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UK market study on the Commercial Use of Public Information (CUPI)Tony Donaldson, Director of Economics & Antoinette Graves, Team Leader
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Drivers for the study
● Importance of the knowledge economy & value of public sector information:
- PIRA 2000 UK top down: €11.2bn
- OFT 2006 UK bottom up: £590m
- BUT potential for UK to be £1bn
● Complaints about Public Sector Information Holders (PSIHs)
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Complaints – market-wide & difficult to address with competition law
● PSIH needs to be an undertaking – though many are
● Excessive pricing difficult to prove because, in the UK, PSIH Trading Funds are not over-recovering on target returns to Treasury which means would need to show PSIH was incurring excessive costs
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Complaints – difficult to address with competition law (cont)
● Refusal to supply difficult to pursue:
- Intellectual Property Rights (IPRs) mean that product has to be new
- refusal is not justified by objective considerations
- refusal is such as to reserve to the owner of the IPR the market by eliminating all competition
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Complaints – difficult to address with competition law (cont)
● May not be outright refusal to supply but refusal to license for certain purposes
● Margin squeeze difficult to prove because:
- often accounts not separated into up & downstream
- complicated by use of differential pricing for different uses
- complexity of information products/services & determination of substitutable products
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Complaints – difficult to address with competition law (cont)
● Resource-intensive
● This means that businesses, especially SMEs, are unlikely to take private action
● Penalties – any fines or financial recompense to the business complainant have to be paid for from public funds
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Benefits of developing well-functioning markets in PSI
● Innovative products & services
● Lower prices
● Resources not wasted in re-building what the public sector already has (where that’s even possible) in terms of raw information – related to this is the point that where PSIHs have public duty to collect data they do not need IPRs to incentivise them
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Role for competition authorities
● Consider & promote OECD principles on PSI (adopted by Seoul Ministerial 2008)
● Share experiences of tackling anti-competitive behaviour by PSIHs
● Consider how to address cross-border issues
● In the long term consider revisions to PSI Directive
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Key messages of CUPI study
● PSI valuable & vital input for businesses wanting to make new products/services
● Improvements could be made to way PSI supplied leading to doubling value to UK economy to over £1bn per year
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● Most PSIHs are sole suppliers of PSI – where they also add value to PSI themselves could be in competition with businesses & have incentive to restrict access to PSI in its less refined form
● Range of legislation & guidance should ensure access to upstream information is provided on an equal basis but lacks clarity & inadequately monitored
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Supply of PSI in UK
● Income to PSIHs from supply of PSI is £400m
● About three quarters of this to Ordnance Survey, Meteorological Office, UK Hydrographic Office, HM Land Registry & Companies House
● 78% in analysed form: not raw, consultancy, information search or designs
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Use of PSI
● 50% income from businesses, 45% from other public sector bodies, 5% from public
● Most businesses use PSI to produce value-added products
● Half use it to produce business products, three in ten consumer products
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Common IssuesOver one third businesses reported
problems, over two thirds were serious
● Inadequate availability of upstream PSI
● Overly-restrictive contract terms
● Inadequate quality of service
● Unduly high prices
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Overly-restrictive contract terms● One obvious instance of PSIH
licence exception policy stating that it would not licence PSI for products competing with existing value added products or any it intends to market
● Businesses unable to gain licences of sufficient length to allow them to tender for major govt contract
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Unduly high prices● Costs not allocated between
upstream & downstream PSI
- Means PSIHs cannot ensure prices charged for both types PSI reflect relevant costs of their provision
- Means that it’s not possible to determine that prices of upstream PSI charged to businesses are same as those charged internally
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Remedies to achieve equal access
● Considered:
- Divestment of refined PSI operations
- Making upstream PSI available at no charge
- Building on existing regulatory framework
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Need to ensure:
● Businesses have access to PSI at earliest point in refinement useful to them
● On equal basis to any downstream information operations of PSIH
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Improving pricing
● Ceiling on upstream PSI prices to be the full cost (including any required rate of return)
● Upstream PSI should be available to third parties and internally at the same price and on equal terms for comparable purposes
● Downstream PSI products should be priced at no less than full cost recovery, including any required rate of return and an appropriate share of any common costs.
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Conclusion
● Supply of PSI not working as well as it could
● We know that PSIHs can do things differently because there are examples of best practice incl in separating upstream & downstream PSI
● Benefit: doubling value PSI to £1bn pa