Competition and Markets Authority

Baroness Hayter of Kentish Town Excerpts

Wednesday 8th February 2017 Lords Chamber

Asked by

[Baroness Hayter of Kentish Town]

To ask Her Majesty’s Government whether they will review the extent to which the Competition and Markets Authority, in meeting its objective of promoting competition, is doing so “for the benefit of consumers”, as required under Section 25(3) of the Enterprise and Regulatory Reform Act 2013.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I thank the Minister for giving up his dinner to be here to answer what is clearly not the top question on everyone’s lips. That is a shame because consumers matter and are being short-changed, both in the Brexit talks—their interests do not even get a mention in the 12 principles in the White Paper—and, as I will argue, in the work of the CMA. Yet, as the Question before us sets out, the CMA’s role in promoting competition is not as a good in itself but for the benefit of consumers, so we should judge the CMA’s work on whether it has indeed benefited consumers.

I first queried the obsession with competition in itself, regardless of consumer detriment, with the CMA’s predecessor, the OFT, when working on estate agents. It quite solemnly told me that what was needed was “more providers”—that is, more estate agents—and perhaps some relaxation of the rules on the accurate advertising of homes. I have to say that that is not how house buyers or indeed house sellers saw it.

Sadly, my dealings with the CMA have left me wondering whether it has yet put itself in the shoes of consumers to act as their champion in the marketplace. Certainly, a number of us across the House had our run-in with the CMA over secondary ticketing—ticket touts—as my noble friend Lord Stevenson will set out in due course. If we look more broadly, we see the CMA reluctant to take action, relying time and again on consumers to make markets work better, even in markets where the tiny individual consumer is up against the “big six”, whether in energy or banking. Indeed, so obsessed is the CMA with expecting consumers to regulate markets by “switching” that, in an unfortunate speech, the CMA chair said that the “major problem” in banking and energy,

“is a large number of inert consumers”,

who have,

“to make just one effort to get off the sofa”.

That is no way to speak of consumers, and it is not what will make large, unaccountable industries treat their customers fairly. The whole point of the CMA is to take action in global markets where the individual user can have little effect.

If banking, for example, were consumer-centred, everyone would have access to a comprehensive package of appropriate and affordable services and products. That is not the industry we see today. Rather, banking is highly concentrated—and highly uncompetitive. It is complex, opaque, hard to negotiate and expensive. Indeed, today’s Metro suggests that some bank overdrafts are more expensive than loan sharks. The CMA’s reliance on switching will not drive change when all the banks are essentially the same and offer the same poor service. It is the tiddler versus the giant. Reliance—even onus—on individuals to drive competition is inappropriate in these markets. Asymmetry of information, long-term outcomes, lack of transparency about fees and charges, lack of plain English terms and conditions—we all know the problems that prevent meaningful shopping around, which is of course the precursor to switching.

The CMA was accused of complacency regarding banking reform by MPs on the Treasury Select Committee, which questioned why it,

“had not done more to break the stranglehold of the current account market”.

Even the FCA thought that the CMA had not done enough on overdraft fees and decided to look at the issue itself, while Which? said that the CMA’s Retail Banking Investigation Order,

“simply allows banks to continue to set their own level of exorbitant fees”,

and called on the FCA to take action as the CMA proposals seemed,

“unlikely to transform the market”.

Regrettably, the CMA rejected the calls by Which? for customer challenge groups, leading Which? to question the CMA’s heavy reliance on switching, which puts the onus on the consumer.

Turning to energy, the CMA’s failure to intervene effectively even appears to be recognised by the Prime Minister who, over the weekend, threatened to intervene over npower’s “shocking” price rise, which will push up the energy bills of 1.4 million households by over £100 a year. I welcome the Prime Minister’s intervention, but where was the CMA when it was needed?

There is also the example of Volkswagen. American customers have been compensated some £7,000 each for buying supposedly “low-emission” cars when, in fact, Volkswagen was cheating. No compensation has been secured by the CMA for the 200,000 car owners affected. Instead, the CMA wastes time warning local authorities not to charge higher prices for high-strength alcohol, which they of course do to reduce harm. Where was the interest in public health, parents or the public in that extraordinary guidance?

Returning to where I started, what is the CMA doing about the newest story about estate agents? We read on Saturday that some estate agents are issuing home buyers with demands for hefty payments. Not only does this give rise to a glaring conflict of interest if an estate agent is working for both the buyer and the seller; it takes advantage of desperate house buyers at a vulnerable point in the purchase process.

Going forward, consumers risk being squeezed out and their interests forgotten, as the country prepares for Brexit. The CMA is meant to be their champion. Indeed, since the Government—very sadly—abolished the National Consumer Council, there is no one else to speak for consumers across all markets. I wrote to ask the CMA what it was doing in preparing for our exit, but I was referred only to a voluntary initiative, the John Vickers group, rather than getting the advice I would expect the CMA to be preparing. Since then, indeed on Friday, the CMA’s acting chief executive finally spoke on the subject—albeit in Miami rather than in answer to my letter, despite her description of its role as assisting and advising Ministers and other public bodies, which I assume includes Parliament. In her speech, she failed to indicate whether the CMA wanted to remain, even as an associate, in the European Competition Network, which is a vital source of co-operation as it comprises the European Commission and national competition authorities; or to remain in the European consumer enforcement network, known as Consumer Protection Cooperation.

When the CMA was created, I and my noble friends Lord Stevenson and Lord Whitty pushed for a consumer panel such as that of the Financial Conduct Authority and Legal Services Board, and we were right to do so. Had there been such a panel, the issues that I have raised tonight would have been raised time and again at the CMA board. It would have heard these views at a time when it could have taken them into account in its work programme.

Will the Government review whether such a consumer panel is needed—or, at the very least, dialogue, which does not require legislation—noting the view of Which? that the CMA’s inquiries appear to come from a predominantly economic background and approach, which rather excludes the consumer point of view? Indeed, in the pack helpfully prepared by the Library for today’s debate, there was virtually no commentary on the CMA’s record—testimony to the absence of proper scrutiny and accountability, particularly regarding consumers. Will the Government ensure that consumers are at the table for Brexit discussions, since there is some doubt that the CMA can represent them adequately, if at all? Will the Government publish their or the CMA’s thinking on Brexit, including on continued participation in those vital European networks, the ECN and CPC? Lastly, will the Government publish any impact assessment that they have undertaken of how to replicate current EU-wide competition activity, for the benefit of consumers?

--- Later in debate ---

[The Earl of Courtown (Con)]

My Lords, I thank the noble Baroness, Lady Hayter, for enabling me to respond to this interesting debate. Some important points were made both by the noble Baroness and by the noble Lord, Lord Stevenson.

I agree with the noble Baroness that it is important that markets work in the best interests of consumers. That issue is at the heart of what the Government believe. My right honourable friend the Prime Minister has said:

“Where companies are exploiting the failures of the market in which they operate, where consumer choice is inhibited by deliberately complex pricing structures, we must set the market right”.


The UK’s independent watchdog for competition, the Competition and Markets Authority, along with the economic regulators, is a key player in making sure that we achieve this goal.

My department is in the front line of making markets work for consumers. Empowering consumers is critical to delivering the department’s aims and objectives. The departmental vision includes a commitment to secure better outcomes for consumers by creating a more competitive business environment. I recognise that it is important that we live up to that vision. That is why, in the Autumn Statement, my right honourable friend the Chancellor announced that the Government will produce a Green Paper that will closely examine markets which are not working fairly for consumers.

The Government are working up proposals to step in to strengthen competition where markets fail and consumers may not be getting a good deal. This provides support to the CMA’s statutory objective to make markets work in the best interests of consumers. As Her Majesty’s Government we are keen to give the CMA the right resources and the right incentives to help it deliver on its statutory goal. This is why we have set the CMA the target of achieving £10 of consumer benefit for every £1 it spends.

The Government continue to challenge the CMA to deliver more for consumers. Through the Government’s strategic steer to the CMA we have made clear where we think it should focus its efforts to ensure that competition thrives for the benefit of consumers. It is important, though, that the CMA remains free to use its resources as it considers most appropriate, to get the best deal for consumers. To help achieve this goal, the CMA uses a set of prioritisation principles to decide which work it should undertake to have the biggest impact. The principles include impact and strategic significance.

Every year, the CMA consults on and publishes its annual plan, which sets out its strategic goals for the year. In the annual plan on which it has recently consulted, the CMA commits to,

“continue to prioritise work that has the greatest impact on ensuring a good deal for consumers—including the most vulnerable”.

This approach has led the CMA to tackle some key markets in recent years. It has recently concluded two of the largest and most complex market investigations that the United Kingdom has seen—into the energy and retail banking markets, as mentioned by the noble Baroness and the noble Lord. It has also undertaken important market studies into higher education and the provision of legal services, and it recently announced a new study looking at the operation of the care homes market. The CMA continues to assess mergers to make sure that they do not create market conditions which could lead to poor consumer outcomes or a lack of choice or competition. It has also upped its game on cartel and anti-trust enforcement, concluding high-profile cases—for example, in the pharmaceutical sector—and issuing substantial fines.

It is clear that this work is not a purely academic exercise and it is important that the CMA and the Government assess and measure the impact of the CMA’s work. To this end, the CMA assesses its total impact on consumers as part of its annual report. Between 2013 and 2016, the CMA demonstrated that it delivered on average £687 million-worth of benefit to consumers per year on an annual budget of £65 million, exceeding its 10:1 target. The NAO has also recently looked at the operation of the UK competition regime. It found that overall the regime is working well. However, it identified that the CMA could do more. The CMA is keen to build on its success and has committed to review the way that it conducts market investigations to ensure that they are as efficient and effective as they can be and improve the CMA’s brand. That review will conclude in the next financial year, and the CMA hopes to use it to develop this important tool to help make the greatest difference to the largest number of consumers and businesses.

The Government also take very seriously their obligation to review the operation of legislation to ensure that it is achieving its objectives in the best possible way. We consulted on a number of measures last year to improve the regime. A response will be issued in due course. That is why we are committed to review the operation of the parts of the Competition Act 1998, the Enterprise Act 2002 and the Enterprise and Regulatory Reform Act 2013 which give the CMA its powers. These reviews must be concluded by April 2019. Over this Parliament the Government will continue to keep under review whether the CMA has the right powers and whether it is using them to achieve its statutory goal.

The noble Baroness mentioned the connection between the CMA and Brexit. On 4 February the CMA’s chief executive outlined its role as the UK exits the European Union. This speech is published online and, if it would help, I can give information about where the noble Baroness can find it.

[Baroness Hayter of Kentish Town]

I referred to it; it was the one given in Miami, which I read with great care.