Unhappy Christmas at the regulators

Bah humbug at the OFT and Competition Commission after setbacks on BAA and bank charges.

Last Updated: 31 Aug 2010

There’s likely to be little in the way of festive cheer at two of the major regulators this morning as some high profile cases have run into trouble. At the OFT, its marathon investigation into bank charges has been summarily dropped, whilst at the Competition Commission, BAA won its appeal against an earlier ruling that it must sell two more of its airports.

The OFT has been probing the fairness (or not) of bank overdraft charges for the past two and a half years, in an investigation that is likely to have cost millions. It has now dropped the case after deciding that any further investigation would have ‘very limited scope and low prospects of success’. Shame it took them so long to come to this conclusion but there you go.

While the banks have welcomed the news (unsurprisingly, as it allows them largely to set their own charges) the customers behind the million-plus claims that have been on hold since July 2007 and are now likely to be rejected out of hand, are likely to feel rather less chipper.

We can’t help feeling that the OFT finally realised that it was on a hiding to nothing, because had it succeeded in forcing banks to refund charges, the banks would simply have responded by doing something even less politically palatable – like charging to simply have a bank account in the first place. Retail banking isn’t a hugely profitable business anyway, and around a third of what the banks do make comes from charging for unauthorised overdrafts, bounced cheques and so on. They would not take the withdrawal of such a hefty revenue stream lying down. Plus, of course, half the high street banks are publicly owned now, so we all have a vested interest in keeping them financially healthy.

Another watchdog incurring the wrath of consumers and the press this morning is the Competition Commission – or the ‘Incompetence Commission’ as it’s now being dubbed. Heathrow-owner BAA won its appeal against the forced break-up of its airport empire through the sale of Stansted plus either Glasgow or Edinburgh after the Commission was caught out on a technicality. One of the six members of the panel assigned to the BAA case was an advisor to a fund which eventually joined a consortium bidding for Gatwick. Oops.

But this is not to say that campaigners against BAA’s airport monopoly should give up hope. The original conclusion still looks to be the right one: the break-up of BAA’s dominance and separate ownership of the capital’s airports would improve the quality of service and possibly increase capacity, too.

It is likely the case will eventually re-run (yes, taking another couple of years and another few million quid) but in the meantime BAA has at least won some breathing space. This way, when the time does come to sell, it may at least get a decent price – better than the paltry £1.5bn it got for Gatwick last year anyway…


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