What happens when British charitable institutions designed to serve the public good are treated like market actors and then a policy regime imported from the United States gets imposed on them? In the case of UK universities, the consequences have become increasingly difficult to ignore. The financial instability now threatening dozens of higher education institutions (HEIs)—a category of entity that is still formally classed being in the charitable sector (albeit as “exempt charities”)–is forcing a critical reconsideration of whether applying commercial competition policy to universities has gone too far. If the principles underpinning anti-trust law (particularly those ultimately derived from the Sherman Act in the United States) are unsuitable for cultural institutions such as museums, churches, or libraries, one might reasonably ask: why are universities—whose remit is arguably broader and more clearly charitable—subjected to the same regulatory logic?
The Competition Act 1998, the key legislative instrument shaping the UK’s competition framework, prohibits anti-competitive agreements and abuse of dominant positions. In doing so, it seeks to protect consumers from monopolistic behaviour and ensure market fairness. However, its extension to universities has had unintended consequences. Universities are not merely providers of services in a neutral market; they are mission-driven institutions, historically embedded within local and national contexts. The framing of students as consumers and universities as competitors—solidified in policy from the 2010 Coalition onward—has encouraged duplication rather than cooperation, shared infrastructure, or regional mission cohesion. Of course, there isn’t a real market here: the prices (tuition fees) are set by the government and students are allocated to universities through a public sector body called UCAS.
This problem is no longer theoretical. Financial strain is now systemic across the sector. In early February, Wendy Larner, Cardiff University’s Vice Chancellor, publicly stated the strictures of competition law are actively inhibiting cost-saving collaboration between geographically proximate institutions. For the benefit of international readers, I should explain that in the UK, it is not unusual to find universities whose buildings sit cheek by jowl next to the buildings of other universities, an arrangement that appears to scream out for a merger to achieve economies of scale. Cardiff University, which is in serious financial difficulties and is talking about closing its nursing college (!!) is an example of a university that shares a city with other universities whose campuses are also scattered across town.
Mergers, similar to the one undertaken by the universities in Manchester in 2004, and collaborations short of a merger, such as the collective provision of janitorial services, seem to be inhibited because they might now be construed by the Competition and Markets Authority (CMA) as cartel-like behaviour under the Act. Universities that once shared specialist staff, jointly invested in laboratory facilities, or coordinated postgraduate research training now find themselves navigating a thicket of legal ambiguities. My impression is that the CMA is run by people who read Adam Smith’s famous book and are now inappropriately applying it to universities. In a great sentence, Smith wrote that “people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” That may well be true of car dealers hanging out at the country club– they might well agree to fix prices somewhere around the ninth hole of the golf course. But universities are different because they are charities. When people from different universities re-unite at conferences, they are producing a public good rather than trying to find a backdoor route to the creation of a cartel.
To its credit, the CMA responded by Wendy Larner’s comments by saying that it is willing to have conversation with universities and to be flexible about the rules (see here and here). While the Competition and Markets Authority (CMA) has issued some clarifications by suggesting that collaboration is not necessarily impermissible the climate of legal caution remains pervasive. The chilling effects are real, even if not always explicitly codified. I’m not speaking here based on anything I have personally observed but I am basing my comments on what I have read online.
From a historical perspective, this represents a profound shift. British universities have long been seen as charities. Originally, they were closely tied to the established Churches (Church of England in this country) and then in the nineteenth century we had non-denominational civic universities. In the twentieth century, their funding, legitimacy, and purpose entangled with state agendas (think of Cold War science policies). Their institutional success has often depended on collaboration rather than competition. The Robbins Report of 1963, for example, imagined an expanding and coordinated system of higher education, with universities working together to meet national needs. The author that report was certainly a supporter of competition in commercial markets—he was a classical liberal friend of F.A. Hayek. It was not until the market-oriented reforms—accelerated in the New Labour and post-2010 periods—that universities began to be reconceptualised as companies.
I’m not even going to get into the issue here of whether anti-trust law is a good thing or whether the world would have become a better place had the Sherman Anti-Trust Act, which has now been emulated in every country influenced by American soft power, had never been created. (I’m sympathetic to that counterfactual but will leave that to another blog post). I’ll simply point out that many scholars, particular in my home field of business history, have long been sceptical of both the early, path-setting anti-trust laws and the motives of their creators (see this paper). My main argument here is that we shouldn’t apply competition laws to universities because they are charities, not companies!
Theoretically speaking, the case for viewing universities as companies rests on shaky ground. While classical economic theory correctly champions competition as a driver of innovation and efficiency, the university sector defies many of the assumptions necessary for those outcomes to materialise. Information asymmetry is profound—students cannot fully evaluate the “product” they are purchasing until years after the fact—and the “goods” on offer (teaching, research, cultural engagement) are not easily interchangeable. Moreover, duplicating niche programmes or competing for the same shrinking pool of students (think of how the post-2008 fertility crisis is about to hit universities) does not lead to efficiency; it results in waste. This problem is particularly acute in regions with multiple institutions serving overlapping communities. In such cases, the inability to merge departments, co-deliver teaching, or rationalise real estate due to fear of breaching competition law borders is unhelpful.
The analogy with the Sherman Anti-Trust Act, as applied in the United States, is instructive. That legislation was justified on the grounds it was necessary to prevent industrial monopolies from exploiting consumers. But when applied to universities—which do not exist to maximise shareholder value—it risks misdiagnosing the problem entirely. Indeed, the collapse of several for-profit universities in the US should serve as a cautionary tale: market logic, when applied too uncritically, can hollow out the very institutions it purports to reform.
If we do have to think of universities as companies, a more appropriate model might be drawn from the regulated public utility sector (think of electricity and natural gas pipeline companies), where certain forms of collaboration are not only permitted but required to ensure service continuity and universal access. Alternatively, one might revisit the statutory exemptions available to public broadcasters or national cultural bodies, which recognise that competition law should not be enforced uniformly across all sectors of national life. If universities are to survive and thrive they must be permitted to act like charities.
Perhaps a wholesale exemption from competition policy may not be necessary but clearer “safe-harbours” for collaboration and pre-authorisation for all mergers could make a substantial difference. But continuing to treat universities as if they are indistinguishable from mobile phone providers or supermarket chains is intellectually indefensible and practically damaging. Don’t get me wrong– I love that the UK has so many competiting mobile phone providers. It’s just the universities are different. It has taken centuries to build a higher education system with global reputation and local relevance. Let us not dismantle it through policy frameworks designed for a fundamentally different domain of human effort.
Is it time, then, to reconsider not just the letter of the law, but the philosophy behind it? The financial crisis in UK universities is not solely a consequence of external shocks or demographic decline—it is also the product of a misalignment between institutional purpose and regulation. If collaboration is what the moment demands, then regulation must follow suit. Perhaps the UK needs to declare independence from the Sherman Anti-Trust Act and the philosophy behind it.
The Past Speaks 