Competition watchdog threatened by funding issues

Friday 21 December 2018

Funding issues are threatening Jersey’s competition regulator’s ability to do its job properly, an independent report into its high-profile battle with ATF Fuels has said.

Published yesterday, the review assessed whether CICRA (Channel Islands Competition and Regulatory Authority) correctly handled an investigation into fuel supplier ATF.

It had previously ruled that ATF “abused” a dominant market position by charging one company – Aviation Beauport – higher prices than others and refusing to supply it altogether.<

However, ATF successfully appealed the ruling in the Royal Court, leading CICRA to receive strong criticism from ex-Senator Philip Ozouf and then Chief Minister Senator Ian Gorst.

Pictured: ATF successfully appealed against CICRA in the Royal Court.

The pair criticised the amount of money spent on legal fees by the regulator – around £500,000 – and the Chief Minister launched a review into how the case had been handled, hinting that there may have been deficiencies.

ATF were also vocal in calling for “urgent action” on CICRA, who they accused of needing an “overhaul to address publicly acknowledged failings”. 

But the review has now found no basis for these concerns.

It concluded that CICRA “acted appropriately” at all times in its dealings with the fuel and that its cause for concern over ATF’s market behaviour was genuine and justified. 

Instead, the review suggested that CICRA may have only failed in its Royal Court fight due to a lack of funding.

Pictured: Funding problems mean CICRA cannot defend its rulings in court, the report said.

In the case of ATF, CICRA decided not to appeal when the Royal Court found in the fuel provider’s favour because it did not have any more money available to fight the battle.

However, this lack of funding was labelled a problem by the review, as it created an incentive for wealthy companies – like ATF in this instance – to appeal CICRA judgments “in the expectation that the Authority will decide not to defend it given the risks and costs involved”.

It noted that the Royal Court also needed “specialists” to help it deal with such “technically complex matters” involving competition law – something a previous review had recommended, but was never acted upon.

The previous review, which was conducted by Oxera, also stated that the government should “provide an explicit commitment that it will fund the JCRA as necessary if the Authority faces a legal challenge.”

“If the government does not want to provide the resources to defend an appeal (under competition law), it should give a reasoned decision explaining why it is not in the Island’s interest to do so,” the Oxera report said.

Pictured: Ex-Senator Philip Ozouf and Ian Gorst criticised the regulator after the Royal Court appeal result.

Author of the most recent report, Kassie Smith QC, endorsed these recommendations in her conclusions.

CICRA officials said that they agreed with the report’s analysis, adding that the QC’s comments on how funding problems affected their ability to enforce competition law confirmed “a view the Authority has held for some time”.

“We do not believe the current state of affairs serves Jersey well,” they said in a statement.

It continued: “We will now work with government to implement the recommendations set out. We would like to thank Kassie Smith QC for her diligence and professionalism throughout this process. The JCRA remains committed to delivering its statutory obligation to make markets work through fair competition to advance our economic well-being.”

The Chief Minister, Senator John Le Fondré, has now said he is committed to releasing funding for court appeals for CICRA under the next Medium Term Financial Plan.

Pictured: Current Chief Minister John Le Fondré said that he would make a request for funding for CICRA appeals in the next MTFP.

Plans for a formal settlement procedure will also be considered, he said, so that companies being investigated have clearer guidelines on how to avoid action being taken against them by CICRA.

The report also recommended that the watchdog record and explain how it makes its decisions to investigate companies, and work with the Ports of Jersey to clarify the ways in which licences are issued for port operators. 

The QC's findings came after consideration of a wealth of evidence, including a high-level meeting in 2015 between the regulator and ATF officials including owner Peter de Putron, lawyer Hiren Patel and Chief Operations Officer Jonathan Best.

Submissions were also made by a number of interested parties for consideration. These included Aviation Beauport, ex-Senator Philip Ozouf, Ports of Jersey, and Jersey Telecom, who had previously fought CICRA in the Royal Court.