Several sectors have tried to address how competition might provide better quality for the customer. The basic hope is that by ‘opening up the market’ to more providers, the private market is more intense, the choice is wider, and customers receive a ‘good deal’. However, there are very few markets in the U.K. where this can be said to have worked. We can all think of the big five in supermarkets, including Tesco, Sainsbury’s, Asda, Safeway and Morrison’s. Earlier this year, 2,000 dairy farmers attended a rally in Westminster to bring attention to the situation. The following weekend they picketed branches of Asda, Morrisons and the Co-operative, which pay less than Tesco, Sainsbury’s, Marks & Spencer and Waitrose. More pickets are expected this weekend, powered by movements such as Farmers for Action and #sosdairy, which has been trending on Twitter. As little as far back as 2011, the Office of Fair Trading (OFT) said it saw clear problems with competitiveness in the audit market, meaning referral to the Competition Commission is almost certain. The OFT said the dominance of by so few firms – PricewaterhouseCoopers, Ernst & Young, Deloitte and KPMG – made it hard for rivals to compete and didn’t allow for companies to switch auditors, creating what critics have described as a dangerous dependence on too few firms.
Today, David Cameron’s pledge to ensure that gas and electricity consumers get the lowest tariff was thrown into confusion today as the Government staged a partial retreat. Labour accused the Prime Minister of presiding over another “omnishambles” after John Hayes, the Energy Minister, stopped short of repeating Mr Cameron’s promise on Wednesday of legislation to ensure “energy companies have to give the lowest tariff to their customers.” Last year, John Robertson, a Glasgow MP and member of the Energy Commons Select Committee, called on the regulator to use its toughest penalty – fining suppliers up to 10pc of their turnover – as dual-fuel bills have risen to a record £1,300 per year. In a Commons motion, he claims that recent energy price rises by the “Big Six” are “clear acts of anti-competitive behaviour” . Across these companies – British Gas, npower, E.ON, EDF, SSE and Scottish Power, the maximum fine for their supply businesses could be around £4bn in total, based on last year’s revenues. Mr Robertson wants to see any penalties imposed on the companies put in a “consolidated fund via the Treasury” and dispersed to consumers. He further added: “These companies are pinching money out of the pockets of the poorest people in this country at a time when snow is about to fall and when wholesale energy prices are low. Yet the Government and Ofgem are acting like there is nothing they can do”. The executive director of Which?, Richard Lloyd, has recently written a strongly worded letter to David Cameron: “It’s time to face facts: the energy market is broken. The sector is dominated by a handful of big and powerful players who are seemingly unaffected by the normal competitive pressure of price and customer service.” Reacting to Cameron’s announcement yesterday, Lloyd said: “Legislating so energy companies have to give the lowest tariff to their customers is a big statement from the prime minister and acknowledges that competition in the energy retail market has failed. This is a big moment for consumers, but we must now see these words turned into action and see the detail from the government in the energy bill.”
An obvious solution to increasing the scope for competition is to lower the barriers-to-entry for new entrants to the market. Interestingly, in the new legal services market of England, reported today, the Solicitors Regulation Authority has made a conscious decision not to place too many conditions on new alternative business structures (ABSs), its leader has revealed. Chief executive Antony Townsend said the terms of the licence had deliberately been kept simple for the 33 entities that have been granted ABS status by the regulator so far. Speaking today at the Westminster Legal Policy Forum, Townsend said the aim was not to tie the SRA or applicants ‘up in knots’ and instead to monitor their behaviour after they had become an ABS. ‘We’re supervising appropriately and managing risk appropriately rather than trying to put in place elaborate licensing conditions,’ according to Townsend. The new NHS, which has allowed greater scope for private provision, faces a similar task. In a pamphlet for the King’s Fund by Loraine Hawkins from July 2011, entitled “Can competition and integration co-exist in a reformed NHS?”, it is conceded that much of the public debate about the Health and Social Care Act 2012 has focused on proposals to give Monitor, the sector regulator for the NHS, a duty to promote competition (where appropriate) and to apply national and EU competition law to foundation trusts. The emphasis in Monitor’s competition role will instead focus on prohibiting behaviour that prevents, restricts or distorts competition contrary to the interests of NHS patients. This revised formulation of Monitor’s duties will mirror the language of competition law, instead of using more activist pro-competition language modelled on legislation governing economic regulation of the privatised utilities. However, this is potentially worrying, if the blueprint for regulation of the NHS is a sector where there have been massive problems thus far.
For competition to work in the NHS, it will be necessary likewise to ensure that the barriers-to-entry for new entrants to the healthcare market are not onerous so as to prevent entry, but high enough to ensure quality of healthcare and trust of the public in the reputation in the NHS. “Any Qualified Provider” is a procurement model which clinical commissioning groups could use to develop a register of providers accredited to deliver a range of specified services within a community setting. The model aims to reduce bureaucracy and barriers to entry for potential providers. However, thus far, the NHS market could face the same problems in supermarkets and accounting, with a dominance on a few firms which have a legal obligation to maximise dividend for the shareholder. For example, it was reported only this month that two major players in the private healthcare market, Virgin and Serco, have considerable made strides into the NHS as business gurus claim the private sector is set to cash in on community services. All of this is deeply worrying, as the track history in disasters of privatisation is now getting quite substantial. Other examples are wide-ranging, described here, including railways, hospital cleaning, bus services, prisons, and social care.
