reforming UK competition and consumer lawFebruary 17, 2021
The new regime should operate on the basis of ‘one in, two out’, and apply to all forms of government and regulatory rule-making. Penrose notes that the previous regime excluded all EU rules and rules set by sector regulators from its scope.
Regulator independence and sector regulators
The report strongly endorses the need for independent regulators that are free of political interference and focuses on the empowerment of consumers, especially in relation to digital markets. It recommends strengthening and defining the over-arching role of the Competition and Markets Authority (CMA) as a “micro-economic sibling for the Bank of England’s well-established public macro-economic role, responsible for tracking progress of UK competition, consumer rights, supply-side reforms and productivity improvements”.
Sector regulators’ primary legal duty should be to achieve “competition for the benefit of consumers first, regulation as a last resort”. They should develop multi-year plans for turning their sector into a ‘normal’ pro-consumer, high standards competitive market, progressively handing over more responsibility for the sector to the CMA as the plan progresses.
Sector regulators would be expected to abide by the ‘Better Regulation’ regime and to focus their regulatory powers only on the core network monopolies. Other proposals include the independent auctioning of contracts to build and upgrade the network monopoly infrastructure in regulated sectors, and having all appeals of sector regulators’ decisions dealt with by the Competition Appeal Tribunal (CAT).
The CMA’s civil consumer enforcement powers should be updated to bring them into line with, and have the same importance, as, competition law. This is significant as it will enable the CMA itself to investigate and make decisions itself relating to consumer law infringements, and impose penalties directly for breach of the rules; rather than, as currently, having to go to court to force companies to make the necessary changes.
Currently, many consumer protection cases are settled by way of voluntary undertakings given by companies to make the changes requested by the CMA. It is possible that if the CMA is given more powers to take infringement decisions and impose fines, companies will be more inclined to defend themselves more robustly.
Notably, Penrose recommends that restrictions on price discrimination and ‘loyalty penalties’ should be extended beyond the financial services sector to be a general consumer protection regulation across the entire economy. Similarly, the CMA should update its guidelines on what treating customers fairly means in practice, including ‘transactional fairness’.
Consumers should also have enhanced information and transparency in relation to pricing, terms and conditions, and a CMA market investigation should be carried out to assess how consumers can be protected from the negative aspects of ‘nudging’ techniques in digital markets. The CMA…