Universities referred to CMA

Posted on 06 July 2017 by Sam Ruback

Man studying in library

Former Education Minister, Lord Adonis, has asked the CMA to investigate whether a cartel is being run by English universities because they all charge the maximum, £9,000 a year. 

In an interview for The Times newspaper, Lord Adonis said that in having to pay £9,000 a year many students were being charged more than the cost of running their courses and in effect were subsiding more expensive degrees. 

Lord Adonis described himself as the "moving force" behind Tony Blair's decision in 2004 to introduce what were then called "top-up" fees. Vice-Chancellors had said they were needed to address long-term underfunding and the intention was that fees would vary between £1,000-£3,000 depending on the benefit and cost of each course. Almost immediately all universities charged the maximum, £3,000. The ceiling was raised subsequently under the Cameron-Clegg coalition in 2012 to the present day maximum of £9,000. 

In response to Lord Adonis' allegation and referral to the CMA, Nicola Dandridge, chief executive of Universities UK, which represents Vice-Chancellors, said in a letter to The Times on 30 June that the shift to fees of £9,000 had replaced income universities used to receive directly from taxpayers.

Ms Dandridge went on to reject the accusation that universities were being greedy and stated that the money which had previously come from the state was now coming from income-contingent loans to students.

The Office of Fair Trading (OFT) published a report in 2014 on competition between universities. The OFT identified some areas which required reform but concluded that there were a number of factors, beyond collusion,  behind why all universities set fees at £9,000 a year.

This is not the first occasion on which the UK Competition Authorities have been called on to investigate alleged collusion in relation to tuition fees.  Back in 2006, the OFT found that 50 fee-paying independent schools had unlawfully shared information about the fees they were intending to charge.   In light of the serious allegations being made against them, universities need to consider how they set tuition fees for individual courses and obtain appropriate advice as to whether what they have done may be viewed as unacceptable by the CMA.

The CMA has the power to carry out civil investigations into cartels under Chapter 1 of the Competition Act 1998 and Article 101 of the Treaty on the Functioning of the European Union (TFEU) as well as instigate criminal investigations and prosecutions under the Enterprise and Regulatory Reform Act 2013 and the Enterprise Act 2002. The CMA's criminal powers are shared with the Serious Fraud Office (SFO) in relation to cases involving serious or complex fraud.