Does competition law prevent sector collaboration?

As universities consider working together on solutions to the problems posed by the pandemic, Uddalak Datta considers the legal issues.

As the Government starts to publish its first tentative steps out of the restrictive measures in response to the Covid-19 outbreak in England, higher education providers are increasingly looking for ways to return to “normal” operations.

In this context, there are many issues that are best tackled through a coordinated, sector-wide approach – rather than individual institutions forging their own paths in a marketised way – as the Government and OfS interventions into offer-making have shown.

Universities UK has also taken a leading role in coordinating a national response on common challenges facing from the sector including in relation to protecting staff and students, as well as the longer-term financial impact of the pandemic on universities. The sector’s collaborative approach to dealing with the common concerns is of a piece with the general collaborative approach between institutions in the sector.

This collaborative approach raises, of course, a tension with rules on competition which are intended to ensure rigorous rivalry rather than cooperation, and common activities between suppliers in a competitive market. This tension is clearly visible in two recent communications from the Competition and Markets Authority (CMA).

Rip-off Britain

On 25 March, the CMA published guidance on how it will deal with businesses that are ripping-off customers with unfair prices or exploitative market practices.

In principle, from a purist economic point of view, this is competition, red in tooth and claw, in practice. Price-gouging reflects the simple law of supply and demand: where there is a national shortage of, say, toilet roll, it is hardly a surprise that sharp sellers have been keen to take the opportunity to make a quick buck on eBay.

Or, as we learnt in the textbooks, to ensure the most efficient allocation of a scarce supply through the operation of the market, which competition law would usually encourage.

On the same day, the CMA has also published guidance on how it intends to use its regulatory powers during the Covid-19 pandemic. Where parties, who are otherwise competitors in a market, collaborate in order to develop a joined-up response to an emergency affecting each of them and their customers – that is, in principle, anti-competitive.

Useful and beneficial

However, anti-competitive collaboration is not unlawful. Competition law is sufficiently nuanced so that it does not prohibit collaborations which are useful and beneficial. This has already been detailed in the CMA’s findings on the sector in 2014, which suggested that the sector was getting unnecessarily exercised over competition law (I paraphrase), which is not intended to outlaw the many useful areas of collaboration in which universities participate.

In its recent guidance, the CMA provides advice which reiterates the message that the law in fact, permits collaboration between competitors which:

  • (a) contributes to improving production or distribution, or promoting technical or economic progress;
  • (b) allows consumers a fair share of the resulting benefit;
  • (c) is necessary and proportionate; and
  • (d) does not allow the possibility of eliminating competition in the market.

Keep calm and collaborate

This means that, provided that the cooperation or collaboration is to ensure the continuing provision of services which might otherwise be at risk; or to ensure the protection of staff or students; and that this is limited; while still being competitive in other, unrelated areas; a collaborative approach is, of course, permitted and will not be challenged by the CMA.

The common thread in the CMA’s two pieces of guidance is that the CMA’s remit is also to temper extremes of competition, to promote a “regulated” market and not an ideologically pure “free” market – by on the one hand, limiting the scope for exploitation in a seller’s market, and, on the other hand, not prohibiting reasonable collaboration, where, in each case, there is a benefit for consumers.

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