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The OFT has provisionally decided to refer the market for statutory audit services to large companies in the UK to the Competition Commission for a market investigation. A final decision will be taken following a six-week consultation period.

The OFT has been concerned for some time that this market is highly concentrated, with substantial barriers to entry and switching.

In May this year, the OFT announced that it had made the provisional decision that the statutory test for reference to the Competition Commission had been met. However, before reaching a decision on whether or not to make a reference, it wished to explore in more detail whether there was a reasonable chance that appropriate remedies would be available to the Competition Commission. Since then it has held a number of roundtable discussions and bilateral meetings with interested parties to discuss whether there may be such remedies.

Clive Maxwell, OFT Executive Director, said:

'We have had valuable engagement with a wide range of industry participants over the last two months and, in light of those discussions, we believe at this time that a reference to the Competition Commission is an appropriate response to our long-standing competition concerns in this market. A reference would give the CC the opportunity to conduct a thorough investigation into this market and determine whether there are any adverse effects on competition. However, we will of course consider any consultation responses before making a final decision. We anticipate announcing the final decision before the end of 2011.'

Interested parties wishing to respond to the consultation can send written representations to the OFT before 9 September by emailing auditconsultation@oft.gov.uk.

The consultation document is available from the Competition in the Audit Market page.

NOTES

1. The OFT announced on 17 May 2011 that it considers that the statutory test for reference in Section 131 of the Enterprise Act 2002 is met, namely that there are reasonable grounds for suspecting that there are features of this market that prevent, restrict or distort competition in the UK.
2. The OFT concluded that in this instance it did not require a Market Study to reach the view that the section 131 threshold has been met This is because the OFT has been keeping this market under review for some time and participating in regulatory and policy processes. It has therefore developed a good understanding of the performance of the market and notes that information has been readily available for the OFT to assess without the need for a market study. 
3. Downnload the OFT's published guidance on Market investigation references (pdf 1.03Mb).
4. Further details on the OFT's work on the audit market, including its submissions to the House of Lords Select Committee on Economic Affairs, can be found on the Competition in the Audit Market page.