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CMA Loyalty Penalty Report

Volume 662: debated on Tuesday 18 June 2019

Our competition, legal and regulatory frameworks are fundamental to our future economic success. We have a reputation for a world-leading competition framework and independent economic regulators with duties to protect the interests of consumers. However, where markets are not working for consumers, we will ensure that they are treated fairly. Today I published the Government response to the Competition and Markets Authority’s (CMA) loyalty penalty report. It is my intention that the UK’s competition and markets regime is firmly focused on delivering improved outcomes for consumers. That means ensuring that significant sources of consumer detriment, such as the loyalty penalty, are tackled quickly and effectively.

Following concerns raised by Citizens Advice in a “super-complaint”, the CMA uncovered harmful business practices by firms, which exploit consumer loyalty. The CMA investigation looked at the five markets highlighted by the super-complaint—cash savings, mortgages, household insurance, mobile and broadband—and found that there is a total loyalty penalty of around £4 billion a year in these markets. It also found that vulnerable people, including the elderly and those on a low income, may be more at risk of paying the loyalty penalty.

Our response to the CMA’s loyalty penalty investigation sends a strong signal that poor practices by suppliers will not be tolerated and sets out the following:

our intention to establish an administrative model of consumer enforcement for the CMA and to consult on how to do this as part of the forthcoming consumer White Paper

that the CMA and the economic regulators must do more to stop business practices that lead to the loyalty penalty, and that we are prepared to legislate to give our enforcers new tools to do so where necessary

that targeted price interventions, where proportionate, should be considered by regulators to tackle the loyalty penalty. Although pricing interventions should be a matter of last resort, it is vital that all potential interventions are considered to protect those who are most vulnerable

reiterates the commitments we set out in our smart data review, including creating an “open communications” initiative and establishing a vulnerable consumer challenge.

This builds on our consumer Green Paper, as part of our modern industrial strategy, published in April 2018, which tackles areas where markets are not working for consumers and businesses. We believe that all of these measures will help create the conditions for more effective competition and improve day to day outcomes for consumers.

I will place a copy of our letter to the CMA in the Libraries of both Houses.