Competition and Markets Authority: Legislative and Institutional Reforms

Baroness Hayter of Kentish Town Excerpts

Wednesday 8th May 2019 Lords Chamber

Asked by

[Baroness Hayter of Kentish Town]

To ask Her Majesty’s Government what assessment they have made of the letter from the Competition and Markets Authority (CMA) to the Secretary of State for Business, Energy and Industrial Strategy dated 21 February which sets out the CMA’s proposals on legislative and institutional reforms to safeguard the interests of consumers and to maintain and improve public confidence in markets.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, the Question posed for debate is exactly the one that I want to ask of the Government: what is their response to the CMA’s proposals?

In one sense, I am sorry that we are debating this now, rather than when the CMA was established, when we did try to raise these very issues. My noble friends Lord Whitty and Lord Stevenson and I tried to get a consumer focus written into the CMA’s objectives, as well as its structures, via a consumer panel or board appointments, but we were rebuffed by the coalition Government—even as, in the same breath, they abolished the National Consumer Council. That did not augur well for consumer interests, which is why I welcome the approach set out in the CMA’s letter to the Secretary of State for Business, Energy and Industrial Strategy. I hope he will use the word “Energy” in his title to run with these proposals.

As we said at the time, and as the CMA chair has said, competition is not an end in itself but a tool to serve the intended beneficiaries: consumers. Although without competition, consumers are disadvantaged, if not completely ripped off, a simple economic analysis of markets without measuring consumer detriment simply is not enough—as the long-suffering public know, with higher prices and unfair practices. As the noble Lord, Lord Tyrie, wryly muses:

“Adam Smith’s invisible hand appears rather idle”.


There are particular reasons why we need regulators —or the law—to protect consumers: sometimes because there are monopolies but sometimes because of the specialist nature of the providers—doctors and lawyers come to mind. Often, though, regulators are needed where the individual consumer cannot challenge the provider themselves—unlike with a broken table or a faulty car, where the consumer can see the problem and knows who sold the goods to them. With many goods and services, the imbalance between consumer and provider is immense, particularly where consumers rarely make a purchase—houses and pensions come to mind; where the consequences are long term or invisible to the client, as with will writers and surveyors; where buyers cannot shop around for quality or price—letting agents, lawyers and e-commerce are examples; or where the mischief is so large that no individual can take on the system, such as when Volkswagen cheated to make cars look less polluting than they were. Drivers bought them in good faith, but they were actually mis-sold those cars. But what happened in the UK, as opposed to the States? There was no action here and no compensation for consumers, whose car resale value promptly dropped.

At present, the CMA can only address consumer detriment caused by an adverse effect on competition, not by gross mis-selling or unfair contracts. I recently won a case at the Advertising Standards Authority in which a so-called “treatment” for dementia had been advertised, but all that happened after I won was that the ads could no longer appear. There was no fine on the company. No one was responsible for contacting people who had bought these junk products, and there was no compensation for purchasers.

We need a regulator that will step in to protect all consumers from those who break the law. The current proposals in the letter to the Secretary of State would give the CMA the power to fine firms that flout consumer law.

We have debated past CMA failures in this House before, particularly in relation to secondary ticketing, where the CMA originally failed to measure the consumer detriment or to grasp that, in such a market, only it could act. I am pleased to say that more recently, it has applied for an injunction to stop Viagogo’s unacceptable behaviour. However, if it had had the power to fine earlier, it could have acted more quickly, cheaply and decisively than it could via drawn-out court processes. Although I am sure that Viagogo could have absorbed any civil fine, given its lucrative but dishonest practices, the threat of personal disqualification might have made the difference. Similarly, the CMA had to embark on lengthy enforcement against the care home company Sunrise Senior Living before securing a £2 million settlement for the inflated costs in T&Cs. However, the new proposals would have given the CMA interim measures to protect vulnerable consumers from unfair practices and even award compensation.

Another example is medicine, where pharmaceutical companies’ control of prices is wholly unchallengeable by individual patients, who either bear the costs through higher taxes for the NHS, the bulk purchaser, or lose because NICE feels the drugs are too expensive to prescribe. Indeed, even the bulk purchaser, the NHS, is weak in the face of determined pharmaceutical companies. The CMA’s involvement over Phenytoin suggests that the NHS might be losing some £200 million a year through such unfair pricing.

With unfair contracts, individual consumers cannot challenge the system, so a robust regulator is needed to stand in their shoes, but the CMA has lacked the tools to put the consumer centre stage, with its hitherto narrow focus on competition and process rather than practical outcomes meaning that consumer detriment goes unchallenged. So I strongly welcome the proposal for a new duty to make the economic interests of consumers and their protection from detriment paramount. This should always have been the objective, as any attempt to regulate markets should be to safeguard consumers. However, many regulators appear closer to the providers—the regulated community—than end users.

I have spoken in the House before about the Government’s Regulators’ Code which, as I recall, speaks of working with the regulated community but not with consumers. The National Consumer Federation’s Consumer Charter for Regulators is vital here. As it says:

“The main purpose of regulation is to promote and protect the interests of consumers … where market forces alone would not deliver the best outcome”.


So consumers must be at the heart of regulation. This is where the new CMA approach is brilliant, along with its focus on enforcement, including legal powers to order remedies, civil fines for individuals and, vitally, the disqualification of company directors for breaches of consumer law, which can already happen for competition law breaches. Just as consumers will pursue complaints only where there is the possibility of redress, company directors will prioritise compliance only where their own position is at risk—and potential disqualification is a meaningful risk.

It is no surprise that consumer representatives have welcomed these proposals, with Which? commenting:

“Giving the regulator … a duty to put consumers first will help tackle the imbalance of a system that … worked in favour of powerful businesses rather than consumers”.


Citizens Advice says the proposals are,

“strong stuff ... and great to see”.

Both groups’ eyes, however, are on the Government, who need to ensure that these proposals are swiftly implemented to protect consumers.

Consumer confidence in some markets is shockingly low, with only one-third trusting gas and electricity suppliers, the very markets supposedly overseen by regulation. These CMA proposals appear when the public hardly trust big providers or the machinery of the state to protect them. As the noble Lord, Lord Tyrie, says, the CMA proposals are,

“taking place against the backdrop of an erosion of trust”.

The Government should heed his warning. Without these changes, public dissatisfaction will only grow, so I urge the Minister today to give a positive response from the Government and an undertaking to act rapidly to implement these proposals.