Fair Trading Among School Suppliers Ensured

Jack Humphrey, Regulatory journalist
December 14, 2011 /

Members of a group of school suppliers in the public sector have given voluntary assurances to the Office of Fair Trading (OFT) regarding the way they compete for business from schools in England.

The assurances coincide with new guidance from the OFT to help public sector bodies understand when and how competition law applies to them.

Historically, schools procured the goods and services that they required from their local authority. However, since 1988, they have been able to purchase certain goods and services from any supplier, whether in the public or private sector. Some local authorities have formed combined purchasing bodies called PSBOs, in order to provide schools with better value goods and services.

The OFT approached members of the Pro5 group of Public Sector Buying Organisations earlier this year following a complaint which highlighted possible competition concerns about the way in which they marketed their goods and services to schools. PSBOs are combined purchasing bodies formed by some local authorities in order to provide schools with better value goods and services.

Each member of the Pro5 group has since worked with the OFT to address its competition concerns. In particular, the assurances provided by the PSBOs 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.

Five PSBOs formed the Pro5 group primarily to collaborate with regard to their procurement activity, in order to achieve savings through their combined purchasing power. The members of the Pro5 group are the Central Buying Consortium (CBC); Eastern Shires Purchasing Organisation (ESPO); the North East Procurement Organisation (NEPO); West Mercia Supplies (WMS) and; the Yorkshire Purchasing Organisation (YPO). For the CBC assurances were received from Hampshire County Supplies, Hertfordshire Business Services, and Kent County Supplies.

The OFT’s new guide on the application of competition law to public bodies highlights that competition laws apply to publicly owned bodies whenever they engage in ‘economic activity’. In broad terms, a public body is urged to ask itself whether it is 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 guide stated.

Sonya Branch, The OFT’s Senior Director for Services, Infrastructure and Public Markets, said: “We welcome these voluntary assurances from school suppliers, which we believe will bring greater choice and improved price competition for their public sector customers. Through constructive dialogue with them, we have also been able to reach a rapid resolution to our concerns.

“Our new guidance explains how competition law applies to public bodies engaged in economic activity. 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.”

The OFT has made no finding of an infringement of competition law by members of the Pro5 group, but has closed its preliminary inquiry in response to the PSBOs voluntary assurances without opening a formal investigation.

The Competition Act 1998 prohibits agreements, practices and conduct that may have a damaging effect on competition in the UK. The Chapter I prohibition covers anti-competitive agreements and concerted practices that have the object or effect of preventing, restricting or distorting competition in the UK (or a part of the UK).

Public bodies are subject to the Competition Act when engaged in a commercial supply of goods or services, which is likely to be the case where that supply is in competition with private sector providers.

 

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