Sassoon Saleh, FCA MIoD About Us

Storecards – completed in March 2006 after nearly 2 years - some remedies were specified to remedy findings of anti-competitive features and impacts on customers.

Liquified Petroleum Gas – this 2 year investigation ended in July 2006, with remedies ordered in 2007. It involved major suppliers, such as Calor Gas, Flogas, BP and Shell. The CC decided to impose orders which were not finalised for all aspects of this investigation until early 2009.

Classified Directories – this finished in December 2006. It dealt with activities by suppliers such as Yell (Yellow pages), Thomson (Thomson Local Directories), and BT. The CC found Yell had market power and competition was not satisfactory. The CC continued a price control on Yell’s charges, and introduced other measures to ensure Yell’s market power is constrained. The CC hopes the internet will impact on this market, and recommended the OFT to review the remedies after 3 years.

Home Credit – this finished in December 2006. It effected main lenders such as Provident Financial, Cattles, S&U plc which lend money to individuals – the CC found anti-competitive behaviour and imposed remedies from 2007 to open the market to greater competition, and enable customers to get more choice and better prices.

Northern Ireland personal banking market – the CC has suggested anti-competitive behaviour in its provisional findings document. This case required a remedies stage, and orders to improve competition were issued in February 2008.

Competition & business specialist

You can contact Sassoon (Sass)
by phoning on
020-8202-9796 (London), or

email S.Saleh@btinternet.com

Regulation, market investigations & Appeals :-

Click on links below for more information:

The UK grocery trade – the CC started this investigation in April 2006, following referral from the OFT. It effects major supermarkets, such as Tesco, Sainsburys, Asda, Morrisons, as well as specialist food retailers such as Marks & Spencer, Waitrose, etc.   The CC issued its final report in April 2008 with remedies as follows:
• a recommendation for the inclusion of a ‘competition test’ in planning decisions
     on larger grocery stores;
• action to prevent land agreements which can restrict entry by competitors;
• the creation of a new strengthened and extended Groceries Supply Code of
     Practice; and
• a recommendation to establish an independent Ombudsman to oversee and
     enforce the Code.

The CC expects to implement remedies by 2009. During 2009, Tesco won an appeal for the competition test to be reconsidered - if you want to know more, please contact me. The CC reconsidered its decision and has reimposed the competition test. It recommended that the Department of Communities and Local Government and the devolved administrations take such steps as are necessary to implement this remedy.

Payment Protection Insurance (PPI) – this finished in January 2009 – the CC started this investigation in February 2007, following referral from the OFT. It effects major insurance suppliers of PPI, and lenders that cross-sell these products, and sellers of retail PPI. The CC published its provisional findings in June 2008, and identified potential excess profits as some £1.4 billion per annum. Its work pointed to the need for remedies to improve competition in this market, and ensure customers benefit from PPI.

The CC plans to implement remedy Orders in 2010/11, for example:
- to break the point of sales (POS) advantage of selling PPI with the underlying
credit product (ie imposing a POS prohibition), or
- measures to increase customer knowledge of alternative PPI products, and the
opportunity to switch PPI provider, and
- baning the sale of single premium PPI policies, which were judged to be bad value
for money.

Since issuing its final report in January 2009, Barclays appealed the CC decision and partially succeeded in its appeal. Several other parties also asked to intervene. The CAT decided that the 'point of sale prohibition' imposed in the CC's remedies package should be quashed and remitted back to the CC to reconsider, based on the principles decided by the CAT - if you want to know more, please contact me. The CC was tasked in early 2010 with reviewing its POS prohibition remedy, and since reconsidered the matter, and reinstated the POS prohibition remedy. Its final remedy orders were published in 2011.

Sassoon worked on, for example, the following regulatory investigations (in addition to cases mentioned on the Home page):

Northern Ireland Electricity – this included examination of all aspects of its pricing and charges in Northern Ireland where a price control was recommended.

Manchester Airport – this included examination of its charging structures for a five-year period, as a result of anticipated changes in air traffic and passenger flows, and consideration of acceptable operating and capital expenditure programmes.

Talk to Sassoon about the following CC
market investigations in recent years ...

- the brief descriptions below of market investigations will give you an idea
of what happened.

BAA – the investigation into its airports started in spring 2007 - one aspect was to consider the price controls, which the CAA sets from 2008 for the next 5 years.

The other aspect was a structural review of the airport sector in the UK, following an investigation by the OFT calling for some airports to be divested in South East England and Scotland. The CC published its provisional findings in 2008, mentioning many potential competition problems at BAA controlled airports, and the need for break-up of BAA’s airports in the South-East, and Scotland. BAA subsequently agreed to sell Gatwick airport in autumn 2008.

In early 2009, the CC confirmed its provisional decision that BAA needed to sell Gatwick, Stansted and one airport in Scotland. BAA will be left with Heathrow and some minor airports. BAA since appealed the CC remedies decision to the CAT and the CAT ruled that the CC's remedies decision was flawed because of apparent bias ie a member of the Panel had links to a potential bidder for airports that might have to be divested under the CC's remedies order. This was a significant defeat for the CC and it expressed disappointment at the result, and would need to consider the judgement carefully.

The CAT noted that it reached its conclusion on apparent bias with the greatest reluctance. It said it had throughout been very conscious of such implications for the CC's Report which followed a detailed inquiry over a period of two years, at great effort and expense to all concerned. The CAT ruled that it would quash the report dealing with adverse effects of, and remedies for, BAA’s common ownership of various airports, and remitting the matters in question back to the CC with a direction to reconsider and make a new decision in accordance with the CAT's ruling. In February 2010, the CC applied to take this case to the Court of Appeal to reverse the CAT's judgement.

BAA applied for recovery of its appeal costs, at some £1.77 million, and was granted 75% of its reasonable and proportionate costs in relation to the apparent bias issue. BAA failed in its challenge on the proportionality of the CC's decision-making powers to impose a divestment remedy.

The CC appealed the CAT's findings to the Court of Appeal in June 2010, and the decision in October 2010 was to reinstate the CC's original report and remedies. The Court of Appeal decided that the bias issue had only occurred near the end of the CC's investigation (Dec 2008), and accordingly its work and report could not be tainted (ie contaminated) by apparent bias. The report was therefore reinstated in full, and the original CAT decision, declaring bias was judged to be in error. The CC noted it would implement its remedies, with BAA, for divestment of 2 airports (ie Stansted and an airport in Scotland).

BAA put Edinburgh airport up for sale; but continued to appeal the decision to sell Stansted to the CAT. In 2012, the CAT reconfirmed the CC's decision that Stansted must be divested.

A separate referral on pricing levels at Stansted airport was also made to the CC in April 2008, which the CC completed in late 2008.

The Competition & Markets Authority (CMA), can carry-out market studies into sectors/industries deemed to be acting in anti-competitive or monopolistic ways. The investigations are meant to identify features that prevent, restrict or distort competition in a market, and result in detrimental effects on customers/consumers (eg high prices, lack of innovation, poor products or poor service). The features causing competition concerns can include, for example, problems with the structure of the market (eg too few competitors), or conduct by suppliers or customers in the market. Such work requires careful analysis of information and evidence, and takes considerable effort for CMA decision-makers to conclude whether features cause adverse effects on competition (AECs).

Prior to 2014, the CMA's merger investigation function was carried out by the OFT doing the phase 1 investigation, and the separate Competition Commission (CC) doing the phase 2 investigation. These organisations were merged in 2014 to form the CMA.

Following phase 1 market study investigations, the CMA (or previously the OFT) could give the industry a clean bill of health eg that there is no evidence to substantiate allegations of competition concerns.

If the CMA identifies prima facie competition concerns, it has various options.

First, it can agree binding undertakings with affected parties in the defined market to resolve such competition problems. This might avoid need for further action (in the short term), or the need for a more intense phase 2 investigation.

Alternatively if the CMA (a) is unable to remedy the identified competition concerns via undertakings; or (b) believes the adverse effects on competition are significant, it would consult the industry and then probably refer the market for a lengthy phase 2 investigation, where a much more detailed investigation will be done.

The CMA then follows a process where it independently investigates and identifies features/conduct causing adverse effects on competition, or detrimental effects on customers. It is then empowered to order remedial action as necessary, based on its findings and judgement (subject to appeal). [Previously the phase 2 investigations were done by the CC, until it was merged into the CMA.]

The CMA is required by law to do such investigations within 24 months of referral, but says it aims, in practice, to complete most investigations within 18 months.

The CMA's investigation needs to be within the terms of reference arising from the phase 1 process. The phase 2 market investigations are usually extremely onerous on the industry and parties effected by the terms of reference. The costs in terms of external and internal resources are very heavy for the affected participants (called main parties); and third parties (eg customers, suppliers, or special interest groups) can also incur significant costs in providing evidence/views that are useful to the CC.

- Phase 1 market study cases cover a broad range of business sectors and activities, and are too many to list here. Short market studies take up to 3 months, whilst long studies can take up to 1 year. Some of these cases could be referred to the CMA for more detailed scrutiny as Market investigations (see below).

- Sometimes, instead of the Phase 1 process leading to a phase 2 CMA investigation, sectoral regulators (see below) may carry out their own investigation, and refer the market or competition concerns to the CMA phase 2 investigation, when they are unable to remedy with effected parties.

Sassoon can help in special investigations ...

The CMA (previously the OFT) can carry out investigations under:

Chapter I (anti-competitive agreements), and
Chapter II (abuse of dominance) of the Competition Act 1998.

There are severe penalties for infringements, for example, fines up to 10% of turnover. In the case of cartels, criminal liability may arise on individual participants. Infringements can result from for example, price fixing agreements, or abuse of dominance by companies deemed to have excessive market power.

Chapters I and II of the Competition Act 1998 are based on Articles 101 and 102 of the European Community Treaty.

The CMA can impose significant fines for businesses found to infringe the anti-cartel rules. This happened, for example to parties selling replica sports shirts, and roofing contracting in the UK, and airlines for fuel surcharges to customers. In the airports cartel case, 4 British Airways executives were prosecuted in 2009 on charges of price fixing.

my aim is to work collaboratively with your team – for example your management, economists, solicitors and others eg accountants.
I would not expect to duplicate the work of such people, but rather improve the quality and value of work done in dealing with complex issues/problems.

Sector regulators, for example:

OFCOM (Office of communications),
CAA (Civil Aviation Authority),
OFGEM (Office of the Gas and Electricity Markets),
OFWAT (Office of water supply), or
the FSA (Financial Services Authority)

can also carry-out investigations into your business activities. If this arises, please contact me.

There are 5 principles of good regulation that effected parties should note ie regulation should be:

proportionate,
transparent,
accountable,
consistent and
targeted.

Regulators can impose licence conditions and binding undertakings against firms in sectors where market power is deemed to arise.

For example, Ofcom in 2009 is carrying-out a review into BSkyB's deemed dominance of the PayTV sector, and specifically in its supply of Movie and Football rights. At the end of the consultation process, Ofcom is seeking to agree binding undertakings with BSkyB, for example, controlling prices of its wholesale supply of Movies and Football programs to other competitive platforms eg Virgin Media and BT Vision.

However, if this potential remedy is not agreed with BSkyB, BSkyB could appeal to the Competition Commission for a regulatory investigation.

Sectoral regulators may also carry-out periodic regulatory reviews of prices for businesses operating in their controlled sectors (eg airports, gas, water and electricity suppliers).

Where disagreement arises, the parties are permitted to appeal to the Competition Commission (CC) to investigate the case and determine the appeal. However, the exact basis for a referral (and the effect of a CC decision) depends upon primary legislation for the industry/Sector concerned, or the provisions in existing licences agreed with the Regulator.

The Competition Appeal Tribunal (CAT) and the
European Court have made decisions which impact
on the scope of competition investigations
- please discuss with me.

Note: click on your browser’s ‘back’ button to return to the home page, or click on the Home link above

For example, Surrey and East Sutton Water plc made an appeal to the CC in March 2009 under the Water Industry Act regarding Ofwat’s rejection of a price increase in its regulatory revenue for 2009/10, under a ‘substantial effects’ clause in the company’s licence. The CC agreed a prima facie case was made for requesting higher revenues but provisionally rejected the appeal for higher revenue on various grounds.

The CC finally rejected the appeal on grounds that any income shortfall has not affected the company's ability to finance the proper carrying out of its functions; and there was a clear consumer interest in keeping prices lower. The CC noted that while it took very seriously a range of concerns that consumers would in fact be best served in the longer run if current prices were allowed to rise, on the facts of this particular case, the CC were not persuaded that it was appropriate for there to be a price increase.

There are various points for you to consider, which I can discuss when
you get back to me, for example:

If allegations are made against you, do you have robust
   commercial justifications?

     - do you have a competition compliance programme - are you innocent?

If guilty of infringements, are you aware of what should be done?

         - do you know about the leniency regime?

Sassoon Saleh, FCA MIoD

Rolling Stock investigation – this 2 year investigation started in spring 2007, following referral from the ORR (Office of Rail Regulator).   The provisional findings were published in August 2008, and noted problems which required remedial action. The CC is consulting on appropriate remedies, and will issue Remedy orders in late 2009.

Local Bus Services – the OFT referred the supply of local bus services (excluding London and Northern Ireland) to the CC January 2010. It covers all bus services including commercial and tendered services. The CC made a provisional decision in spring 2011 noting the need for remedies, which it finalised for implementation in 2012.

Movies for Pay-TV market – In August 2010, after a consultation for more than a year and complaints against Sky, Ofcom referred to the CC the supply and acquisition of Subscription Pay TV Movie Rights and the wholesale supply and acquisition of packages, including Core Premium Movies channels from the 6 major Hollywood movie studios. Ofcom believed that a combination of features in the UK created competition problems for the CC to remedy. The CC published its Issues Statement in September 2010, and made a provisional decision in summer 2011 noting this sector was not competitive. The CC issued a notice of remedies on what it will consider to improve competition.
However, in 2012 the CC decided that recent new entry by businesses (such as Netflix and Love Films) providing subscription movies on demand via non-Sky satellite platforms may result in Sky's movie market power being weakened over time. It therefore concluded that no AEC arose, and therefore no remedies were appropriate. Other Sky competitors, such as BT Vision and Virgin Media are not happy with the CC's decision to do nothing for the foreseeable future.

Auditing services to large companies in the UK – In October 2011, after a consultation for several months, the OFT referred the audit market for large companies to the CC. The OFT was concerned that this market is highly concentrated with four large firms earning 99% of the fees paid by FTSE 100 companies between 2002 and 2010. The OFT believed there are substantial barriers to entry, and low switching between firms of auditors capable of serving this market.   It expects the CC to formulate remedies to enhance competition in this sector, or provide input for legislation at the UK and EU level. The CC issued its provisional decision in 2013, with some remedies, eg that auditors retender every 5 years.

Aggregates, cement and ready-mix concrete markets – In January 2012, after preliminary work for over a year, the OFT referred these markets to the CC. They collectively account for turnover of around £3.3 billion a year.

The CC issued its provisional findings in May 2013. It provisionally concluded there was [tacit] co-ordination between the 3 main cement producers (out of 4). The evidence supporting this was for example, high market concentration, homogeneity of product, customer characteristics and behaviour, vertical integration from cement to downstream operations, and conduct issues to ensure market stability at high prices. The proposed remedy is divestment of cement production capacity, the creation of customer buying groups, and prohibitions of behaviour where prices are signalled to other producers. The package of remedies is under consideration.

The CAT has dealt with a large number of appeals over the past 10 years.

In 2009, for example, appeals were made to the CAT by Talk Talk and Cable & Wireless UK regarding prices charged by BT for specific types of services, as regulated by Ofcom.

The CAT has asked the CC in a number of cases to conduct further CC analysis/investigations, especially where Appeal cases are complex, and/or evidence for the CAT to make its decisions is not sufficiently robust.

In 2010, Bristol Water plc made an appeal to the CC against Ofwat's 5-year price determination (re 2010/11 to 2014/15). It sought an increase in regulated income of around £40 million. The CC provisionally decided in June 2010 that only some £4 million (10 per cent) of the requested sum should be added to the price control regulated income. It decided this money was necessary for speeding up the replacement of mains to reduce leakage, and improve quality of service.

Bristol Water was not happy with this decision. But Ofwat suggested the CC’s approach to the re-determination unduly favoured the company. While the CC characterised its provisional decision as a small change to the price limits that Ofwat set in 2009, Ofwat objected that the increase was still a meaningful increase for customers – particularly in the 2010 economic climate. So, the CC's decision was not a customer-focussed approach to setting price limits. The case received further detailed arguments and the CC finally decided to slightly reduce the additional revenue it permitted at the Provisional Decision stage.

In 2012, Phoenix Supply appealed the Northern Ireland regulator's price control and licence modifications to the CC. DCC has around 140,000 customers connected to natural gas in NI, and distributes natural gas throughout its licence area. The Regulator noted its price control would save around £10 a year for an average consumer, but Phoenix wanted a price increase of some £25 higher.

As these investigations require intensive efforts – I can help your people,
from the S26 notice requesting information, to issue of decisions, and
possible appeal.

UK Private Healthcare market – In April 2012, after preliminary work over a year, the OFT referred this market with revenues of some £4.9 billion a year, to the CC. The market is marked by its high concentration of private health providers and private health insurers.   The CC noted competition concerns, especially from Private Hospital Providers, in its autumn 2013 provisional findings. It wants to see potential private hospital divestment remedies, and other changes to increase choice for customers. The objective is to see lower prices, innovation, and better quality private patient care. The investigation may go to April 2014.

Private motor insurance – this 2 year investigation started in autumn 2012, following referral from the OFT.   The OFT was concerned that features in the market, and practices by providers of car repair and car hire services, together with conduct by the insurance providers could result in higher premiums to customers. One area of special concern was how claims by 'not at fault' drivers were handled, and whether their claim costs were leading to higher prices in the UK. The investigation was completed in 2014 with no remedies being imposed on credit hire businesses, even though an AEC was identified. This was a major victory for this sector. I was involved in this case and can discuss this more with interested parties.

Payday lending market – this 2 year investigation started in June 2013, following referral from the OFT.   The OFT was concerned that payday lenders were applying procedures that exploited customers in need of emergency short-term funding, up to around £1000.
For example, the OFT was not happy with consumers' ability to find the best loan. It also had concerns about weak price competition; the ease with which loans were rolled-over with increasing costs on borrowers (with poor ability to repay loans); and the ability of lenders to take money from borrower's bank accounts with little notice. The OFT also noted that the market was concentrated in the hands of a few suppliers, and had grown quickly in recent years.