into markets on a ‘no-fault basis’ to assess if they are functioning effectively and whether there are any impediments to consumer choice," Lougher said. "If the OFT finds aspects of the provision of undergraduate higher education in England market are not functioning well for consumers, it may decide to open a more in-depth market study, as it did earlier this month in relation to the supply of public sector ICT services."

"These calls for information are an important opportunity for all interested parties to give their views to the OFT and their potential impact should not be underestimated," he added.

Nicola Dandridge, chief executive of Universities UK, a membership organisation that represents 133 UK universities and colleges, said that the sector in England would "look forward to feeding into" the OFT's project. She said that despite the reforms being in their infancy, universities had "done a great deal already to increase the amount of available information on courses and to respond to feedback from students."

The OFT is currently in the middle of a separate investigation affecting the universities sector. It is assessing whether terms and conditions relied on by some universities to justify withholding degrees until non-academic debts are settled by students are in line with consumer protection laws.

Nicola Hart of Pinsent Masons, said that the latest OFT probe is "considerably more wide-ranging and significant" than its look into debt collection practices in the sector. She said that the regulator's interest in the universities market reflects the "changed environment" in which universities are operating.

"A kind of market in relation to undergraduates has been developing for some time and the present government has pressed the accelerator pedal with its student and competition centred reforms," Hart said. "The OFT will look into whether these reforms are actually delivering real competition as intended. It is a complex set-up, and it’s not obvious that competition between English institutions for UK / EU undergraduates is based on price at all, as opposed to, say, reputation."

"There is also a recognition by the OFT that universities are playing a crucial role in the UK economy, and represent a key export market. It is great news that this message seems to have got through and be widely accepted by government and influencers, thanks to effective lobbying by the sector. If it turns out there’s a slight downside to this high profile – attracting the attention of yet another regulator –  it shouldn’t come as too much of a surprise, and at least this initiative is a useful reminder that competition law applies in the sector," she added.