CMA launches market study into the care and nursing homes sector

9th December 2016

Market study notice and consultation

On 2 December 2016, the Competition and Markets Authority (CMA) published a market study notice announcing that it has launched a market study into the care and nursing homes sector. The CMA’s statement of scope of the market study can be found here.

In its market study, the CMA will assess how people find the experience of choosing care homes, explore whether the current regulation and complaints system gives residents adequate protection, and examine how well care homes are complying with their obligations under consumer law.

The CMA is acting after reports of potentially unfair practices and contract terms being used by some care homes. It said it wants to use its market study to determine how widespread the concerns are, how residents are impacted and whether or not the practices and contract terms are likely to breach consumer law.

What will the market study focus on?

In light of the concerns set out above, the CMA is undertaking a market study to examine the care and nursing homes sector. The CMA’s market study will in particular look at:

• Consumer protection issues in the care home sector: Are older people and/or their representatives being disadvantaged through the use of unfair terms and conditions? Are care home providers engaging in unfair business practices? How easy is it for care home residents and/or their representatives to complain and obtain adequate redress? Are existing protections for residents on these issues sufficient? For example, does consumer law work well in this context, or are additional protections needed?
• Choosing care homes: Is there sufficient information and is the information clear and easy to assess when older people and/or their representatives first choose a care home, especially in the context where they may be struggling to understand the issues and options and making these decisions under stressful and time pressured circumstances? Is there anything preventing care home residents from moving, for any who are safely able to, when they wish to do so?
• Regulation of care homes: How do regulations in each nation affect competition between care homes in terms of quality and price? Do existing regulations provide adequate consumer protections for residents and/or their representatives? How do local authorities and regulators affect outcomes in this sector, including through their commissioning practices and “market shaping” activities? Are current standards enforced effectively and how do regulators and commissioning bodies coordinate to limit the administrative burden imposed on care homes?
• Competition between care homes: Is competition working well for residents and does competition drive choice, quality and value for money in this sector for both self-funded and local authority funded residents? Are there any impediments to competition such as barriers to entry and expansion and a lack of capacity? If competition is not effective in improving outcomes, what is the role of regulation? What are the key pressures for care home providers that affect their long-term sustainability (for example changes in costs and regulation)?

What next?

The CMA has invited submissions from interested parties in writing by no later than 16 January 2017.  It has also published guidance on how residents and relatives can inform it about a consumer protection issue with a care home.

The CMA has six months from publication of the market study notice to announce whether it intends to refer the sector for a more in-depth (Phase 2) investigation. It must publish its report within 12 months, setting out its findings and the actions if any it proposes to take.

Potential outcomes from this market study include referring the market to a CMA Panel for a detailed (Phase 2) investigation, accepting undertakings in lieu of such a reference, or recommending more robust industry self-regulation or government regulation.

If the CMA uncovers evidence in the course of the market study that suggests individual businesses may have breached competition law, it could take enforcement action against the business(es) concerned.

What are the opportunities?

The market study represents an opportunity to influence future regulation. It also provides a means to raise any concerns that businesses may have as regards their ability to compete in the market and barriers to entry or expansion.

What are the risks?

Market studies can be resource and time intensive for businesses involved. The CMA may issue information requests directly to suppliers in the market and will typically require a response within a few days. As noted above, the outcomes could be significant, including further detailed review of the market, possible regulatory reform or individual enforcement actions for suspected breach of competition law.

What should I do?

If you are interested in finding out more about this market study, or if you receive a direct communication from the CMA and wish to understand the implications of your proposed response, please contact Trudy Feaster Gee, Partner (Barrister) or Andrew Northage, Partner.