Competition watchdog to focus on high-profile abuse cases

The Office of Fair Trading is planning a dramatic reduction in the number of cases it investigates to allow more firepower to be trained on high-profile abuses of competition law that affect the most people.

One result of the sharp change in tack will be that some of the 25 investigations currently under way will be dropped. The competition regulator believes that is too many for its finite resources to handle and intends to cut the number to between 15 and 20 although it declined to disclose which of its current cases it will choose to drop.

New criteria to be used to prioritise competition cases in future will be announced this morning by the OFT. This will help it to concentrate on "high-impact" cases.

The OFT will in future rank competition investigations against six factors to identify which to take up and which to drop. Initially, it will consider whether it is best placed to tackle the problem. Then it will estimate the direct benefit to consumers from intervention, and the likely benefit to them from deterring others from similar anti-competitive activity.

Aggravating or mitigating factors, such as whether the industry or companies concerned are repeat offenders and how blatant the infringement is, will be taken into account.

Then the case will be assessed against the OFT's overall policy priorities, and the resources needed to proceed. Finally, a judgement will be made on the likelihood of success.

Vincent Smith, the OFT's senior director of competition, said yesterday: "We are trying to look at our case load across the piece and see if the ones we have are the ones we want. We will be looking at our case roster at the moment and measuring them against these criteria."

Publication of the new guidelines follows criticisms of the OFT last year by the National Audit Office over the way it selects cases for investigation. The NAO looked into the matter after complaints from business about a perceived lack of transparency at the competition regulator.

"We felt we needed to be open," Mr Smith said. "Some people were telling us that they did not know why we were doing what we were doing. This is our attempt to answer that."

The OFT has a budget of £11.4m with which it expects to investigate between 25 and 40 cases this year. Some take as long as three years. About five decisions are published per annum.

Examples of "high-impact" investigations that would meet the new criteria include the ongoing probe into alleged price-fixing by British Airways and last year's inquiry into price-fixing at fee-paying independent schools.

In November 2005, the OFT fined 50 top schools, including Rugby, Westminster, Eton and Cheltenham College £10,000 after concluding they had exchanged detailed information about the fees they intended to charge and were, therefore, in breach of competition law.

Other investigations under way include one into price-fixing allegations against six Scottish dairies and alleged anti-competitive behaviour by the London Metal Exchange.

The new criteria affect only the OFT's work relating to cartels and other anti-competitive behaviour. The OFT will continue to scrutinise all major mergers and acquisitions as before.

Its annual plan for 2006 identified the areas that the competition watchdog thought a priority. Chief among them was consumer credit. The OFT said it would develop new guidance on the fitness of those providing credit, and a risk-based licensing model.

Its other two major priorities were competition in healthcare provision, and cartels in construction and housing.

The regulator also looks into mass-marketed scams and interaction between government and markets.

The OFT can itself initiate investigations after identifying potential problems in markets, or after it receives a complaint, or after participants in a cartel blow the whistle in exchange for leniency.