Competition and Markets Authority: Legislative and Institutional Reforms

Lord Whitty Excerpts

Wednesday 8th May 2019 Lords Chamber

[Lord Whitty (Lab)]

My Lords, I join in applauding very much the tone, and much of what was suggested, in the letter sent by the noble Lord, Lord Tyrie, to the Secretary of State. As has been said, the UK has a highly respected competition regime, and has been instrumental in devising the European regime—which has had some successes and some failures. As my noble friend Lady Crawley says, Brexit now presents us with some problems. My sub-committee of the EU Select Committee produced a report relatively recently on competition and state aid post Brexit. It means that the competition authorities here have to take on more resources, because they will have more cases—plus the state aid cases referred to by the noble Lord, Lord Turnbull. It also gives them an opportunity to rethink their role, which I think is what the noble Lord, Lord Tyrie, has done here. I hope that the Minister and the Secretary of State take his propositions seriously.

What is the end of this policy? That is the central point. As my noble friend Lady Hayter says, the end is consumer benefit. Like her, I recall us making that case at the Committee stage of the then Enterprise and Regulatory Reform Bill, which set up the CMA in its present form. We were not properly heard then. We need to be heard now. Even the reference to Adam Smith given by the noble Baroness, Lady Neville-Rolfe, was that the aim of competition is actually the welfare of all. It is a means, not an end. Therefore, it is right that the objectives of the CMA be written in those terms.

I have a number of points, and will also no doubt be tempted to respond to some of those already made. If we are to change the nature of the CMA in the direction that the noble Lord proposes, that has to be reflected in the totality of the regulatory regime on competition and related matters across the board. In other words, it also needs to affect the way we operate the sector regulators in terms of their competition function. That, I think, is an important point. Also, it has to be built into the structure of the CMA. It was, I think, six years ago—God!—that there were suggestions about a panel within the CMA or some other means of reflecting the consumer interest, and that needs to be part of the new thinking. The role of consumer organisations is also important here, not as part of the CMA but as its interlocutors—Citizens Advice, the National Consumer Federation, Which? and, of course, trading standards. I am even tempted to say that the Government should come back and rethink the unfortunate abolition of the statutory consumer basis made under the coalition. I have a slightly personal grudge here; nevertheless, it is sensible to reconsider those issues.

I will put one other thing on the agenda because I am presently conducting a commission looking at the effect of energy companies in their dealings with vulnerable consumers. While an increase in competition usually benefits most consumers, it does not necessarily benefit all of them. Some consumers get left out of whatever process we have. One thing that needs writing into the consumer protection role of the CMA, and the increase in its powers advocated here, should be to pay particular attention to the needs of those who are not quite able to engage with the market, particularly the sophisticated and digitally-driven market that we now have. Whether that comes from questions of capacity or income, we need to pay attention to it.

On the implications of Brexit, as I say, there are possibilities for changing the structure because we no longer have to quite conform with or mirror the European structure. We will need to ensure that the CMA has adequate resources. I am glad to say that its staff have been co-operating with my committee to indicate how they are progressing on that. The noble Lord, Lord Tyrie, referred to speeding up processes. Clearly, one of the complaints about European and national competition regimes is the issue of speed and he made a number of very sensible propositions there. In particular its power on market investigations is, in a sense, a jewel in the crown. Internationally, many other competition regimes do not have that power and it is an important part of its armoury but it is a bit clunky and needs speeding up. Early intervention and direction, and the undertakings sought by the CMA, would make that more effective.

I am not totally sure about the criticism implied in some of the noble Lord’s views on the CAT. I partly agree with the noble Baroness, Lady Neville-Rolfe, but the fact is that all regulators are judge and jury to a certain extent. The issue is whether they are subject to some form of appeal and what the nature of that appeal is. It is true that the CAT has become a bit litigious, or that companies which appeal to it have become over-litigious. Perhaps it could be focused down a bit but the aim should be to enhance and focus the role of the CAT, not make it less effective.

I will not repeat the points made by my noble friend Lady Crawley, and by the noble Baronesses, Lady Altmann and Lady Neville-Rolfe, about trading standards. The national-level activity on consumer protection and abuse of the market has to have a local arm. The reality is that, over the last 10 years, the resources available to local government trading standards have been cut by over 50%—in some places, it is far worse. Unless their local arm of trading standards operates effectively, any individual citizen or small company that feels that they are being abused by companies under consumer protection, or under things such as safety standards, cannot get redress. In most of the country, they are not. That needs to be addressed within the same timescale as we address the CMA’s own role.

The CMA has a number of new challenges. If I may advertise again the products of my sub-committee, in the glory days just before Brexit we produced a report on the challenge of online platforms and the ability of competition authorities across the world to deal with this new form of trading, which is now a dominant form. Markets are difficult to define and whether you are dominant in a market is difficult to define, as is whether you are abusing that dominance. The long-running saga of the European Commission and Google illustrates this. The digital giants are the new oil companies—the equivalent of the Rockefellers of the 1890s—and we need anti-trust legislation to be able to deal with them. Our traditional forms have not really managed to do so. The Googles, Amazons and Facebooks are not necessarily acting in the interests of consumers even though consumers may think that those companies are because, for the most part, they do not pay anything up front. The fact is that the data about consumers is both the product and a currency for that type of company.

The CMA will also need to return to some old issues. I have often thought that the terms “cartel” and “monopoly” do not entirely describe the most usual form of market distortion, which is effectively oligopoly. In so many of our sectors, whether it is in energy, banks, supermarkets, insurance or whatever, there are half a dozen or so companies determining 60% to 70% of the market. Our market laws have not really worked out how to deal with that situation, either in respect of the rest of the market and competition within it, or in respect of consumers.

My last point is simply this. We need to ensure that our competition authorities are up to speed, resourced properly and respected so that they have powers which they can use. The proposals of the noble Lord, Lord Tyrie, move a significant way in the direction of strengthening that intervention. I hope that the Minister will be able to reply today—we will hear from the noble Lord, Lord Tyrie, in a moment—in a very positive way to at least the gist of the direction in which the noble Lord recommends that the Government should go.