Students are paying the price for supplier deals on campus

Jim Dickinson considers the regulatory and competition law issues surrounding graduation gowns and washing clothes on campus

Jim is an Associate Editor at Wonkhe

As it’s that time of year around the sector, I thought I ought to round up my top ten rules for not spoiling students’ graduations.

Until this year I naively thought that most of these were so obvious as to not require writing down – but as ever, especially post-pandemic, it turns out that every day’s a school day:

  1. Read everyone’s name out. Printing their name on a mug after attending an open day in 2018 but not saying it out loud at graduation makes students and their families think you only care about their money.
  2. When you read the names out, take steps to pronounce them correctly. Not doing so means you sound even less thoughtless about the international students bankrolling the place and reinforces the idea that higher education is really quite racist.
  3. Make sure the poorest students can afford to come. Graduation might not be a chapter in the Access and Participation Plan – but it probably should be if you think about it.
  4. Let the students’ union have a speech. Some of the most memorable, authentic and empathetic contributions I’ve seen this year have been from students. And their jokes are better.
  5. Ensure the family (and or friends/loved ones) can afford a hotel room. Booking a stadium might be helpful from a diary and mass processing point of view, but not if staying over is costing £350 a room. This isn’t the first time a university has invited a large number of people to the local area without considering accommodation capacity now is it?
  6. Don’t be over-precious about who is allowed to formally graduate at a particular ceremony. It’s a bit of pomp and circumstance. You were playing fast and loose with academic regs during the pandemic, as if now is the time to get all jobsworth over awards.
  7. Triple check your arrangements for disabled students. They already think you’ve let them down in multiple ways. Don’t make it even worse on the way out.
  8. Do that again, but this time from the point of view of disabled guests. Can you imagine how awful it is to travel 300 miles to see your niece graduate only to not be able to access a disabled parking space because you failed to anticipate that problem (“anticipatory” is the character of the duty required in the Equality Act)
  9. Let people wear the get up outside of your sweaty, talcum powdered sportspark (a niche one that which I accept is both aimed at a particular university and only there to make the ten up.)
  10. Let people use a different robe supplier – because the (hidden) commission that you’re trousering from the robing form you’re using is egregious enough without pretending that if someone orders from a rival the academic sky will fall in.

I mention that last one because one of my favourite “Wizard of Oz” moments with new student officers is to ask them to guess the percentage of market leader Ede and Ravenscroft’s turnover that is returned to universities that they work with in commission rather than passed on as a discount. The right answer is not one that they are especially impressed by.

It’s a market where, at each university, one player dominates – where that competition is specifically restricted such that the message from the university is that you shouldn’t (or in some cases absolutely can’t) use an alternative, and one where the reward for that restriction of price and quality competition is maximised income to the university.

Let me tell you where I am

As such, of the things I’ve been meaning to check up on is the progress of Churchill Gowns Limited and Student Gowns Limited v Ede & Ravenscroft Limited and Others in the Competition Appeal Tribunal – a specialist judicial body with cross-disciplinary expertise in law, economics, business and accountancy which hears and decides cases involving competition or economic regulatory issues.

A few years back you might remember that a firm called Churchill Gowns turned up on Dragon’s Den, causing Deborah Meaden to utter the famous line:

£279 to students for gowns is taking the mickey”

Particularly, Deborah, if you’re graduating from a Mickey Mouse course.

Since taking Meaden’s money, Churchill have found it difficult to get a proper foothold in the market, coming across a whole bunch of quasi or actual exclusivity arrangements that they argue are anti-competitive and bad for consumers. It’s a process that has rumbled on for a whole and culminated in a claim under Section 47A of the Competition Act 1998 against market leaders Ede and Ravenscroft.

The basic argument was that by entering into exclusivity agreements and arrangements with a number of UK universities for the supply of academic dress to their students, E&R had procured the status of exclusive or near exclusive supplier of academic dress to those universities’ students – and Churchill have been unable meaningfully to enter the market(s) as a result of some of those practices. They alleged that:

  • Exclusivity agreements impose obligations on universities to instruct, direct or recommend their students to hire academic dress from E&R;
  • Some have warned students against using academic dress supplied by competitors; and/or threaten students with sanctions if they do so;
  • On site, E&R staff check that academic dress being worn by students is that which E&R have supplied and graduands have been told on a number of occasions that they were not permitted to graduate in the academic dress that was not supplied by E&R;
  • E&R would only supply academic dress as a bundle.

Obviously the central arguments concern a lack of competition, anti-competitive practices and abuse of a dominant position – resulting in detriment to the end student user in terms principally of price but also innovation and quality insofar as Churchill promote that their gowns are made from recycled bottles, a claim partly contested by E&R.

Defining the market and choosing the customer

There’s a lot of fascinating complexity to the case in general and the judgement specifically, but there’s a couple of central issues at stake. The first is about how the Competition and Markets Authority, or in this case the courts, works out the scope of the market being assessed – and crucially whether we consider the market to be “higher education gowning” or “a specific university’s arrangements for gowning”.

Clearly where you have suppliers competing to have access to near or actual exclusive supply to students of a paid for product, if you consider the market to be “the whole sector”, you can see how E&R argued that they compete along with others to get the gig. But if you view the “market” as a single university’s bespoke arrangements for graduation dress, you can see how appointing a single supplier and then telling students that they must use that supplier (or at least using phrases like “the approved supplier”) might feel like it’s not very competitive.

Related to that issue is who the customer is. In many ways the contracts between E&R and universities are standard(ish) Business to Business (B2B) contracts, and where the “customer” is the university you can see how competition between suppliers might make the deal agreed more attractive – either in kick back commission terms, or on quality grounds, or both. But if you viewed the customer as the student, you might end up more suspect – especially if the deals being signed stopped a student shopping around and caused a maximisation of the price to top up the university’s graduation budget.

That’s partly what makes the judgement so interesting. The case is evaluated very much from a “whole sector”, B2B perspective – and so it’s little surprise that Churchill have not emerged victorious. In other words, the tribunal mainly talked about gowning firms being able to compete with eachoher to become the supplier to university customers – with almost no material on the impact on students.

But as the judgement notes, there is…

…the potential for a misalignment of economic incentives where one party (the university) is able to define a hire price which incorporates a revenue stream from which it will derive benefit, but which another party (the graduand) is obliged to pay. This divergence between the beneficiary and the funder could raise legitimate public policy issues of the kind that might be addressed in the context of a market investigation which focused on the conduct of universities in choosing to offer official supplier agreements.”

Playing the circuit

We’ve been here before. Another familiar name on post-it note exercises about student moans that I run over the summer is “Circuit Laundry”, the dominant player in vend-share laundry machines attached to halls. This is another scenario where students are astonished to learn that commission makes up a substantial chunk of the price they’re paying to wash their clothes – and another one where the regulatory regime seems unable to consider the issues from the student perspective. In this CMA report on the acquisition by JLA New Equityco Limited (the owners of Circuit) of Washstation Limited, the regulator clearly thinks the customer is the university – with the underpinning customer research making the same call:

Managed laundry providers offer rentals or sales agreements to customers who require a bulk laundry service on site. This could include customers from sectors such as care homes, schools, or hotels, but the focus of this research is on Higher Education (universities, colleges and student accommodation providers).

I’m not 100% sure whether the problem here is the actual legislation or the judgement of the regulator and/or the courts, but either way this strikes me as a problem.

We have legislation, designed to protect consumers, that is supposed to ensure that competition exists within markets as a way of driving up quality and driving down costs. But it looks like the regime isn’t working where we have relationships of the sort exemplified by gowning and laundry firms. In fact here the cost to the actual consumer is artificially jacked up via the exclusivity of the supply agreement – and unless you’re sleeping at night reassuring yourself that at least the profits go back into education, the truth may well be about exploiting students rather serving them.

Are there other deals like these on campus? We can’t count supplier arrangements where there’s no direct cost to the end user – in those cases (your university’s travel firm, for example) the competition incentives are straightforward as the end user doesn’t pay directly. Most external university catering deals would likely count particularly given the slow erosion of competition from SU outlets. Vending might also count if through a different firm. Deals with accommodation providers over “guaranteed first year accommodation” may well be in my basket. Maybe childcare. In none of them is the regulation working as it should – it might be working for the university, but not the student.

Does how “porous” a campus is matter? Probably. Notwithstanding the “you must using ribbing form X or Y” stipulations, a university gym might be subject to healthy competitive forces if in a city centre, as may catering or printing – but if the campus is 3 miles from the city centre, even buses become a monopoly. Regulators need to think about that.

Are there other markets outside of HE like this? I’m not counting the caterers on a train or even the vending machines at a Butlins – both involve exclusivity but you can holiday and travel in different ways. I’m not even counting the suppliers of those TVs over hospital beds on the basis that you probably won’t be there for long – but maybe I should given how outrageously priced they seem to be.

Perhaps the closest analogy is school uniform, where the market was the subject of regulatory intervention via an open letter from the CMA in 2015, identifying concerns that exclusive agreements between schools and school uniform suppliers had had “tangible effects” on the cost of school uniforms for parents – eventually given the inadequacy of the existing legislative and regulatory landscape, we end up with dedicated statutory guidance from the Secretary of State for Education:

Schools should ensure that their uniform supplier arrangements give the highest priority to cost and value for money (including the quality and durability of the garment).

Single supplier contracts should be avoided unless regular tendering competitions are run where more than one supplier can compete for the contract and where the best value for money is secured. This contract should be retendered at least every 5 years.

Legislators and regulators might usually assume that bodies like universities would prioritise student welfare and costs when making deals with those that end up with a right to dominate chargeable supplies on campus. And it’s true that profits get re-invested into the student experience. But the danger is that a university becomes addicted to the revenue streams, and works to protect them at the expense of the interests of the end-consumer.

Are we the bad guys? Maybe. In a cost of living crisis, there is a legitimate debate about how the pain should be shared between a student and a university. But there’s a better one about the way in which what we might have once thought of as benign commercial deals actually serving to harm the student interest. If nothing else, a CMA market investigation which focuses on the conduct of universities in choosing to offer official supplier agreements is probably long overdue.

One response to “Students are paying the price for supplier deals on campus

  1. Fascinating analysis of this case, and I veer towards hoping the little guy takes down the big nasty monopoly (if true, the thing about E&R reps checking officiality of robes is quite sinister).. But the impact on other areas of supply is considerable.

    Can students graduate if they choose not to wear casual clothes instead of official robes? Presumably this is the way to avoid the hefty hire charge.
    Do universities specify the cost of hiring robes when setting out the tables of fees for students being made offers? If the answer is yes to both then presumably the uni is in the clear.

    Are universities transparent about how much they make in commissions? 8k students at £50 a pop is nearly £1/2m.

    I’ve just read an example of a university statement (Birmingham) about official robe hire. What a load of absolute drivel. It shames the university. What about, you know, just not having robes?

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