The UK competition regulator is not fit for purpose

The writer chaired the UK Competition and Markets Authority and the Parliamentary Banking Commission

One of Boris Johnson’s great strengths is that the UK prime minister can talk to many people that most politicians cannot reach. These are often the very ones who feel disempowered and unheard. He needs to talk to them again. He can “level up” the UK, “build back better” and address public scepticism about the benefits of markets by demonstrably putting consumer interests at the centre of economic policy. Major regulatory reform is needed. The Competition and Markets Authority is a good place to start.

Many people feel vulnerable to rip-offs in products and services from which regulators are expressly set up to protect them. They are often right. Energy — until parliament intervened — and broadband spring to mind. There have been huge differences between the best and worst deals; with loyal customers often losing out the most. Likewise little practical protection is available for those shopping online, or exposed to digital advertising. A radical shift in priorities is needed to secure visible improvements and reduce the rip-offs that alienate the public.

Reassuring language alone is of no use and may even be counter-productive. A new mindset is needed by some regulators, who too easily have appeared captured by vested interests, like some pre-financial crash authorities.

A full transformation may require parliamentary oversight and will certainly need firm government direction. This is a great opportunity for business secretary Kwasi Kwarteng and for chancellor Rishi Sunak, probably supported by further legislation. But much can be done without that. The CMA’s high quality staff can make a start now — from the top of the organisation.

First, the CMA must put more effort into finding out what is going on in markets where consumers are harmed. It needs data to determine whether competition in the economy is rising or falling, and to identify markets where competition has become a race to exploit consumers. The CMA should become a central repository of such data and use it to analyse where to intervene. Progress on this has so far been inadequate.

Second, the CMA’s top brass should follow the example — among others — of the Bank of England by engaging directly with small businesses and the public. Currently, two-thirds of businesses do not know the CMA enforces UK competition law. One in ten businesses openly admit to discussing prices with similar ones, apparently unaware this is illegal. Six years after the Office of Fair Trading was abolished and replaced by the CMA, 62 per cent of consumers had heard of the OFT. Only 19 per cent had heard of the CMA last year.

This is unsurprising because the CMA engages mostly with competition lawyers and other specialists. This important work will not reassure a public that knows nothing of it. Direct contact with its final customer — the consumer — needs to enter the CMA’s bloodstream.

Third, the CMA needs to focus on cases with the greatest and most visible returns for consumers. The CMA could have acted much earlier on higher prices paid by loyal customers, and abuses in leasehold property, rather than prioritising antitrust work on sales of Ping golf clubs. It focuses too many resources on mergers and antitrust at the expense of consumer protection, investigating markets and advocacy. When the CMA is given authority over online platforms, it should focus much more on consumers. Its bold action to tackle price gouging and holiday refunds during the Covid crisis should be a model for the future: it needs to develop, not shrink, a Covid-type task force after the crisis.

Fourth, the CMA must shed its impenetrable decision making. Its board, not anonymous senior executives, should decide which major cases to take on. These determine the CMA’s character. And the board should explain its choices to parliament and the public.

Fifth, the CMA should press for new statutory duties both to promote the consumer interest, and to act swiftly. Just as legislation creating the CMA’s office for the internal market imposes a consumer duty, now parliament should do the same for the whole authority.

A more assertive, powerful and accountable regulator, one that visibly serves the public and acts on issues they care about, is long overdue. The CMA has just announced deeper, international co-ordination of work to tackle tech-platform power, a step for which I have long argued. The prize, of strengthening the CMA’s legitimacy and getting free markets demonstrably to work for consumers, is very large. It will bolster public — and investor — confidence in capitalism. The CMA needs to put the consumer first. And it needs to get on with it.