OFT publishes guidance on application of competition law to public bodies
The Office of Fair Trading has published guidance for public bodies on when their activities will be subject to UK and EU competition law.
The OFT said a range of developments had reinforced the need for public bodies to be aware of their existing and ongoing obligations under competition law when carrying out their functions.
These include:
- Markets for public services continuing to be opened up to the private and voluntary sectors
- Public bodies increasingly seeking to generate revenues by utilising assets or spare capacity in markets beyond their core public functions.
“Public bodies must comply with the UK and EU competition law prohibitions on anti-competitive agreements and abuse of a dominant position if and when they engage in 'economic activity', as opposed to carrying out non-economic, wholly social functions or exercising public powers,” the OFT said.
The ‘high level’ guide to the application of the Competition Act 1998 can be downloaded here. It sets out the circumstances in which public sector bodies’ activities will be 'economic activities' subject to UK or EU competition law.
The OFT said that, in broad terms, a public body should ask itself the following questions for each of its activities:
- “Am I offering or supplying a good or service, as opposed to, for example, exercising a public power?
- If so, is that offer or supply of a ‘commercial’ – rather than an exclusively ‘social’ – nature?”
The guidance stresses that in making this assessment, it is the nature of the particular activity being conducted that is key, not the legal form, or public or private sector status, of the body that carries it out.
The publication adds: “Where UK or EU competition law does apply to the activity of a public body, it is not necessarily the case that that body’s existing conduct infringes such competition law or that it will have to amend its conduct. Indeed, compliance with competition law should not materially impede public bodies’ efficient exercise of their functions.
“However, non-compliance with competition law can have serious consequences. These include the unenforceability of the relevant agreement or decision and an adverse reputational impact, as well as the possibility of financial penalties and/or claims for damages.”
The OFT warned that breaches of competition law could also have consequences for the individuals involved in some cases.
The watchdog said its guidance set out factors to which public bodies should have regard, but was not intended to be a comprehensive guide to the legal and economic frameworks for applying competition law to agreements and conduct.
Public bodies seeking a more definitive indication as to whether any of their specific activities are subject to UK or EU competition law should seek legal advice in the first instance, it suggested.
The OFT also outlined the possibility – “in cases involving genuine uncertainty” – of approaching it for the provision of a non-binding ‘short-form opinion’ on the application of the 1998 Act to a specific collaborative activity.
Sonya Branch, Senior Director for Services, Infrastructure and Public Markets at the OFT, said: “The issues that our guidance covers are increasingly relevant and important as public services provision is being opened up further to the private and voluntary sectors.
“The OFT is committed to supporting compliance with the law and, more generally, to ensuring that a level playing field exists for all operators in these markets.”
Publication of the guidance came as the OFT announced that it had been provided with voluntary assurances from members of a group of school suppliers in the public sector regarding the way they compete for business from schools in England.
The watchdog had approached the Pro5 group of public sector buying organisations (PSBOs) after receiving a complaint raising possible competition concerns about their marketing to schools. PSBOs are combined purchasing bodies formed by some local authorities to provide schools with goods and services.
The members of the Pro5 group are the Central Buying Consortium, Eastern Shires Purchasing Organisation, the North East Procurement Organisation, West Mercia Supplies, and the Yorkshire Purchasing Organisation.
According to the OFT, the assurances provided “recognise that, where they are given discretion under relevant legislation and regulations, schools remain free to purchase goods and services from any supplier that they choose, and each PSBO remains free to decide independently how, where and at what price to market goods and services to schools and other customers”.
The OFT said it had made no finding of an infringement of competition law by Pro5 members, and had closed its preliminary inquiry in response to the PSBOs’ voluntary assurances.
Philip Hoult
