CMA goes into reverse
Back in December last year the Competition Commission suggested seven ways to address the separation of cost liability and control it saw as leading to the generation of revenues with little or no regard for costs. In June the CMA stated it would only introduce two of those measures, one of which was a proposal to introduce a dual rate price cap that would lead to a reduction in hire costs in fault accident claims. The CMA has now announced that it does not have the power to implement that proposal and it has been scrapped.
The CMA had proposed that in cases where liability was accepted by an insurer in a short period of time then a low rate cap would apply, with a high rate cap applying in cases where liability was not admitted. The amount that would become recoverable by the hire company would be restricted to one of the two rates. The CMA has now concluded that it does not have the power to implement such a cap, restricting as it would the amount recoverable by a party in tort.
Instead, the CMA is now proposing a cap on the charges that a hire company can make in fault accidents, so that a claimant presenting a claim for hire in a fault accident would be sure of recovery of the hire charges at whatever rate it was that the CMA set. But the CMA recognises that it might have to abandon its attempt to implement a rate cap altogether, leaving CHOs and insurers to adopt aspects of its proposals in GTA II, by the introduction of a credit hire portal and/or by reaching bilateral agreements with individual hirers.
The CMA has now issued a notice of further consultation, with responses due by 4 August. We will wait to see what happens next in this long drawn out saga.
For further details please contact Gavin Perry, Partner on 0151 907 3493.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.