Penrose Review: UK Competition and Consumer Policy — [Clive Efford in the Chair]

Part of the debate – in Westminster Hall at 3:16 pm on 8th March 2022.

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Photo of Patricia Gibson Patricia Gibson Shadow SNP Spokesperson (Housing, Communities and Local Government) 3:16 pm, 8th March 2022

I am delighted to participate in this debate on UK competition and consumer policy in response to the Penrose review. I pay tribute to John Penrose for all his work on the review. The goals of the Penrose review, which are to improve consumer choice and outcomes, are, of course, very important; they are things that we can all sign up to. Now more than ever, with household budgets being badly squeezed in this cost of living crisis, consumers must be supported, so that they can secure the best value for money and have sufficient protection under the law. For that to happen, we need UK competition and consumer protection that is fit for the modern age.

Consumers need confidence that if they fall victim to exploitation and unscrupulous practices, there is redress and the consumer protection that they need and deserve. It is clear that some markets simply do not work for the consumer. I understand that the clear statement of intent in the Penrose review was that markets must work for people, not the other way round. Who could argue with that?

Consumer confidence is essential for economic growth, so it is worrying that research by consumer champion Which? has found that up to one third of consumers experience at least one problem with a product or service every year. That not only causes financial loss and anxiety but has a detrimental impact on consumer confidence. We all know that there are gaps in consumer protection and enforcement, some of which have been exacerbated by the pandemic. For example, we all witnessed how the disruption to the travel industry during covid left passengers out of pocket when airlines either refused to pay for cancelled flights or delayed refunds.

Digital markets are not subject to the same regulations as their offline counterparts, and that opens the door to fake products reviews, which have exploded on online marketplaces. We heard a lot about that from Yvonne Fovargue. Members in all parts of this Chamber have expressed concerns about digital markets, and our constituents share those concerns.

The situation is made worse by the fact that regulators do not have the necessary powers to hold companies to account when the law is flouted. The Competition and Markets Authority does what it can to uphold consumer law, but its investigations can take years and tend to result in commitments instead of fines, and offer little in the way of deterrents for those who would flout the law. The problem is that to be more effective, the CMA needs more powers to properly perform the task of protecting consumer rights.

I note with interest the conclusions of the Penrose review, which proposes that the Competition and Markets Authority be given sharper teeth, so that it has increased power to drive consumer rights, supply-side reforms and productivity improvements. It also proposes a streamlined legislative framework for UK competition and consumer policy.

Of greater interest is the question of which of the Penrose conclusions the UK Government will take forward. Indeed, if the Penrose review is implemented in full, it could constitute the biggest shake-up of the UK’s competition and consumer law regime since the creation of the Competition and Markets Authority in 2014. The changes would range from providing the Competition and Markets Authority with the same powers to prosecute consumer law cases as it has for competition law investigations to reforming sectoral regulations. The review contains some very interesting ideas and would give the Competition and Markets Authority significantly increased powers.

However, concerns have been expressed that concentrating such increased power in the Competition and Markets Authority at a time when it is adapting to its new post-Brexit case load and the challenges of a digitised economy could be very challenging indeed for the CMA. We simply do not know yet what the Government response to the Penrose review will be, although it does appear—I underline the word “appear”—that the Chancellor and the Business Secretary have welcomed the recommendations. The question is: where do we go from here?

We have all waited so long. The chair of the Competition and Markets Authority, Lord Tyrie, set out recommendations for reform in 2019. In 2020, the hon. Member for Weston-super-Mare was asked by the Government to look into competition, and he published his report last year. The UK Government recognised the need to reform the enforcement regime in their 2019 manifesto, and the Departments for Business, Energy and Industrial Strategy, and for Digital, Culture, Media and Sport, have undertaken consultations.

Last year, the Business Secretary set out plans to bolster competition regimes, but that must be underpinned by legislation. Consumer and competition policy has been under review for over four years, which has meant that the challenges that consumers face in the marketplace have continued, and have often become much more difficult. If the Competition and Markets Authority had more power, as other regulators do—enough power to protect consumers and hold companies accountable for breaking consumer law—we could raise standards in the consumer marketplace.

We can see clearly what the lack of such powers can lead to in practice. We have had the example of the secondary ticketing platform Viagogo for six years; after the threat of legal action, it finally changed its practices and paid attention to the Competition and Markets Authority guidance on advising consumers. Had the immediate imposition of fines for not complying with guidance been an option, it would not have taken six years for Viagogo to comply, and for us to secure the changes that everybody wanted. We have all seen that the Competition and Markets Authority lacked the power it needed, during the time of covid disruption, to ensure that consumers were refunded in a reasonable timeframe by some players in the travel and wedding sectors.

A consumer and competition Bill could tackle the bad business practices that harm consumers and consumer confidence. There could be simpler investigation procedures, and fines could be imposed, so that matters were not dragged through the courts in lengthy processes, as the hon. Member for Weston-super-Mare said. That would be nothing but a boon to consumer confidence and protection.

I agree with the call in the report for stronger protections for consumers against the so-called loyalty penalty, unfair contractual terms, perceived attempts by digital businesses to nudge consumers into making decisions, making it hard for consumers to exit contracts, and of course the practice of creating an unreal sense of urgency to pressurise consumers into making purchases, as well as trapping them in subscriptions.

A code of conduct would benefit both business and consumers. It would ensure that the largest online platforms did not abuse their market power. There would also be an alternative dispute resolution scheme that offered an efficient, affordable and proportionate route for resolving difficulties relating to high-value transactions while avoiding the complexity and cost of going to small claims court.

Finally, a consumer and competition Bill must be introduced in the upcoming programme for Government. That would be the point at which all the work that has been done at last comes to fruition—when a competition and enforcement framework fit for the modern economy is delivered through legislation. There is real impatience for the Government to finally commit to action on these important consumer protection matters. It is not clear how far the Government will go in improving competition and consumer policy. We do not know how they will interpret and implement the recommendations of the Penrose review. Perhaps the Minister will enlighten us.

Alongside the proposals made by the chair of the Competition and Markets Authority, Lord Tyrie, we have had consultations by the Department for Business, Energy and Industrial Strategy and the Department for Digital, Culture, Media and Sport, and the Penrose review. What we have not yet had is the introduction of a consumer and competition Bill. We all look forward to a Bill with proper teeth that will confer real power on the Competition and Markets Authority, so that it can support consumer confidence and create a marketplace in which the consumer is protected, and in which, as the Penrose review boldly set out, the market works for people, not the other way around.

I look forward to this long-promised, long-awaited and much-anticipated Bill. I hope the Minister will at least say when we will be able to see and scrutinise it.