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CMA launches market study into care homes for the elderly

December 05, 2016

The Competition and Markets Authority (CMA) has given notice (on 2 December 2016) that it has started a market study into care homes
for the elderly

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The study will assess the following:

  • The consumer’s experience of choosing a care home.
  • Whether the regulation of care homes is adequate.
  • How well care homes are complying with their obligations under consumer law.

Why conduct a market study?

The purpose of a market study is to examine possible competition and consumer protection issues in a market. If the CMA thinks that the market is not working efficiently it can:

  • Take action to improve the quality and availability of consumer information and increase consumer awareness.
  • Promote self-regulation in the market.
  • Recommend revisions to regulation and government policy.
  • Make a market investigation reference.
  • Accept undertakings from providers instead of making a market investigation.

Background to the market study

The CMA’s decision to start the market study stems from the Office of Fair Trading’s findings in 2005 that there was cause for concern in relation to the following points:

  • Whether care home providers were treating consumers fairly and complying with consumer protection law.
  • Whether care homes were providing sufficient information to make an informed decision as to choice of care home.
  • How local authorities discharge their obligations.
  • Competition and regulation.
  • The impact of changes in costs and regulation
  • Whether the market, policy and regulation are effective and sustainable.

Citizen’s Advice also made a report in February 2016 highlighting instances of care home providers not complying with consumer law. For example, there had been evidence of increasing fees at short notice and charging undisclosed additional costs.

Concerns have also been raised by Age Concern and other charities in the past in relation to complaints procedures, for example, care home staff imposing restrictions on residents who complain.

What is a market investigation?

A market investigation (as opposed to a market study) is an in depth investigation into a market to consider if there is an adverse effect on competition. 

Such an investigation would be conducted by a team from the CMA’s panel of members including experts in different areas such as economics, business, law and the public sector. The investigation is conducted independently from the CMA board and none of the team involved will have taken part in the decision to refer the market for investigation. 

The market investigation should be finalised within 18 months of its reference (although this period can be increased by a further 6 months). If the investigation finds that there is an adverse effect on competition, the CMA has extensive powers to impose its own remedies and make recommendations to regulators and the government. 

Appeals against any decision related to a market investigation would then be made to the Competition Appeal Tribunal.

What does the CMA define as ‘adverse effects on competition’?

It is difficult to define ‘adverse effects on competition’ because these vary from market to market. 

The OFT (predecessor to the CMA) found in its 2012 market investigation into private healthcare a number of features that, individually or in combination, , restricted or distorted competition in the UK private healthcare market. These features included a lack of easily comparable information, high levels of concentration at national and local level which may give a degree of market power to healthcare providers and significant barriers to entry and expansion.

Next steps – what can you do?

Care providers, consumers and other interested parties are invited to submit views and evidence on whether the CMA should make a market investigation reference by 16 January 2017.

The CMA must:

  • Announce whether it intends to make a market investigation reference by June 2017 and begin.
  • Publish its final report on the market study in December 2017 setting out the reasons for its decision.

What can you do to protect your business?

Care providers should have their service user terms and conditions and residents contracts reviewed to ensure they comply with current consumer law, especially if they have not been reviewed since October 2015 when the Consumer Rights Act 2015 came
into force.  Please contact us directly for a free review of your Service User Contracts to ensure you are compliant.

For more information please contact our Corporate & Commercial team on 0117 929 0333.

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