Competition and Markets Authority

Lord Stevenson of Balmacara Excerpts

Wednesday 8th February 2017 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank my noble friend Lady Hayter for her very fine introduction to this debate. It is of wide interest and it is a pity that we do not have either a longer list of speakers or a larger audience to whom we could appeal—but those who are here are, I am sure, actively writing down everything that has been said, to study it for later consumption.

I do not wish to go over the ground that my noble friend covered so well, but it is interesting that she made several points that I also want to make. I will therefore cover some of the ground, but not quite from the same direction. The first question is how the existing structure perceives its responsibilities in relation to consumers, given we are told that the primary purpose of the CMA is to make sure that consumers are dealt with fairly and appropriately in the market. The truth, as my noble friend said, is that, without satisfactory representation and active dialogue with consumers, it is very difficult to see how they would be able to be in that position.

I think, however, that it goes deeper than that. She touched on something that I want to stress. The change in the way Government themselves have dealt with the consumer interest in the past 15 years is extraordinary. In 2010 there was a fully active department within BIS, as it then was, dealing with consumers’ interests and making sure that consumers were represented in all decisions taken by that business-facing department. Now there is virtually no involvement in the interests of consumers. It is entirely a producer-led department with only producer interests at heart.

It is not surprising, therefore, that the public interest, on which my noble friend spoke, is not being treated well. As she said, consumers are not constantly searching for ways in which they can maximise their situation in the market; they are living their life and getting on with it. They do not expect to have to make all these complicated trade-offs and decisions. Certainly, if they did try, they would not have the information. Some change has happened in recent years in terms of MyData, although that seems to have run out of steam, and in terms of trying to encourage switching.

Switching itself, however, is not the issue. The issue is knowledge, the ability to understand how action could work in a policy frame in order to change attitudes and approaches and action, not just sitting around waiting to switch in the hope that that will work. Her description that this was tiddlers playing with giants rang true. The asymmetry of information and the way in which big business ever since the time when Adam Smith identified it will always conspire against the consumer means that we do not have a very satisfactory or fair situation.

The second point is whether the regulatory system that has been created in recent years has consumers’ interests at heart. It does, as my noble friend said, look more like an economic regulator than it does a regulator in support of those who are being affected by decisions of business. One issue that I have raised before in your Lordships’ House is this question of what would be seen as a result in some of the cases that are being discussed. They always seem to revolve around the question of whether the market is working well in terms of price and whether the firms involved are getting a reasonable return on capital invested. It is not about whether consumers are being ripped off and whether harm is being done.

I recall an earlier regime, but I am afraid some of the thinking has moved forward to this one, in which I was involved in the film industry. At the British Film Institute we were concerned about the apparently monopolistic behaviour of the American film distributors. There was virtually no UK-based distribution and therefore no market in which they could operate. On three occasions submissions were made to the then Competition Authority about this issue. Each time it found that there was a complex monopoly operating, so there was no question that harm was being done. On each occasion, however, it said that it lacked the ability to interrogate that on behalf of consumers because the foundation Acts did not deal sufficiently with the issue concerned in the way that was wanted.

So I think that this is a long-term solution. I do not think that the Government should be picking up the blame for everything, but I think the basic, underlying point—I think this was the point of my noble friend’s original argument—was that we need to rethink what is required of the sort of market arrangements that are being set up in terms of both initial concern for consumer rights and how that can be expressed in a change of policy as we go forward.

I will take three short examples and end with a proposal. The first, as mentioned by my noble friend, is the question of secondary ticketing arrangements. She and I and others were involved in trying to change the Consumer Rights Bill that was going through Parliament in 2015. The incident that caused us the most concern was that, as is normal with many of these Bills, we were receiving lobbying from a number of people, including many of the companies involved in the secondary ticket market.

What was extraordinary about the meetings that we held with these bodies was that they were incredibly unconcerned by the prospect of the amendments that we were considering and the campaign and the coalition that we were building up across the House. We were pretty confident that we could get changes to the Consumer Rights Bill, as it then was, because we felt that we had made the arguments in Committee and we were approaching Report with a real chance of getting some change. We knew that this would also have support in the other place. They were not concerned at all. They were completely insouciant about the prospect of action being taken in Parliament, and indeed were extraordinarily challenging about some of the basic assumptions we made about how the market might be transformed. Of course, it turned out that they had reason for that. In parallel to the discussions that they were having with us, they were talking to the CMA about a series of undertakings which, when they were produced, were less burdensome on them than anything that we were proposing to do in our amendments. They knew, and we did not know, what was going on and what was going to happen as the result of the discussion.

I find that unacceptable, and I hope that when the Minister responds he might reflect on whether there is an issue here that needs a bit more ventilation about the operations of the competition authorities as we currently have them when an issue of public interest is being discussed and legislation is being considered. Although it is right and proper that the CMA, in its present constitution, is independent of government, I do not think that it is right that we should be in the position of possibly making bad law as a result of lack of knowledge and understanding of what is going on.

My second point is topical. We are considering in Committee, and are about to go to Report on, the Higher Education and Research Bill. Within that, the Government are proposing to set up a new body called the Office for Students, which they consistently, in all the debates and discussions, refer to as a regulator of higher education. When they are asked, however, to respond to amendments on that, it is very difficult to see whether it is a regulator. It is not, apparently, to be part of the Regulators’ Code. It will not have economic requirements, as do all other regulators, as required by previous Acts discussed in your Lordships’ House, to take account of growth and economic well-being. It would not have those responsibilities. It is apparently a regulator without a regulatory superstructure. It can operate in a regulatory mode but it will not have the responsibilities or, indeed, the fall-back or the ability to be queried and appealed against as a regulator.

This is complicated by the fact that, in the Consumer Rights Act 2015, the CMA is given responsibility for assessing competition issues in relation to consumers accepting places at universities. This is turning out to be quite interesting in the sense that the CMA seems to have no problem saying that some of the practices it is seeing are not acceptable. It is now apparently obtaining undertakings from a range of institutions that it has been involved with—it has done a study of about half a dozen—which will involve changes to the ways prospectuses are published and what they say. It will change the nature of conditions placed on some students when they graduate. There is quite a significant range of issues which would, I think, probably, in most people’s minds, be more appropriately applied by OfS if it was a regulator. My question to the Minister, therefore, is: is there a possibility that we might look at the boundary issues relating to when you have a generic regulator and when you have a specific sector regulator? I am not expecting a full answer today—I am not going to get one, clearly—but I think this is a matter for further debate, possibly after the Bill is finished. I register it as being an important issue.

Finally, I think my noble friend is right. I think now it is appropriate to think in terms of reviewing where we are in terms of where the public interest is in how consumers are protected. The existing bodies, as I said, seem to be broadly inhabiting an economic and not a policy world, but there does not seem to be any mechanism because there is nothing left in government that could take that forward. Even having a consumer panel, as my noble friend said, would be a step forward, but we do not have one in the CMA.

The other question is whether additional duties might be responsible. My noble friend did not mention this, but I know she bears the scars of attempts over the years to try to get mainly the financial regulators but also those in a broader range to have inserted into their main mission statement a fiduciary duty. I think that is something to be looked at. Again, we also should think about how all this is carried out in terms of bodies such as the Chartered Trading Standards Institute because, at the end of the day, you cannot have effective consumer action unless there are people checking what happens to consumers. With the cuts made in local government affecting the number and the activity of Trading Standards, there is a perfect storm there—again, something that we might return to at a later point.