UK market study on the Commercial Use of Public Information (CUPI)Tony Donaldson, Director of Economics & Antoinette Graves, Team Leader

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)

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

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

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

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

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

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

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

● 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

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

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

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

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

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

Remedies to achieve equal access

● Considered:

- Divestment of refined PSI operations

- Making upstream PSI available at no charge

- Building on existing regulatory framework

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

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.

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