MacRoberts Competition Law e-update 13/11/09

OFT TO INVESTIGATE CORPORATE INSOLVENCY MARKET

The Office of Fair Trading ("OFT") has announced that it will conduct a review of the corporate insolvency market in the UK. Its aim is to assess the level of competition in the UK market and ensure that the market itself is working well for consumers.

Under the Enterprise Act 2002, the OFT has the power to carry out such reviews, which are known as market studies. Basically, the OFT analyses the market with a view to identifying any failures within that market - such failures can include competition issues (such as a lack of real and effective competition), consumer detriment and the adverse impact of Government regulations on the market.

The OFT has confirmed that this particular study will focus on the structure of the corporate insolvency market and the process by which insolvency practitioners are appointed. It will also consider any features of the market which could result in harm or consumer detriment, with fees and recovery rates apparently in the spotlight. This latter point derives from a recent World Bank report which raised issues about the cost of insolvency in the UK as against recovery rates.

Some sources are also reporting that the OFT will examine pre-packs as part of its enquiry.

If the OFT identifies any failures in the corporate insolvency market, it has a range of options open to it. These include investigating individual companies, making recommendations to Government for changes to the law and referring the market to the Competition Commission.

At this initial stage, the OFT will gather factual information and views from parties which are active in the corporate insolvency market, such as accountants, lawyers, regulators, trade bodies and Government. Some parties will be approached by the OFT directly, while others have the option of submitting their comments to the OFT if they so wish. Thereafter, the OFT may decide to implement a full study, in which case the review should be completed by the end of next year.

For further information, please contact Alan Meek or John Reid on 0141 332 9988.

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