Higher Education and the CMA

Back in February I highlighted some concerns with the operation of the Competition and Markets Authority (CMA) in relation to higher education. Essentially, it looked like they were being less than helpful at a time when institutions were under significant financial stress and exploring a wide range of sustainable solutions in a turbulent environment. 

And, as I commented recently in relation to the regulatory burden on the sector, the Higher Education and Research Act 2017 (HERA) has not worked. The implementation of the legislation has been focused on expanding the diversity of HE providers and promoting competition in the sector in a way which has led to a significant increase in regulation and a very different operating environment. The impact of this change is such that we now see institutions’ concerns about the CMA – which really should be, at best, a bit-player in higher education and much more concerned with real markets – becoming surprisingly prominent.

In particular, there was a piece in the Times a short while ago from Cardiff University’s Vice-Chancellor, Professor Wendy Larner,  who observed that she was keen to explore the impact of disciplinary contractions, eg in the Arts and Humanities, with peer institutions but

Because of the CMA, I had been precluded from having that conversation with my higher education peers, with the Welsh government, with the NHS.

“We took legal advice. I do think this is a real challenge for the sector and for the new Universities UK efficiency task force. If we’re going to be more collaborative, take duplication out and all play to our strengths, these are precisely the kinds of conversations we need to be allowed to have.

“It means I couldn’t explore potential solutions prior to this point. I’ve got really upset staff who think we don’t care about them and really upset Welsh politicians who think I don’t care about the future of the NHS in Wales.

“I’m deeply frustrated. The structure is set up to enhance competition, not collaboration.”

Similar frustrations and concerns have been expressed by many in recent months.

The Long Arm of Consumer Law

As a reminder, most of the HE-related CMA regulation is focused on protecting the interests of prospective and existing students as consumers and, as originally published in 2015 and updated in 2023, the organisation’s guidance to universities and colleges covers issues including:

• Clear, timely, accurate and comprehensive Information provision for students;
• Fair and transparent terms and conditions between HE institutions and their students;
• Ensuring that HE institutions’ complaints processes and practices are accessible, clear and fair to students.

The other element of legislation in play here though relates to bodies abusing a dominant market position to the detriment of consumers. It is this area with which universities are currently most concerned and where the impact of the CMA regime has at times been quite debilitating for the sector.

It does appear at first sight – and the advice received by Cardiff seems to be along these lines – that universities wanting to work together to address realignment of their own subject and course provision in order to address a systemic higher education funding challenge would be in breach of competition law. They would look like they were trying to stitch up consumers by acting in a way which undermined competition and potentially left one institution in a dominant market position.

Well-Intended But…

But no institution right now is looking to smash its competitors. The issue is, firstly, for many, survival and identifying a way forward to a sustainable future and, secondly, trying to do the right thing for students, the sector and the country in terms of subject provision. Sustainability of the university as a whole is absolutely in the best interests of everyone – students and staff, alumni, local communities and regional and national economies. 

It is important to remember that no institution is going to be able to choose to charge higher tuition fees and thereby be penalising consumers as a result of any collaboration. Nor would any organized co-operation mean additional profits to any shareholders. If institutions cannot collaborate, for fear of breaching a law intended to protect consumers, then it is likely that provision of some subjects will disappear altogether because of the decisions taken independently by each one. If provision is therefore not available at any UK institution for any future students who wish to study that subject how can that be in anyone’s interest?

Not Hurting Consumers

The principal point of competition law is to prevent companies stitching up consumers in any form. In an HE context – which still feels to me to be, on the whole, not the domain for any of this area of legislation to be remotely relevant – the concern appears to be that institutions might engage in conduct which could be viewed as preventing competition, distorting or restricting it or acting in a way which results in an abuse of a dominant market position.

As noted in the previous piece though the aim here is the opposite. It is about ensuring there are indeed some institutions for future students to choose between in terms of the courses they wish to study in different parts of the country. The main risk here is that if universities feel themselves unable to discuss the issues about whether they can protect the interests of their students, ie deliver their consumer rights, by talking to other institutions about collaborations or transfers, then they are at risk of breaching one part of consumer law by observing the other. This makes no sense. Indeed it highlights the absurdity of even considering the application of this element of the CMA’s brief to university operations. Higher education is fundamentally a co-operative enterprise. Everyone’s instinct is to work together to find the best solution for all. Not to compete to the death and see who survives.

A similar set of concerns was set out in the report of the Universities UK’s Transformation and Efficiency Taskforce in May which summarized the issue as follows:

Competition law was consistently held up as a barrier to greater collaboration. Universities are engaged in economic activities and compete on student recruitment. As such, they fall within the scope of competition law and are understandably wary of breaching it. As a result, some have been cautious in initiating conversations about collaboration, particularly where it relates to teaching and students. Some felt that wariness over competition law was also preventing organisations that may be considering a merger from engaging in early discussions that could benefit the merging institutions (and their staff and students). The Competition and Markets Authority (CMA) have engaged with key sector stakeholders to understand where competition law concerns are preventing collaboration and intend to provide more clarity where necessary.

Getting Round the Table

My very much not at all legally informed perspective on all of this earlier this year was that the main parties should get round the table to ensure that no-one would be prosecuted for doing the right thing in relation to institutional collaboration given where we are. Now it does sound from the UUK Taskforce report that the CMA has indeed engaged with the sector on this issue. This is good to hear. We do need to go further and faster though and the Taskforce includes the following as one of the actions to be undertaken by others:

The taskforce supports the ongoing work of the CMA to address concerns raised by HE providers around competition law and collaboration, including the development of bespoke advice and guidance. The CMA and central government should continue to work with universities to build on this.

All pretty encouraging, huh? And then it all seems to get better still as at around the same time as the UUK Taskforce was publishing its report, the CMA published a new blog, which has generated a good deal of excitement, on “Supporting higher education providers through beneficial collaborations.”

It confirmed that the CMA had been working with the sector and government to understand concerns preventing institutions working together “in ways that could be good for students or the economy” (emphasis added). And the good news is that they “won’t prioritise enforcement” in this area. All of which sounds less like a carte blanche than a ‘keep the noise down and we’ll look the other way’ kind of offer.

Free To Do What I Want Any Old Time

There are some handy tips in the CMA blog about where collaborations “which could be beneficial” to HE are unlikely to cause competition law concerns. These are, in summary:

• jointly purchasing certain goods or services. 
• sharing certain services and infrastructure. 
• working together to facilitate student and staff movement, for example, if a course is closed.
• discussing the possibility of merging with another provider. Providers can engage in discussions about potential mergers – there is nothing stopping them from doing so. 
• participating in conversations with government, regulators, and public bodies. 

So, far so good. Some of these seem staggeringly obvious but it is reassuring to see it in black and white that discussions about mergers and moving students and staff following course closures can actually take place. And you can also collaborate on jointly run courses, which “may not be a problem” apparently. BUT, this is a more complex area it seems and the CMA is

working to understand what collaborations may be under consideration and how these fit with the overall plans for higher education reform.

Really? This sounds to me like a significant over-reach. Does the CMA really need to know the details of all collaborative courses which might be developed by all institutions? Are they going to start mapping the huge variety of such arrangements, including transnational collaborative activity? It is hard to see how the CMA can or should be involved in this area at all.

Thanks But No Thanks

HERA ushered in a very different and more competitive framework for higher education in England, one which has already shown itself to be inappropriate, already past its sell-by date and not fit for purpose in the environment in which HE institutions are now operating. The active involvement of CMA in higher education feels to me to be an integral part of that misguided project and one which looks like being an unhelpfully active legacy. 

The final part of the CMA blog seeks to sound a positive note:

The CMA is committed to supporting collaboration which could help the higher education sector and ensure they don’t fall foul of the law. We will keep you updated on our thinking as it develops, as we continue to engage higher education providers and the government on how we can best assist the sector – for example through providing bespoke advice or issuing further guidance. This will support work by the government, which expects to set out its plan for higher education reform by the summer.

That’s all very good to hear but in my view the best way the CMA could be of assistance to the sector right now I think is by backing away from involvement in the issues around institutional collaboration and co-operation (which are, let’s not forget, in everyone’s interest). The CMA could also helpfully reinforce its intention not to prioritise looking at the sector’s collaborative activity, ideally in a more formal policy statement rather than just a blog, and stress publicly that collaboration is likely to be fine. But that is about as far as it goes I think.

Continuing the dialogue between sector leaders and the CMA makes sense of course but what is really required is reform of the regulatory framework to address this whole situation. Government needs to confirm the diminution of the role of CMA in higher education (beyond the position of students as consumers) when revising the regulatory architecture. The market-led approach as envisaged post-HERA, drawing in additional and unhelpful regulatory involvement from the CMA and others has had a significantly damaging effect in constraining innovation, collaboration and change in HE. In addition to the cost incurred in responding to the unnecessary extra burden. So, less of the anxiety about competition law please and a bit less of the extremely unhelpful regulatory activity too.