February 2000

CONSULTATION ON REPORTING SIDE PROCEDURES AND PRACTICES

Results and Implementation

Introduction

1. During 1999 the Competition Commission undertook two consultation exercises in tandem designed to elicit opinions on its reporting side procedures and practices, and in particular on various measures introduced on an experimental basis aimed at incorporating more openness into those procedures.

2. The two exercises were:

3. This paper describes the responses to these two exercises, the Commission’s evaluation of those responses and the decisions reached on the procedural changes that were proposed. Those that have been accepted are reflected in the Chairman’s Guidance to Groups made under paragraph 19(3) of Schedule 7 of the Competition Act 1998 which was issued on 7 February 2000. Under paragraph 19 of that Schedule the Group responsible for an investigation may, subject to any special or general directions of the Secretary of State, determine its own procedure. However the Group must have regard to any guidance issued by the Chairman.

The consultation paper

4. The proposals outlined in the consultation paper on which comments were sought were that the Commission should:

Responses

5. In all 22 direct responses to the consultation paper were received, and a full list of those responding is at Annex 1. Apart from SG Hambros, all respondents expressed themselves as generally in favour of greater transparency. However, a significant number of respondents particularly among legal practitioners, companies and industry representative bodies had major reservations about the changes proposed. These are discussed at paragraphs 6 to 13 below.

Publication of outline timetables

6. This commanded wide support, with no respondents opposed. Many also called for progress reports and/or the updating of timetables during an inquiry.

Separation of confidential and non-confidential evidence

7. This found some support but several respondents opposed the idea because of the practical difficulties of separating evidence in this way and the extra burden it would impose on parties.

Publication of non-confidential evidence

8. On balance there was support for this change, but reservations were also expressed primarily that the inevitable incompleteness of non-confidential information could lend itself to media misrepresentation and that publication of such information could prejudice a merger proposal. It was always the intention that providing copies of evidence should be entirely at the discretion of the parties concerned and that no inference should be drawn from any reluctance to release information.

Publish names of persons submitting evidence unless anonymity requested

9. This was generally supported although some reservations were expressed concerning the possible additional workload for the parties concerned in dealing with subsequent inquiries.

Publication of issues statement and options for remedying possible detriments

10. These proposals was supported by a majority of respondents, although strongly opposed by a number of respondents concerned about protecting the interests of main parties and misrepresentation by the media. It was suggested that issues statements should not be published in all cases, and that the publication of hypothetical remedies came too early in the process and could be damaging. The responses suggested that the parties themselves and their advisers would welcome more focussed remedies statements provided they were private documents. It was the publication of such statements and the attendant publicity which gave rise to concerns.

Joint and open hearings

11. Open hearings, ie meetings with main and/or third parties which are open to the public were opposed by the majority of respondents, though there was a firm body of support for them. Those opposing them suggested that no advantage had been demonstrated, that interactive debate was inappropriate to the Commission’s processes and that the interests of main parties in particular could be adversely affected or put at risk with the knock on consequence of trial by media and media misrepresentation. It was also suggested that proper debate was not possible without reference to confidential material. Some critics of open hearings suggested that third parties could be deterred from participating. Variants suggested by some respondents included hearings before selected audiences and hearings involving main parties and consumer interests only. Those supporting open hearings generally accepted that they should be used selectively and with due regard to the cost involved.

12. There was more support for joint hearings, ie meetings attended by more than one party, particularly in regulatory and other complex inquiries. Those supporting joint hearings were generally in favour of consumer interests also being in attendance.

Exchange of written evidence and transcripts

13. The exchange of written evidence and transcripts in regulatory investigations was generally welcomed, some respondents suggesting that this procedure would be helpful in all cases. One respondent suggested that the exchange of evidence between regulator and company should be conditional on the agreement of the parties. Another respondent called for the written evidence of the regulator and regulated company to be sent to the statutory consumer body concerned as well.

The OLR exercise

14. This testing of the opinions of people with a direct interest in the work of the Commission and those whose views were considered significant or influential, revealed very strong support for the proposition that the Commission should make its procedures more transparent in order to heighten accountability and improve the decision making process. The principle of increased openness and transparency was supported by an overwhelming majority of those with a direct interest in the Commission’s work (89 per cent).

15. Respondents were also asked their views on the various procedural changes suggested in the Commission’s consultation document. There was strong support from those with a direct interest in the Commission’s work for each of these proposals as follows:

16. The very strong support for the publication of outline tables (92 per cent) was buttressed by 62 per cent support for the proposition that there should be regular updates about the progress of inquiries.

17. 73 per cent supported the publication of issues statements in all cases. Of the 34 per cent who had seen an issues letter or statement, 75 per cent said they had found it useful in deciding whether or not to make representations. There was general support for more dialogue between the Commission and the parties involved in inquiries. 59 per cent thought companies being investigated should have more information about the Commission’s principal concerns.

18. In addition to testing opinion on the publication of options for remedying possible detriments, where 80 per cent were in favour, OLR also explored the level of support for the issue of provisional conclusions. There was 83 per cent support for these to be notified to the main parties, and of those in favour, 56 per cent thought that they should be published. Significantly however the level of support for any notification of provisional conclusions fell by 60 per cent if this meant extending the length of an inquiry by one month.

19. The vast majority of those supporting joint hearings (80 per cent) thought they should be held on a case by case basis, and 60 per cent thought that consumer bodies should be invited. Support for joint hearings fell away when this meant extending the length of an inquiry, but even so there was still 60 per cent support for joint hearings if inquiries were extended by one month as a result. Similarly the support for open hearings fell away in recognition of an extended inquiry period, but 56 per cent still supported an open hearing if it meant an inquiry being extended by one month.

Conclusions

20. In deciding whether to include provisions on the various proposals in his Guidance, the Chairman also took account of the views of members. Decisions on the individual proposals are described at paragraphs 21 to 30 below.

21. Publication of timetables. This is accepted as a good discipline for the Commission which will focus attention on project management. The Guidance recommends that a timetable for the conduct of investigations should be published on the Commission’s website, updated as necessary during an inquiry.

22. Request parties to separate the confidential and non-confidential components of their written evidence. It is accepted that this proposal would not assist the conduct of inquiries, and could create difficulties and additional work for the parties. It has therefore been decided not to proceed with it.

23. Publication of non-confidential evidence. In the light of the reservations expressed to this proposal, and bearing in mind that this must be a matter for the parties to decide, the Guidance recommends that Groups should encourage parties to publish a summary of their main arguments on the questions in the terms of reference. Whether or not they do so, and the timing and content of any such statements, will be entirely at the discretion of the party concerned. No inference will be drawn by the Commission from any decision by a party to release or not release information.

24. Publication of names of persons submitting evidence unless anonymity is requested. The Guidance recommends that any party providing evidence should be asked whether it is willing to have its name and a contact telephone number included on a list published on the Commission’s website. The list will therefore exclude all those who request anonymity. The form in which a party’s name will appear and the inclusion or not of additional information such as address, contact name, telephone, or fax number and email address will be entirely a matter for the party concerned. The provision of further information by parties in response to any inquiries will be a matter for them.

25. Publication of issues statements. The points made against the publication of issues statements have been carefully considered but on balance there appear in general to be clear gains to inquiries from their publication, particularly in stimulating interest in inquiries and serving to reassure the public that all relevant issues have been identified. The Guidance therefore recommends that the Group should normally publish a statement of the matters which the Group is considering, identifying any which are of particular concern. The Chairman sees the problem of any media misrepresentation not as a constraint against publicising the issues but as something that needs to be tackled separately. To this end the Guidance recommends that in publishing an issues statement the Group should make clear the stage the investigation is at, so as to minimise the risk of misunderstanding of the nature and purpose of the statement. The Guidance also recommends that the main parties concerned should receive a copy of the issues statement shortly in advance of its publication.

26. Publication of options for remedying possible detriments. The Chairman has carefully weighed the arguments for and against publication, and concluded that the decision on publication of a statement of the remedies which a group might recommend if it were to reach an adverse conclusion should be taken on a case by case basis. The Guidance therefore recommends that in deciding whether to publish a remedies statement the Group should have regard to the need to obtain information or evidence on the practicality and effects of any proposal.

27. Despite the level of support identified by OLR for a provisional conclusions letter, whether or not it was published, the Chairman is not proposing to include his in this Guidance. He recognises that the parties themselves and their advisers would welcome such letters provided they were private documents, but publishing provisional conclusions, or even producing them for main parties alone, would lengthen timescales considerably.

28. Joint and open meetings. In the light of the consultation exercise it is clear that some misunderstanding can arise from the use of the terms ‘open hearing’ and ‘joint hearing’. Accordingly the Chairman’s Guidance seeks to remove any possibility of confusion by the use of the terms ‘open meeting’ and ‘joint meeting’. The term ‘open meeting’ is used to describe any meeting between the Group and any party or parties that is open to the public. "Joint meeting" describes a meeting between the Group and more than one party; such a meeting may or may not be open to the public.

29. Joint meetings. Both consultation exercises revealed a strong measure of support for joint meetings held in addition to the normal hearings with the parties, used selectively on a case by case basis. This approach is reflected in the Chairman’s Guidance to members. It will be for the Group undertaking a particular inquiry to decide whether a joint meeting should be held. The Chairman’s Guidance sets down various factors which Groups should have regard to in coming to a decision, in essence the benefit to the investigation weighed against such factors as the time available, the number of parties involved and the cost and additional burdens imposed both on the parties and on the Commission’s own members and staff.

30. Open meetings. Weighing both the strong support for open meetings revealed by the OLR exercise and the counter arguments from respondents to its consultation paper, the Chairman has concluded that there are likely to be some investigations where it would be of value to hold such meetings in addition to the normal hearings with the parties. As with joint meetings, the Group undertaking a particular inquiry will decide whether an open hearing should be held in the light of all the circumstances. The factors that a Group is expected to take into account in reaching its decision are set out in the Chairman’s Guidance. These are broadly similar to those for joint meetings (see paragraph 29 above).

31. Exchange of written evidence and transcripts in regulatory investigations. This proposal which serves to extend to Commission investigations the conventions normally adopted by regulators and regulated companies during their discussions on proposed licence modifications, is reflected in the Chairman’s Guidance. It will be open to any regulator or regulated company to propose that certain material should not be made available to the other, but there will need to be very special reasons for proposing such withholding and it will be very exceptional for the Commission to agree to such a course. The Guidance also asks Groups to pay particular regard to whether statutory consumer groups have received enough information to enable them to comment effectively on the issues under consideration.

Summary

32. In summary, the various changes proposed in the Commission’s consultation paper (see paragraph 4 above) are being reflected in the Chairman’s Guidance apart from those relating to the separation and publication of non-confidential information. The changes in procedure will be monitored closely and to this end any further comments on them in the light of experience will be welcomed.

ANNEX 1

RESPONSES TO CONSULTATION PAPER

In all 22 direct responses were received. These were from:

OFT and Regulators 3

OFT

OFWAT

CAA.

Legal practitioners 6

Baker & McKenzie

Allen and Overy

Slaughter and May

Herbert Smith

Joint Bar/Law Society Working Party on Competition Law

Denton Hall

CBI and trade bodies 5

CBI

Electricity Association

British Retail Consortium

The Newspaper Society

The Society of Motor Manufacturers and Traders Ltd

Companies 4

Go-Ahead Group

BAT

British Gas

South Western Electricity

Finance and banking, etc 1

SG Hambros

Consumer bodies 1

OFWAT National Consumer Council

Trade unions 1

NATFHE

Other 1

Hadfield Associates

Last revised 02/00