Penrose Review: UK Competition and Consumer Policy

Yvonne Fovargue Excerpts

Tuesday 8th March 2022 Westminster Hall

[Yvonne Fovargue (Makerfield) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Efford. I congratulate the hon. Member for Weston-super-Mare (John Penrose) on securing this debate and on the review. Given his doughty defence of non-regulation, I hesitate to propose more regulation, but I would like to see a new competition and consumer Bill in the next session of Parliament. It has never been more needed than now, given the effects of the two-year pandemic and the cost of living crisis.

The pandemic has led to more people buying online, and more people are putting in fake reviews. That is a scam, and it has left millions of consumers bruised, out of pocket and with little trust in the companies trying to sell them goods and services. More than seven in 10 consumers use online reviews to inform purchases. They do not go down to the pub and talk to their neighbours about their purchases; they have not been able to do so for two years. They use online reviews.

There have been review practices across many of the largest online platforms, including Amazon, Google and Facebook, and multiple sectors have seen a thriving market in commissioning and selling fake reviews. Which? has called for commissioning and incentivising a fake review to be added to the list of automatically unfair practices in schedule 1 to the Consumer Protection from Unfair Trading Regulations 2008, and I support that. Other than by looking reviews, where do people get information? What they need is the confidence that a review represents a verified purchase; that the review has been written by a real individual who was not given any money or incentive to buy a product; that the review was not for a free parcel that was delivered to the doorstep unknowingly; and that the review is honest. Sometimes, negative reviews are taken offline. People are told, “We’ll give you £5 for a positive review”, and if the review is not positive enough, they do not get the money.

There are other exploitative online practices, such as subscription traps and drip pricing. It is not about choosing the interests of the consumer over the interests of businesses, because the more effective consumer protection becomes, the more the UK economy benefits. It is a win-win. If consumers can trust businesses and their practices, they are more inclined to buy those companies’ products. Crucially to the businesses, people then come back for more.

Particularly when people are thinking very carefully about how to spend their money, it is imperative that we encourage trust in businesses. Companies will then compete on their ability to meet customers’ needs and provide real value, rather than on cutting corners or passing off shoddy products. Only the best businesses will survive, and that is as it should be. It is a partnership, because consumers and businesses both have the same interests at heart. Consumers want the best products at the best prices, and businesses want to sell them those things.

An important component of the legislation is around redress and alternative dispute resolution. Which? says that there should be mandatory dispute resolution schemes in key sectors that have a high volume of complaints and are often complex and high value. We have all seen, particularly through the pandemic, the problems that people have had getting refunds for air travel. Thousands of covid-related flight cancellations left people out of pocket, and the airlines have quite often chosen to ignore the law by refusing a refund. People have waited months, if not years, for those refunds. There are two ADR schemes in the aviation industry, but neither is compulsory to join. Ryanair left one scheme because it disagreed with the judgments relating to strikes by its air crew. Jetair, Emirates and others have failed to join any ADR scheme. If things go wrong, the passengers do not have any redress.

In early 2019, the all-party parliamentary group on consumer protection, which I chair, published a report calling for the wholesale reform of the ADR platform. We looked in detail at the various ombudsmen and ADR schemes and found enormous variation in how they operate. Some are statutory bodies, and some are not. Some cover all firms in the sector, because everyone has to join them, and some do not. Some can enforce the judgments, and some cannot. That creates total confusion for consumers, who are often left frustrated and do not know who to go to. Air travel was one of the areas where the statutory scheme was most keenly felt, and that was pre covid.

Our report said that what was needed was a powerful and accessible statutory ombudsman, which probably echoes the call from the hon. Member for Weston-super-Mare about a 24/7 dispute resolution platform. People do not know where to go. They have to negotiate a difficult maze of ombudsmen. Who do they go to? There should be a single point of entry for all complaints, which should be passed through to the correct ombudsman. I think that there should be an ombudsman for travel, so that people do not think, “Some of my journey was air travel, but there was also a bit of rail. Was it the delay on the railway that led to my missing the plane?” It gets far too confusing for the consumer. People often buy a package, which includes the flights and hotel. Is that a package, or are there separate bookings for the flights and the hotel? Some companies have said, “You booked the flights and hotel with us, but it is not a package, because they were booked separately.” When one part goes wrong, to whom do people turn? That is why we need an ombudsman for the whole travel industry; I think that is the model in Germany.

We also need to look at enforcement. The CMA is responsible for the enforcement of consumer law in precedent setting and market-wide cases, but it lacks the power to effectively protect consumer rights and deter companies. In order to enforce a decision, there is a lengthy court process, and a company can be fined only if it fails to comply with a court order. One example of that is the issue with the ticket seller Viagogo. It took six years for Viagogo to be forced to change its practices and follow the CMA guidance on the information it gives to consumers. In Canada, however, the secondary ticketing sites Ticketmaster and StubHub had immediate fines of 4 million Canadian dollars and 5 million Canadian dollars in costs. They also received a fine of 1.3 million Canadian dollars for not complying with a previous warning. Compare that with a process that took six years, during which time Viagogo could rip off consumers. It is just not good enough.

There are other examples of companies in the travel and wedding sectors that, despite clear guidance from the CMA, were very slow to offer refunds and unlawfully held on to customers’ money for months and months after the cancellation of services—by them, not by consumers. We need a simplified process of investigation, and we need the CMA to have greater powers—along the lines of those enjoyed by the other UK regulators, such as the Financial Conduct Authority and the Information Commissioner’s Office—to raise standards and challenge companies that fail to comply. We have the power to do that, but it needs some teeth. It is no use having regulation and legislation unless it can be enforced easily for consumers, who are often deterred by a long, complex process; indeed, some businesses rely on that.

We are all consumers. Most of the time, things go smoothly, but it is when things go wrong that the gaps in protection are exposed. Limiting that exposure is vital in order to give consumers the confidence to make more purchases without the undue stress and worry that many have had to go through in the past.