Penrose Review: UK Competition and Consumer Policy

Seema Malhotra Excerpts

Tuesday 8th March 2022 Westminster Hall

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Mr Efford. I thank the hon. Member for Weston-super-Mare (John Penrose) for initiating this debate, and for his work on this issue. His very important “Power to the People” report was published around a year ago. In his opening remarks, he clearly laid out the sentiments and recommendations of the report, as well as, importantly, the context of declining competitiveness, the productivity challenge we face and the importance of making sure that we can act against the non-compliance of companies that do not play their part, so that we can ensure a fair regime for all businesses and for consumers. He rightly raised points about the vested interests that distort our markets.

Competition law seeks to curb practices that undermine or restrict competition to the detriment of consumers. Those practices can include a firm’s abuse of its dominant market position, anti-competitive practices, and mergers or takeovers that, if allowed, would result in a substantial lessening of competition. There has been a rapid increase in takeovers and mergers, particularly during the pandemic lockdowns, so that is an area that needs further work. I will come back to that.

Labour welcomed the Penrose report, and also highlighted where it needed to go further. UK markets are becoming more concentrated, and that hits consumers and workers, and stops small businesses in their tracks and prevents them from progressing. are stopping small businesses in their tracks. We want a re-evaluation of the role of the Competition and Markets Authority to ensure that it has the tools to tackle the growing concentration of market power.

We may disagree on rolling back economic regulation, but the issue is not necessarily the principle; it is more about asking whether we have the regulations we need for effective regulation of markets for consumers. That may not be about quantity; I think it is about quality. That is where the debate needs to start. I am not interested in regulation for regulation’s sake. For me, regulation is about purpose; it is about making sure that it will be effective and deliver the outcomes that we believe are necessary. We need more robust competition policy; we need to crack down on tax avoidance, and challenge mergers and acquisitions that mean taking on unsustainable debt, or that are not in Britain’s long-term strategic interests.

I thank all hon. Members who have contributed; they have made important and distinct contributions highlighted different areas of the subject. We in this House have long known about the work that my hon. Friend the Member for Makerfield (Yvonne Fovargue) does on consumer protection. She raised important issues around fake reviews—reviews are part of how consumers are informed—and around how action can be taken when consumers are misinformed. She also raised the important point that consumers and businesses have a common interest in making sure that markets work effectively and fairly. She highlighted the importance of ensuring that reform is based on how consumers behave today, how the market works and how consumers receive their goods and services. Many of those issues are interconnected. She rightly alluded to the important work of Which? in this area, and I thank it for its contribution.

The hon. Member for Truro and Falmouth (Cherilyn Mackrory) shared a rich picture of her constituency, the opportunities and sectoral issues in her local economy and the challenges in taking forward some of those opportunities. The hon. Member for Folkestone and Hythe (Damian Collins) highlighted clearly the dominance of power of the social media companies, which is an important backdrop to the digital markets reform that we have discussed. The hon. Member for North Ayrshire and Arran (Patricia Gibson) talked about the importance of value for money and consumer protection. Some of the issues that she raised, like those raised by my hon. Friend the Member for Makerfield, were very powerful.

Focusing on consumer interest has never been more important given the cost of living crisis that consumers face. Inflation is out of control, with energy, food and petrol prices rocketing. It is not just about global factors; we know that poor Government economic management has left us uniquely exposed. We have a buy now, pay later loan scheme for energy bills, rather than dealing with the problems in our energy market. We are very worried about raising taxes on working people and businesses at the worst possible time. In parallel to our debate, an Opposition day debate is taking place to call on the Government, again, to stop the national insurance rise in April.

There has been a long journey of reform. Hon. Members will be aware than when Labour was in power, we argued strongly that UK regulation of anti-competitive practices was weak. That led to one of our first pieces of legislation, the Competition Act 1998. That recent journey is worth noting, because, as my hon. Friend the Member for Makerfield said, it has been four years since the Secretary of State for Business, Energy and Industrial Strategy asked the CMA for proposals to better protect consumers in the digital economy and improve public trust in markets.

The then CMA chairman, Lord Tyrie, outlined his proposals to the Secretary of State in a letter in 2019. The Penrose review followed in February 2021. Last summer, the Government published two consultation documents—the first on reforming competition and consumer policy and the second on a pro-competition regime for digital markets. Both sets of proposals would require legislation to take forward some of the challenges raised, but the Government have yet to publish their response to either of those consultations.

I recognise that both the Penrose review and the Government’s consultation represent some progress in addressing the rules governing the UK’s companies and markets, not least as they recognise that reform is necessary. They are also vehicles for reforming the UK anti-trust regime post covid and post Brexit. The Penrose review is very important in that respect. The existing system, however, is no longer serving consumers appropriately, and is not fit for purpose in a digital age. It could lead to new monopolies created at any time in new markets.

[John Penrose]

It sounds as though the hon. Lady is joining other Members in saying that we need a new competition and consumer Act to fix some of those things. Could she confirm that that is the Labour party’s position? I think that is what she is saying, but I do not want to put words in her mouth.

--- Later in debate ---

[Seema Malhotra]

I will come on to that, but I think we need legislation. We hope that will be announced in the next Queen’s Speech, but I will come back to that.

There seems to be broad consensus for providing the regulators, including the CMA and the Competition Appeal Tribunal, with more powers to protect consumers and hold companies accountable if they are not found to be playing by the rules. That is a positive step. However, so far—I say this gently—the Penrose review and the Government’s consultation are a missed opportunity for a more fundamental review and reform of the UK marketplace. Even the CMA, which is now responsible for all anti-competitive practices that affect UK markets and consumers, has said that comments in the Government’s consultation on reforming competition and consumer policy amounted to

“incremental, rather than radical, change to the competition regime.”

Let me mention resources, which are needed to make any regime effective, an issue that was raised yesterday in the debate on economic crime. Powers and resources for investigation and enforcement are absolutely critical. They are the other side of the coin to policy, and are about how we make sure that any regime is implemented effectively.

I want to focus on four areas to which I hope the Minister will respond. In large part, they reflect the comments already made, with one or two extra points.

First, on digital competition and regulation, digital is changing our economy. It is changing how the economy works, the products we have, how we receive services, how consumers purchase those services and how businesses trade with each other. There is a huge concentration of power in the big digital firms, with consequences for monopolisation, consumer rights and prices, as well as access to markets for new firms, as has been mentioned already. We know that tackling these issues needs international co-operation.

The Government have embarked on the creation of a digital markets unit in the CMA, which was set up on a non-statutory basis last April. I hope we will hear when that will be moved to a statutory footing and be given the teeth it needs.

Will Bills on competition and consumer law reform and on digital markets be in the Queen’s Speech? Perhaps the Minister can share with us in this Chamber—we will take it no further; it will stay within these four walls—whether that legislation will come forward.

Secondly, on powers for the CMA and the speeding up of investigations, the Penrose review made a recommendation for a taskforce on how we can make sure that CMA investigations are more effective. It is important to get justice for consumers, as the hon. Member for Weston-super-Mare said. What more are the Government planning to do in that area? There are other instances of unfairness and questionable policy. One example really struck me before Christmas. Royal Mail highlighted 23 areas that would see a reduction in service pre-Christmas, but that came on the back of £400 million in dividends being announced the month before. It does not seem right that there is no accountability for that sort of decision making.

There is some positive news. In its response to the Penrose review, the CMA announced that it is creating a dedicated microeconomic unit, which the hon. Member for Weston-super-Mare called for, and which I understand will be based in Darlington at the Treasury campus.

Thirdly, on the public interest test, Labour has proposed the introduction of a broad public interest test for mergers and acquisitions. That would give the Government powers to review transactions, impose conditions and block transactions where they could have negative, long-term implications for the UK’s industrial strategy, economy and jobs. The Government have powers under the Enterprise Act 2002 to intervene in mergers and acquisitions where they raise issues of national security, stability of the UK financial system, media plurality or maintaining in the UK the ability to combat and mitigate the effects of public health emergencies.

We are calling for the Enterprise Act 2016 to be expanded to include a public interest test where an acquisition may have long-term implications for the UK’s industrial strategy. In our view, that goes further than the Penrose review in strengthening the interests of consumers, and we believe that we need a debate on how the CMA should move past narrow competition and consumer interests to public interest. On takeovers and mergers, that could apply to consumer interest but also to the impact on supply chains, employees and the public interest more generally, which has implications for consumer interests. As is consistent with the approach that the Minister will know we took on the Subsidy Control Bill, we need the CMA to have more diverse voices in its leadership, including reforms to the authority to make it more representative of the nations and regions of the UK.

I will just comment briefly on hollowed-out local enforcement. Our consumer protection regime has been weakened by 10 years of degradation of local authority trading standards teams. That is a serious issue. The number of LATS officers has been cut by more than 50% since 2010, while 45% of local authority trading standards teams say they do not have the resources to deal with consumer issues in their area. I note that the Penrose review has called for action on that and I would be grateful for the Minister’s confirmation that some of the recommendations in the review will form part of his package of reforms later this year.

In conclusion, Labour welcomes competition and consumer choice in the UK as a sign of a healthy, functioning market economy. We are committed to making the UK the best place in the world to start and grow a business, and we believe that that is important as part of a pro-business, pro-society, pro-worker agenda to be built for Britain. We are ready and waiting for Parliament to have the opportunity to act and to build on the Penrose review. We believe that the Government have been a little too slow, so I hope that the Minister will give us confidence that things will be speeded up. I look forward to working with him and with colleagues from across the House on this important agenda as it moves forward.