Competition issues in the further education sector

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A new research report by the Department for Business, Innovation and Skills (BIS) is designed to help colleges and training organisations take advantage of the new freedoms and flexibilities introduced in December 2011 by ‘New Challenges, New Chances: Further Education and Skills Reform Plan: Building a World Class Skills System’, BIS’s reform strategy for the further education (FE) sector.  The reforms resulting from this have given the FE sector more flexibility in the way that they can use funding, and the ability to use new business models.

This increased flexibility however, means that FE providers could potentially do something that is anti-competitive and breaches UK and EU competition law.  The report explains the nature of the FE market and why it is vulnerable to anti-competitive behaviour, due to its localised nature, the need to meet social obligations (which can mean courses are run at a lower cost for some learners) and the availability of funding influencing which courses are run and where.

It sets out some examples of anti-competitive practices, including a group of providers agreeing the fees that they will charge learners in a certain area, or exchanging information about the fees they are going to charge.  It also flags the risk of an abuse of a dominant position by a provider with a high degree of market power in an area (e.g. the largest college), such as through predatory (targeted, below cost) pricing designed to squeeze a competing provider out of the market or tying one product into the sale of another in a way that limits learner choice, e.g. a provider may make a course accessible only to learners that have previously completed another specific course from the same provider, with the potential unjustifiably to prevent learners from switching between courses or providers.

The second part of the report sets out good practice and practical steps that providers can take to support competition in their local area.  In particular, it warns that changing an institution’s delivery model can restrict competition and gives examples of how this might happen.  It also discusses how providers can use their commissioning and procurement processes to support competition, such as running sub-contracts for a reasonably short length of time and giving new providers an opportunity to enter the market.  Finally the report looks at the potential competition implications of partnership working.

Any FE provider needs to consider the competition law impact of their activities, in particular when changing their delivery model to take advantage of the flexibilities now on offer through the Government’s FE reform programme.  The Education and Competition Teams at Walker Morris LLP would be delighted to assist you.