Competition and Markets Authority: Legislative and Institutional Reforms

Baroness Bowles of Berkhamsted Excerpts

Wednesday 8th May 2019 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I too welcome this debate and thank the noble Baroness, Lady Hayter, for securing it. It is a pleasure to follow the noble Lord, Lord Tyrie, and I recommend his speech at the Social Market Foundation earlier today, which I attended. I declare my interest as a director of the London Stock Exchange plc.

The proposals of the noble Lord, Lord Tyrie, are part of a wider review of the competition regime, and the consumer focus also fits with the direction of travel of the inquiries into the FRC and audit, and growing concern over the power of large companies, especially in services, along with new business methods and contracts and new types of dominance and oligopoly, as the noble Lord, Lord Whitty, said.

If there is a generic flaw in the state of our laws concerning companies, it has been in expecting that the public good, or the consumer, can be served in a derivative manner—for example, by promoting competition for the benefit of consumers. It cannot be presumed that competition always serves the public well, when bad practices can be market-wide and indeed driven in that direction by the need to compete. Therefore, I welcome suggestions to have consumer protection powers that mirror those in competition and that, for both consumer protection and competition, the procedures should be capable of collecting more and earlier information and of being swifter in delivery and more effectively enforced.

Given that the noble Lord, Lord Tyrie, has delivered a raft of suggestions and has rightly observed in his letter that further consultation and details will be needed, will the Minister let us know what form of consultation is envisaged? Will it be by the Government, the CMA or both, and when? Will all the proposals be progressed together, or can some be done more quickly?

Several of the proposals would align with practice and developments in competition authorities in other countries, where there is already, to some extent, a track record. The UK has been seen as strong in competition matters and, while that might be true on observing state aid rules and permissiveness for mergers—some would say too true—somehow we have got into the position, laid out by the noble Lord, Lord Tyrie, on page 39 of his letter:

“The UK is not only one of the best jurisdictions for companies to defend a competition case; it is one of the best jurisdictions to lose one”.


That is because the review system allows opening up of the whole case, allowing new evidence even if it could have been submitted sooner to the competition authority. That is not the norm for competition cases in other countries.

Further, our system allows setting aside of remedies until the end of the review, for which procedures have become overly long and have departed from the written procedure that was originally envisaged. If a company loses a case, although the fines available match those in other competition authorities, at 10% of global turnover, the amounts levied have ended up being much lower. With some types of business, the length of the investigation, added to by any review and deferment of remedy, can be sufficient for the company to benefit substantially, taking a substantial market share or playing a part in distorting business practices by establishing new norms or even completing the whole chain of the value cycle in that business. Then, if the fine is small, it can become a price worth paying.

It is a tough call for a regulator to ask simultaneously to have more powers and to prune the scope of legal appeal, but in this instance a good preliminary case to do that has been made. I have some sympathy with the point made by the noble Baroness, Lady Neville-Rolfe, about doing the investigation and being the judge, but that does happen with other regulators as well. What irritated me even more when I had oversight of competition in the EU was the lack of transparency, in terms of not being able to find out what was going on, sometimes even for the business that was under examination—that drove me to go to Luxembourg, to the ECJ, and to sit through the Microsoft tying and bundling case. Actually, I thought the judges did a very good job of digging out the facts, but without that I would really not have had a good understanding of what had been going on, and the public are often left not knowing what has gone on.

Most of the other proposals have two common threads. The first is making the consumer interest specific and stand-alone, enabling bad practice to be dealt with, whether or not it has a competition aspect, and making procedures and remedies the same as under competition cases. I will take a great interest in how that progresses and will measure it against the Australian law of unconscionable conduct in commerce. As I have suggested before in debates about corporate liability, it would be a good idea to have some similar catch-all available in our law. I want all bad behaviour in commerce to be caught, certainly for consumer protection but also between other organisations or businesses.

The second thread is enhanced powers, applicable for both consumer and competition matters, ranging from greater information-gathering powers to more flexible procedures regarding market studies and investigations that do not tie into an inevitably long timetable. This is important considering the speed and innovation of modern business, particularly in the digital age. But how “Get it done quickly” is to translate into law while allowing thoroughness will need some care, more resources and rapid appointments to panels.

The idea of having a Financial Services and Markets Act Section 166-type inspection, paid for by the company, is floated as a possible additional tool and a way of getting expertise. This idea was put forward in the context of the Kingman and CMA reviews of the FRC and audit, and it pops up here as well. It needs examination as to how and when it would be used so that it does not get out of hand, as did the monitoring trustee arrangements that the EU Commission put in place for Microsoft. I recall criticising that arrangement for creating a “Microsoft regulator”, and in fact the Commission lost that part of the case at the ECJ. We therefore need to examine whether, because of the nature of business, it has got to a situation where we are saying that we need to create mini internal regulators, but Section 166 may have become overly fashionable.

I agree with requiring more individual responsibility, and that must cover senior managers and executive committees, not just boards. I am pleased to see the suggestion of more use of director disqualification; again, I have recommended several times that when there is a serious finding in business governance and culture, there should be an automatic review of whether the directors should be recommended to the courts for disqualification. It is possible for the Secretary of State to instigate investigations, but that should be kept for special cases. In general, it should not have to rely on government intervention.

I concur with other noble Lords that this is a robust set of proposals, and they have my support and that of these Benches.