As part of the higher education funding reforms announced in the 2014/15 Commonwealth Government budget, the government announced that existing price caps on university fees will be removed. If implemented, this will result in complete deregulation of the fees that universities can charge for courses.
In preparation for the implementation of fee deregulation, universities will need to take steps to ensure that their conduct in setting fees does not amount to unlawful anti-competitive conduct that may contravene the Competition and Consumer Act 2010 (Cth) (CCA). (Please note that there is always the threshold question of whether particular conduct is conduct that is in trade or commerce for the purposes of the CCA. This article does not consider that issue in the context of other aspects of a university's conduct in the provision of education and other core services.)
Risk of CCA contravention
As universities compete with one another in relation to the provision of higher education services to students, they are competitors for the purpose of the CCA. This means that a university could engage in cartel conduct if it reaches an understanding with one or more other universities about aspects of the services provided by any of them. The most likely contexts in which a risk of cartel conduct may arise are where two or more universities reach an agreement, arrangement or understanding to:
- fix, control or maintain the price of their courses or other services (or any discounts or rebates offered by them, such as scholarships or other financial assistance offered to students), which may amount to price fixing;
- limit the courses they will offer or the number of students to whom they will be offered, which may amount to output restrictions; and
- allocate between them the classes of students who may acquire services from any or all of them, which may amount to market sharing.
The existence of a written, legally enforceable contract is not required for conduct to amount to cartel conduct. An arrangement or understanding may exist where there is communication between two or more universities who compete with one another, a consensus being reached between them as to how they will act (or not act), and an obligation (whether legal or moral) on the competitors to act in accordance with that consensus.
If there are legitimate reasons for a university to engage in this type of conduct, it would first need to assess whether an exception may apply. Universities may be able to structure their arrangements in such a way that they may rely on the joint venture defence under the CCA. Alternatively, they may apply to the Australian Competition and Consumer Commission for authorisation of the conduct on public benefit grounds.
What to do to minimise the risk
In order to minimise the risk of engaging in cartel conduct, the first step for universities is to carry out a risk assessment to identify:
- any contact points that university personnel may have with other universities where there may be a risk of cartel conduct occurring (even if inadvertently); and
- how the university will make decisions about its course fees and the courses it will offer in the deregulated environment, including the groups and individuals within the university who will be involved in, or exercise any influence over, setting or varying fees.
The persons who will be involved in making or influencing decisions about fees and courses should be educated about the risk of cartel conduct in this context and how they can avoid it. For this purpose, it is helpful to develop protocols that cover the various issues that may arise. The protocols should set out guidance on:
- avoiding any communications that could give rise to understandings about fees, financial assistance and course availability which may contravene the CCA;
- setting prices unilaterally, including only taking into account other universities' publicly disclosed prices (for example, to more closely match another university's prices for similar services) if there are legitimate commercial reasons for doing so;
- avoiding soliciting from, or disclosing to, other universities any information about what fees will be charged or expected demand, or other information that may be cost-sensitive; and
- what action should be taken, and who should be consulted or informed, in the event of any concerns about conduct (or proposed conduct) that may give rise to competition law concerns.
As well as developing protocols that are specific to the setting of course fees, the introduction of fee deregulation is also an opportunity for universities to review their general policies and protocols that are relevant to CCA compliance. This kind of review will assist to ensure that existing policies and protocols are up-to-date and adequately deal with cartel risks generally, or to develop such policies and protocols if they do not already exist.