OFT downplays anti-competitive care homes complaint against councils

The Office of Fair Trading delivered (3 March 2004) its
preliminary response to the ‘super complaint’ lodged in
December by the Consumers’ Association, about trading
conditions in the care home market. The CA had raised concerns
about apparent anti-competitive behaviour by local authorities and
some independent providers, as well as possible unfair contract
terms between care homes and residents. 

After its 90 day consideration of the issues raised by the CA
and submissions made by others, the OFT has decided to undertake a
formal market study through its powers under section 5 of the
Enterprise Act 2002. The study will cover three main areas:

• Consumer behaviour – the OFT is particularly
concerned that residents and their families often have to choose a
care home in a hurry and at a time of great stress. Once settled,
however, residents normally prefer to stay where they are in a care
home, even if somewhere else would be more suitable.

• Price transparency

• Contracts in relation to current or future fees

The OFT has downplayed concerns that local authority contracting
and rates work to the detriment of consumers.  The OFT says:
 “…   public authorities are unlikely to persist in
setting excessively low prices for care home services …,
because independent care homes will refuse to accept older people
at such rates. … [I]t is not in public authorities’ interest
to persist in paying prices that are too low.”

The CA itself comments that “it is disappointing that the
OFT has chosen not to take forward the aspects of the complaint
which focused on local authority power; more specifically the
issues surrounding cross-subsidisation. The complaint was careful
not to raise the issue of overall funding of care services and
instead focus on the key issue of how local authorities use their
buying power and the knock-on effects of that power. This is an
issue crucial to solving the problems found in the market and must
be tackled by the relevant government body.”

Many in the independent sector will be hoping that the scoping
decisions soon to be undertaken by the OFT in relation to the
market study will allow for the relationship between commissioning,
rates and provision to be examined more closely.  A market study
can take up to a year, and will result in a further report.

Alison Castrey

Solicitor (Residential Care, Education & Nursing
Services)