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Education Students Briefing: OFT Report on the Higher Education Market

  • United Kingdom
  • Education - Briefings

29-04-2014

Introduction

The Office of Fair Trading (‘OFT’) launched a Call for Information on the undergraduate higher education sector in England on 22 October 2013.  This was  in order for the OFT to gain a better understanding of how choice and competition were working in the higher education sector.  The OFT published a report on its enquiry in March 2014. The report follows the OFT’s February 2014 report on the use of academic sanctions to recover non-academic debts, see our briefing OFT report on Universities' Terms and Conditions. It should also be considered in the light of forthcoming changes to consumer law, on which see our briefing Looming UK consumer law changes, the impact on colleges and universities.

The OFT’s overall impression was that the English undergraduate higher education sector was working well for students, with levels of satisfaction being high and institutions appearing to be competing for students (albeit more on quality rather than price).  However, the enquiry identified scope for improvements. These would involve further work being done by the government,  the higher education sector and the OFT’s successor body, the Competition and Markets Authority (‘CMA’) which will become fully operational on 1 April 2014, bringing together the Competition Commission and the consumer functions of the OFT.  The OFT concluded that further work needed to be done in three main areas, namely enabling student choice, ensuring higher education institutions treated students fairly and ensuring that regulation of the higher education sector was fit for purpose.

Enabling Student Choice

The OFT accepted that there are numerous sorts of information to help students decide which course to apply for.  However, many of those responding to the enquiry expressed a need for a more rounded picture of the learning environment and subsequent employment prospects.  The OFT recommended that the CMA consider the OFT’s findings in conjunction with the review of provision of information to prospective students being undertaken by HEFCE.  Meanwhile institutions should make clear to prospective students any additional charges, options for financial support and terms and conditions in an easily accessible and prominent way, preferably while students are considering where to apply and when they are made an offer.

Ensuring Higher Education Institutions Treat Students Fairly

The OFT identified some institutional practices which appeared to be at odds with the spirit (and perhaps the letter) of consumer protection legislation.  These practices included fees increasing midway through students’ courses, course content and structure changing without adequate notice or reason during a course, and students incurring unexpected additional charges.  However, the OFT did not reach a conclusion as to the extent of these practices or whether they broke consumer regulations.  It recommended that the CMA undertake a compliance review to consider the extent of any breach of consumer protection legislation and the most effective way of addressing related concerns.  Further, while noting significant improvements to institutions’ complaint and redress processes, the OFT recommended that students’ awareness of these processes could be improved and the speed with which institutions dealt with complaints could be enhanced.  It recommended that the OIA and QAA, with BIS, consider whether suitable tools were in place to address common complaints and to ensure all students could access appropriate channels of redress.

Regulatory Concerns

The OFT accepted the view of the great majority of inquiry respondents that the current regulatory framework for the higher education sector was too complex, outmoded and unfit to support current and future policy.  The framework being put in place by HEFCE appeared to stretch the existing legislative framework to its limits.  The OFT identified significant concerns as to whether the framework facilitated effective competition between different types of institutions and treated all institutions in a fair and equitable manner, particularly given the existence of a multi-tier system of regulation and the existence of bodies owned by the sector itself (such as UCAS and QAA).  There were questions as to whether the corporate governance arrangements and accountability of such bodies were appropriate.  There were also concerns about the lack of an adequate ‘exit regime’ in the event of an institution abandoning an activity or closing down altogether, such exit arrangements being required in order to ensure the proper working of the higher education market. Equally importantly the students on closing programmes needed assurance that they would be able to complete their studies.  The OFT suggested that the CMA work with stakeholders to inform the design of the regulatory regime so it could best ensure competition and choice.

Next Steps

It remains to be seen to what extent the CMA will prioritise further work on the higher education sector and the extent to which it will accept the OFT’s recommendations.  Eversheds will continue to monitor the position and issue further briefings as appropriate.  Meanwhile institutions should consider whether their arrangements for recruiting students and their policies and procedures for students once recruited would stand scrutiny by the CMA.  The report contains useful summaries of the points that may cause student regulations to be unfair or unreasonable and the various ways in which institutional activity might fall foul of consumer protection regulations.  We will be happy to help institutions wishing to undertake such reviews of procedures and regulations.

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