Demerger of CICRA and Future Operation of the JCRA: Response of the Minister for Economic Development, Sport, Tourism and Culture. (re-issue)

Findings

Comments

1

CICRA  was  created  in  2010  as  an administrative  arrangement  between the JCRA and the GCRA, to share costs and expertise to work more efficiently across the two Islands.

This point is noted.

2

In 2011, following the commencement of proceedings to merge the JCRA and GCRA into CICRA in 2010, the Jersey Competition  Regulatory  Authority identified  that  the  merge  had  led  to annual  savings  of  approximately £100,000, or 7% of its total operating costs.

This point is noted.

3

In the lead up to the decision to demerge CICRA,  the  Minister  for  Economic Development,  Tourism,  Sport  and Culture  did  not  consult  with  key industry  stakeholders  and  only consulted with Guernsey counterparts.

The decision to demerge CICRA was not taken in isolation. The need for greater focus on Jersey markets  and  Jersey  consumers  arose  over  a considerable period of time, and out of concerns expressed  by  the  Inflation  Strategy  Group. EDTSC has strong relationships with businesses and  receives  regular  ongoing  feedback  from  a range of sources and different perspectives. It was not appropriate to consult the regulated entities on what was essentially a broader issue of effective competition policy in Jersey. Having approached Guernsey on this matter, the demerger progressed swiftly  when  Guernsey  formally  accepted  the

Findings

Comments

separation  in  March  2020  and  sought  an implementation date of 30 June 2020.

4

The  Chief  Minister  transferred legislative  responsibility  for competition policy to the Minister for Economic  Development,  Tourism, Sport  and  Culture  in  July  2020. However,  political  responsibility  had been  transferred  much  earlier  in January 2020. The Panel believes that legislative  responsibility  should  have been  transferred  at  the same  time  to avoid confusion over responsibilities.

This  point  is  noted.  Despite  the  difference  in timing  between  the  transfer  of  political  and legislative responsibility, there was no confusion within  the  Government  and  the  lines  of responsibility remained clear.

5

In the Government Plan 2021 - 2024, the provision of an additional £170,000 was made to increase the ability of the JCRA  to  supervise  markets.  Some stakeholders expressed concerns about the additional funding and called for more  information  about  the  JCRA's remit and future direction.

It is not clear from the stakeholder material that there is a general concern about the specific uplift in funding for the JCRA to increase its ability to supervise markets. This matter was raised directly by the Panel with the Chamber of Commerce. However, there was a concern from the telecoms companies about potential increases in licence fee costs and the Chamber of Commerce expressed the  view  that  the  JCRA  should  have  a  strong rationale for involving itself in markets outside the context of any specific competition issue.

The JCRA has issued an improved business plan for  this  year  and  a  new  set  of  prioritisation principles. Further materials are also expected to be issued by the JCRA later in 2021/22. The JCRA sends the business plan out annually before it is finalised  in  December  and  it  is  open  to  any stakeholder to comment. The Department will be consulting  on  a  package  of  competition  law changes  later  this  year,  which  will  set  out  a possible framework for market studies.

6

The JCRA published its business plan in 2021 and, although it states that the Authority  continues  to  work  closely with the GCRA, it includes very little reference  of  working  collaboratively with  the  GCRA,  or  specific  details about what pieces of work are being undertaken jointly by the two entities.

The  JCRA  has  indicated  its  desire  to  work cooperatively  with  Guernsey  and  has  signed  a Memorandum of Understanding to that effect.

Findings

Comments

7

Despite  stakeholder  concerns  in relation to the cost and efficiency of operating  two  separate  regulatory bodies,  some  stakeholders  believe  it will  make  the  JCRA  more  Jersey focused' on matters directly impacting consumers in Jersey.

The aim of the demerger was to enable the island's competition  regulator  to  focus  solely  on  the economic challenges of this island, which remains different in many respects to Guernsey.

8

The  ability  of  the  JCRA  to  act independently, to ensure its work areas are  free  from  external  influence,  is fundamental  to  it  fulfilling  its  key objectives.

There is no question about the Authority's independence in regulatory decision making. The Government sets the general legislative and policy framework and the Authority acts within that. There is a significant area of overlap in relation to the accountability for the use of public funds, which sits within the States with the relevant Accountable Officer.

Oxera observed in its 2015 report that managing the areas where the Authority and the Government are interdependent is very important and this point is understood.

9

The  Panel  found  during  evidence gathering that the JCRA had maintained a  positive  level  of  engagement  with industry  stakeholders  following  the demerger of CICRA and was open and transparent in sharing its future plans.

The Authority has improved the level of industry engagement because it is now able to devote all its stakeholder liaison exclusively to businesses in Jersey.

Recommendations

To

Accept/ Reject

Comments

Target date of action/

completio n

1

The  Chief  Minister should  ensure  that  any future  transfer  of political responsibility is undertaken  in  a  timely manner  with  advance notice  provided  to  the relevant  Government body.

CM

Accept

Any  future  transfer  of  political responsibility will be undertaken in a timely  manner,  where  feasible,  and advance notice will be provided.

Recommendations

To

Accept/ Reject

Comments

Target date of action/

completio n

2

The  Minister  for Economic Development, Tourism,  Sport  and Culture  should undertake  an  annual review  of  the  JCRA's operating  costs,  to monitor  the  cost implications  for  licence holders  and  to  ensure sufficient  resources  are made  available  to  the JCRA  for  competition regulation  and  market studies.

EDTSC

Reject

Licence Holders are able to challenge a decision of the JCRA if they believe it has  set  fees  in  excess  of  what  is necessary for it to carry out its functions under the law. The JCRA has advised that it engages the licence fee payers whenever a change of fees is proposed and that seems the appropriate process for an independent regulator to operate.

There  is  also  full  transparency concerning the costs of regulation and licence fees with the publication to the States on an annual basis of the JCRA's independently  audited  Report  and Accounts.  The  demerger  has  mainly been secured through an increase in the Government  grant  rather  than  a significant  increase  in  licence  fees. Oxera  has  observed  that  it  is  not possible to achieve the economies of scale  that  Authorities  in  larger jurisdictions  are  able  to  realise  and noted  the  difficulty  in  identifying appropriate benchmarks.

The  Government  would  be  open  to periodic  reviews  every  three  to  five years  but  only  where  there  is  a reasonable cause to conduct a review. It should also be noted that the JCRA has received  increased  funding  in  both Government plan rounds matching its funding request.

3

Following  concerns expressed  by stakeholders,  the Minister  for  Economic Development,  Tourism, Sport and Culture should conduct a review of the JCRA's current remit as the singular authority for

EDTSC

Reject

The  Minister  accepts  that  a  review could  be  conducted  but  not  in  this timescale.  The  JCRA  was  re- established as a Jersey-focused body on 1st July 2020. The 18-month timeline would mean a review conducted by the end of 2021. The first year of the JCRA has  been  very  much  focused  on  its transition back to an insular body under

Q4 2022.

Recommendations

To

Accept/ Reject

Comments

Target date of action/

completio n

competition  regulation in  Jersey.  This  review should  be  carried  out within 18 months of the date of the demerger of CICRA.

its own board and staff and has been affected  by  the  pandemic.  A  longer period, of perhaps three years, would enable the JCRA to conduct a number of  market  reviews,  which  would provide  a  better  basis  for  assessing competition  regulation  under  the insular model.

4

The  JCRA  should publish  details  of  its collaboration  with  the GCRA at the end of each calendar  year,  in  its Annual Report.

EDTSC (with JCRA input where appropr iate)

  Accept

The  JCRA  has  confirmed  it  will undertake this action.

2022 Annual Report