Competition and Markets Authority: Legislative and Institutional Reforms

Lord Tyrie Excerpts

Wednesday 8th May 2019 Lords Chamber

[Lord Tyrie (Non-Afl)]

I am extremely grateful for the support that I have just received from the noble Lord and from a number of other noble Lords around the House. I congratulate the noble Baroness, Lady Hayter, on securing the debate and also of course declare significant interests, both as chair of the CMA and as author of the letter to the Secretary of State to which her Question on the Order Paper refers. It will not surprise anybody if I say that I agree with everything that I have said in my letter—just for the avoidance of doubt. I also want to apologise to the House for missing the opening few moments of the debate.

Some interesting comments have been made, some of which require further thought. There have also been some points of disagreement. Where it is warranted, rather than address those points directly now, I shall come back to them—to the noble Baroness on one, and there may be one or two others.

I think that there is widespread and growing cross-party consensus that competition law and policy are in need of some reform. The legal framework appears to be letting ordinary consumers down. Since the Competition Act was passed more than 20 years ago—here is some of the evidence of the need for reform—profit margins have risen from 20% to 60%; the turnover share of the UK’s largest businesses has risen from 21% to 28%; loyalty penalties for customers in telecoms and financial services alone stand at more than £4 billion a year; and there is price discrimination against the vulnerable in essential services and price gouging by pharmaceutical firms—that much is scarcely in dispute.

Meanwhile, the growth of the digital economy is bringing huge benefits, but it is also making competition and consumer law look increasingly out of date and at risk of being unable to address anti-competitive behaviour before the market moves on and identifies new areas. The existing framework is at risk of being unable to protect millions of previously quite capable and competent consumers who are now vulnerable to exploitation, many of whom are simply time poor and do not have time to address and absorb the huge amount of information on the web required to make good decisions.

When the Secretary of State asked me to undertake this work—he is not a long way away from me at the moment, as a matter of fact—I am sure that it was with some of the points that I have just made in mind. The proposals that I have made are aimed ultimately at preserving, not replacing, an independent competition framework and adapting it to make it more fit for the future and responsive to developments in fast-moving markets and to problems faced by ordinary consumers. There are a large number of proposals in the 44 pages of the letter—it might be the longest letter that I have ever written—and I am very impressed by the number of noble Lords and noble Baronesses around the House who have clearly read it.

In the interests of time, I shall draw noble Lords’ attention to just four of the proposals. First, several new duties are proposed; I shall highlight two in particular. It is proposed that a new duty be imposed on the CMA to ensure that the economic interests of consumers are paramount—several contributions referred to that—and to act more swiftly than we currently do. That should affect the way in which our work is scrutinised in the courts.

Secondly, on the markets regime, changes are proposed that would allow the CMA to order legally binding remedies in markets where competition has been compromised. The scope of that regime needs to be broadened so that it can address a wider range of consumer harm. And it needs teeth, in the form of financial penalties for those who fail to comply with CMA rulings—I think that there was a good deal of support for that.

Thirdly—I think this is an area where there is already widespread agreement in principle—consumer law enforcement needs to be strengthened significantly. When companies break consumer law and rip off consumers with unfair trading practices, or exploit them through unfair contract terms, the CMA currently has to apply to the courts to request them to order the practice to stop. Firms do not get fined and they are no worse off for having broken the law. So, just as it does when it takes on firms engaged in anti-competitive practices, the CMA should be able to decide itself that a firm is breaking consumer law and to order it to stop. It should also be able to fine firms that then flout the law.

The fourth area that I will refer to has also been mentioned by one or two noble Lords. More needs to be done to promote personal responsibility for complying with competition and consumer law. Individuals are far less likely to break the law if they know that they may be held liable for it. The public rightly expect personal responsibility for serious wrongdoing by firms. With that in mind, the proposals include measures to increase board-level responsibility for complying with the law so that both competition and consumer protection are in the minds of company directors. It is also proposed that, for serious breaches of consumer protection law, director disqualification should be a possibility, just as it is for competition law offences.

I have only a couple more points to make, as I have already had the opportunity to make so many points in the letter. All regulators accumulate vested interests; they cluster around regulators. Sometimes they make crucial points. They are also often very effective at getting at Parliament. It is extremely important that we at the CMA all listen to those vested interests, but it is just as important that regulators avoid being captured by them. Certainly, we do not intend to be captured by vested interests in competition law.

I end by asking the Minister to update the House on the Government’s view by responding to a few questions. Does he agree that far-reaching reform to the framework for competition and consumer law is now required? Does he agree that the proposals outlined in the letter are a step in the right direction? If he does, will he tell us how and when the Government will take them forward? Finally, does he agree that we should try to continue with reform to competition law as far as possible on the basis of the cross-party consensus for the legislation that has been in place pretty much since the Labour Government’s introduction of the Enterprise Act a little over 20 years ago? I hope that he can give us some encouragement on that. I certainly think that he has had some encouragement on that last point from a good number of contributions around the House this evening.