Referral to the OFT

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Following Competition Act concerns the protocol was notified to the OFT in late 2002 by the ABI, which administers the GTA on behalf of insurer and CHO subscribers.

The OFT investigated the GTA and published its decision on 22 April 2004. The OFT found that while the GTA is an anti-competitive agreement it is beneficial to consumers and satisfied the requirements for an exemption under competition law, provided certain conditions are met.

The OFT granted the GTA an individual exemption from Chapter I prohibition of Competition Act, provided certain changes were made to the wording and operation of the GTA. The exemption was for a five-year period.

The OFT determined that although the collective approval of replacement vehicle hire rates through the GTA had the effect of fixing prices, the anti-competitive effects of the agreement are counterbalanced by its benefits. The benefits included:

  • Less litigation between insurers and CHOs.
  • A better framework for transactions between insurers and CHOs.
  • Greater certainty and security for consumers who use credit hire vehicles.
  • Restraining further increases in replacement vehicle hire rates and (indirectly) insurance premiums.

The decision was broadly in line with a preliminary decision published by the OFT in January. Since then there were written and oral representations on the preliminary decision, including from ABI and AMA (Accident Management Association). Extensive legal advice was sought by both Associations to assist in their representations.

The thrust of AMA representation was that there should be more joint ownership and control of the GTA by CHOs and insurers. The proposal to have an independent assessor setting rates was welcomed but AMA made representations that the appointment should not be made by the ABI but instead jointly by CHOs and insurers.

The OFT final decision on the GTA supported AMA representations on the running of the GTA, including the appointment of an independent assessor. The structure had to be incorporated into the GTA and the assessor’s appointment must be made by the GTA Technical Committee, comprising representatives of CHOs and insurers.

The independent assessor was also required to subsume the fixed administration fee within the new daily hire rates that they set. The annual review of rates has also to be managed by the independent assessor and this must be incorporated into the GTA.

The OFT stated that any amendments to the GTA or its operation which are proposed in order to comply with the OFT requirement must be agreed by them. The proposed changes were to be implemented within three months of the ruling.

The ABI, however, appealed the OFT decision to the Competition Appeals Tribunal. The ABI was successful in its appeal. The OFT indicated that they considered the protocol was anti-competitive but they decided to close their file for administrative reasons and the GTA continued to operate.

Since then a GTA Technical Committee, comprising of six insurer and six CHO representatives, has been working to improve understanding and reduce areas of uncertainty/conflict.