[Clive Efford in the Chair]
I beg to move,
That this House has considered UK competition and consumer policy in response to the Penrose review.
It is good to have you looking after us, Mr Efford, to ensure that we do not misbehave during the course of the debate. It is good to see you in the Chair.
Just over a year ago, I was commissioned to write a report by the Treasury and the Department for Business, Energy and Industrial Strategy. It came out almost exactly a year ago and it is called, “Power To The People”. It is about competition policy and was produced at the request of the Government. A year after publication, I thought it was reasonably sensible to think that we might want to have a look at what has happened as a result of my recommendations—which ones have happened and which ones have not—hoping perhaps to goad, tease or otherwise persuade my hon. Friend the Minister to be as indiscreet as he possibly can be about what might happen in future, to fill in any gaps, and discuss the recommendations that have not yet taken place.
I will summarise briefly progress on implementing some of the recommendations in the report in the intervening year and I will focus fairly straightforwardly on the things that have not happened yet, so that the Minister has a text from which to work—if I may put it that way—and on the gaps that remain. To be fair, although I do not want to overclaim on this, it is true to say that there has been a reasonable amount of progress across Government on some of the recommendations in my report.
For example, there have been a series of consultations and commitments from the Competition and Markets Authority about the kind of changes that it wants to make to its internal processes and the way it works. One of the central recommendations in the report is that the CMA needs stronger consumer powers—upgraded to match its anti-trust competition powers—and a whole series of other things necessary for it to move faster to judgments in individual cases much more quickly. Ideally, in most cases—the easier cases—that should be within days or months, rather than in the current parlance, when things can easily run into years; we need faster and more certain decisions.
The CMA is supposed to upgrade its capability to become what I termed the “micro-economic sibling” to the Bank of England’s macroeconomic work. In other words, every time the Bank of England talks about the macro economy, the CMA should have a public role in putting forward our progress in creating supply-side reforms to improve competition in individual markets and in individual parts of the country. As we all know, our country has a real problem with declining levels of productivity and of competitiveness the further away from the M25 one travels.
The report therefore makes a series of recommendations, some prompting a series of consultations on internal reforms to the CMA, which are very welcome. There are things like the
“micro-economic sibling for the Bank of England”,
which I have just mentioned, which has been declared and is due to be set up. There have also been declarations that the CMA’s consumer powers will be upgraded in due course. We will need primary legislation for that, but there has been extensive consultation on it. There will also be things such as stronger penalties for companies that do not comply with data requests and so forth, seeking to slow down the progress of any competition cases. So, all—or mostly—good news in that area at least.
The CMA has also established something called the digital markets unit, the DMU, which will be absolutely essential to future operations in ensuring that we can deal with consumer detriment created by digital network monopolies—the big FANGs of Facebook, Amazon, Netflix and Google. The DMU is now in operation, but in shadow form, because it does not have any of the necessary legislated powers that it requires. It has at least started. There has also been an increase in the CMA’s resources post Brexit because, as we left the UK, we had to have a stronger domestic pro-competition set of institutions, otherwise all the things that had been happening in Brussels, in the EU’s competition world, would not have been coped with, so they were repatriated.
Equally, the ideas in the chapter on economic regulators are about trying to reduce the overall role of such regulators over time. We should be trying to normalise as much of the markets that they run as possible. There is no intrinsic reason why, for example, energy, telecommunications or others cannot be mostly normal and as usual, as run of the mill as buying a loaf of bread or a pint of milk. We do not need an economic regulator to protect us when we do that. There are large chunks of these markets where we could be just as protected by normal consumer protection laws, and would not need an economic regulator, except for the bits of those markets that are fundamentally based around network monopolies.
Every single one of the economically regulated sectors in our economy—telecoms, energy, water or any of the others—all have network monopolies at their core, whether it is electricity distribution, the national grid, local electricity distribution grids, gas pipes, water pipes or whatever it might be. There is a network monopoly at the core, and those are inherently less competitive. We cannot get them to work in the normal way, and there has to be a residual level of economic regulation on those networks. Perhaps there are some deeply embedded and hard-to-solve consumer detriments in finance, too. Other than that, we could and should seek to erode the role of the economic regulators over time, normalising their markets as far as we can, as this report recommends. It is not a quick process; it will take time, but it can and should be done, outside the areas I have just described.
How are we doing? In some respects, quite well. There is something called the “Economic Regulation Policy Paper”, which I am sure everybody here has been keeping next to their bed for bedtime reading. That came out of the Department for Business, Energy and Industrial Strategy a couple of weeks ago, and is intended to address the statutory duties of the economic regulators, and increase the level of competition they are involved with. It makes all the right noises and speaks all the right warm words about doing that. I will come back to that in a minute, because one of its problems is that, in modernising the statutory duties, to enable the process I have laid out, it is going to
“launch a review of utilities regulators’ statutory duties in 2022.”
It does not say when that is going to be launched, when it will be finished or what it will do about it when it is done. Everybody here will be familiar with the term “long grass”. I hope the Minister will be able to reassure us that this is not long grass, that it will happen in a timely way, and that he is out with his lawnmower trimming the sward to ensure that it will happen, rather than get parked somewhere and gently forgotten.
There is also good news on public procurement, which has been brought into sharp focus during the pandemic. We absolutely need to have a faster, better and more transparent public procurement process. We inherited this process from the EU as the OJEU—Official Journal of the European Union—rules. They do a lot of good things, but incredibly slowly and in bureaucratic fashion. As a result, we end up with processes that are clunky. When we have a national or international emergency, such as the pandemic, they are cruelly exposed as not working well enough.
I am pleased to say that there was when I published this, and there remains, a continuing commitment to launching a new public procurement Bill. That is due, probably not in this Session, but I hope in the next. It has been heavily trailed, and I hope and expect that it will take what we have and make it much more nimble, digital and open to small firms being able to compete with long-standing large incumbents, such as Carillion. It will not only be pro-competitive but will involve a great deal of better value for money for taxpayers. It will mean that we are less likely to have, for example, a scramble for personal protective equipment, if we have another national emergency such as the pandemic in future.
Finally, on the positive side of the ledger, there has been some progress on the ideas I talked about for trying to improve competition outside the south-east, and to improve retail opportunities for people who need redress, if they have been done wrong and their consumer rights have been breached. There has been a little progress on trying to make small claims courts and ombudsmen work better, more digitally and faster, while continuing to be cheap, so that there is ready justice, if necessary, for somebody who has not got what they paid for under consumer rights. That is all good, but we have a great deal further to travel.
My contention is that in a digital world, we should be able to have the same kind of 24/7 service that we expect when logging on to do our grocery shopping at 3 am— I do not do that, but some people do. That is something that, increasingly, we expect to be able to do. If we can shop 24/7, we should be able to seek redress 24/7 when that is needed, but there is a noticeable gap there.
Although that gap is starting to close, and there have been reforms of the small claims court for example, there has been no reform in other areas that need it, such as in the creation of county competition courts. Such reform is necessary to create opportunity for small, local companies that are being ganged up on by larger local incumbents and prevented from prosecuting their competition rights, because taking someone to the Competition Appeal Tribunal in London for a breach of competition law is never going to be affordable.
Even under the current fast-track approval process, redress is still out of reach for most small regional firms. A restaurant in Bristol, an estate agent in Hull or an hotelier in Liverpool will not be able to afford to do anything if they are being ganged up on by a local competitor until we get what I am calling “county competition courts”. I am afraid that there has been little progress towards that at the moment. Nor has there been progress towards a generalised update and improvement of local trading standards teams. That is needed in many parts of the country to ensure that there are proper defenders of consumer rights.
I do not want to cavil too much, because there is a decent list of progress. It would be churlish to say that nothing has happened in the last year, because it really has. I commend the Government and my hon. Friend the Minister on that progress, but I am afraid that there is a slightly longer list—it is certainly a serious list—of things that have not yet happened on the other side of the ledger. I will run through them quickly, then leave it for others to pick up on any particular points.
First, one of the report’s central points is about speeding up how fast people can get justice through the CMA if they need it. As I mentioned at the start of my speech, we have to ensure that all but the most complicated, hideously difficult and groundbreaking cases can be decided by the CMA. Most cases ought to take weeks or months rather than years. At the moment, there is no overall core process redesign within the CMA or the Competition Appeal Tribunal, which is effectively the appeals court for lots of CMA cases. Such a redesign—if I can call it that—will be necessary to make dramatic improvements in the availability and certainty of justice.
That matters because at the moment, it is all too easy for large, well-lawyered incumbents to walk backwards, slowly, in the face of a challenge from a small, plucky entrepreneurial, insurgent firm that is trying to transform and disrupt a particular market. If they can strew legal obstacles in the challenger’s path, they can basically make it much harder for Britain’s economy to be nimble.
I appreciate what my hon. Friend says about competition. Does that apply to local authorities, which tend just to employ one arm’s length contractor when plenty of local people could bid for jobs such as road building and maintenance, for example?
That is a particularly good example of the kind of problem that I was referring to when I mentioned public procurement reforms. I think we should be all extremely interested in what they show. When those reforms come, they should mean that local government, as well as national Government and many arm’s length bodies—from the NHS to English Heritage, and everyone else in between—should be able to make much faster decisions in a way that is more accessible to small firms that are not equipped to wade through pages and pages of tender documents, some of which require a PhD and actually have little to do with whether a product or service is better than the big incumbent’s. That will be an essential change.
Speeding up the CMA is absolutely essential. One of the most glaring and—I am afraid to say—saddest omissions from the recommendations is on better regulation. There is a difference between deregulation and better regulation. I am sure that you are thoroughly familiar with it, Mr Efford, but for the record and for everybody else, deregulation is where standards are got rid of and there is a sort of race to the bottom—that is not what I am recommending in this report at all—whereas better regulation says, “How do we deliver the same standards in environmental quality, food standards, workers’ rights and all the other things that we regard as essential in our modern society, in a way that is cheaper, quicker, simpler, or more digital or more modern? How can we do that in a way that costs the providers of those things less?” If it costs the providers less, that means they can do it at lower cost, which means that consumers can get the same product or service at a lower price in the first place. It is up to everybody and it will be for all our benefit if we can do that.
However, getting rid of red tape and regulation is one of the hardest things to achieve in Westminster and Whitehall, because everybody here knows that the culture of this place is framed in terms of making new rules. That is how civil servants or—dare I say it?—one or two MPs make their career; it is by inventing new rules and not by getting rid of old ones. That is the culture of this place.
Better regulation is an extremely easy thing to say and an extremely difficult thing to do, although there have been examples—rare ones—in the past where we have succeeded. There was a brief flowering of success between 2010 and 2015, under David Cameron when he was Prime Minister, whereby the pro-regulatory ratchet got reversed and for a couple of years we were genuinely making progress, and in fact local firms and small firms and their organisations, particularly the Federation of Small Businesses and similar bodies, noticed it and said, “This is working”.
Unfortunately, when David Cameron left office, the blob pounced; I do not know whether a blob can pounce, but perhaps it enveloped the new regime. When David Cameron left office, the blob looked at what worked—basically, it was having a gateway condition saying, “If you are the Minister for paper clips, you can’t have new rules about paper clips until you have found two old ones to get rid of”; that was the thing that had been making things work until then—and said, “That’s a terribly old-fashioned way of doing it. We’ve got a much better way of doing it. Why don’t we have a big target and we’ll hit the target and that will be good?”
However, because the blob had got rid of all the rigour and all the mechanisms for getting rid of the red tape, what happened instead was that there was a huge target, which was completely missed. In two years, we went backwards, by £8 billion-worth of extra costs, when we had expected to remove £9 billion-worth of extra costs. Instead of removing £9 billion-worth of extra costs, we added £8 billion-worth, which was a £17 billion miss in two years.
That was absolutely disastrous compared with what we had been doing for the previous five years, and the thing that worries me is that it is being recommended that we go back to something rather similar. I do not care whether it is one in, one out or one in, two out, but it is essential that we have that gateway condition, because if we do not have it we will carry on going backwards.
I am afraid, and very sorry to report, that the benefits of Brexit report—another piece of bedtime reading, Mr Efford, which I am sure you have gone through in detail—says on page 27 that we will not reintroduce the old system at all but will stick with the one that has just failed, and we will carry on repeating the same mistake that we made before. I really hope that my hon. Friend the Minister will be able to tell me that that has now changed around, but I fear that he will be unable to. If we do not change around, then we will fail again, and—let us be very clear about it—that is what we are currently heading towards.
I have final thoughts on the economic regulators, Mr Efford; I am nearly there. As I say, we have had some progress here, because, as I mentioned, the Government have said that they are consulting on trying to improve the statutory duties of economic regulators to add extra competition, which should lead to shrinking the regulators over time.
However, as I also mentioned, we do not have a date for when the report on the economic regulators is due, so we do not know if anything will ever be done about them; I hope that my hon. Friend the Minister will be able to say that the Government will do something about them. Without a date and without a firm commitment in principle that the report will genuinely try to normalise as much of the market as it can, outside the network of monopolies that I was talking about, the suspicion has to be that we are not trying to normalise these markets and that what will happen—unacknowledged, but none the less firmly—is that there will be no appetite for normalising as much of these markets as we can, and that instead the preferred destination is perpetual heavy regulation. I really hope that my hon. Friend the Minister can reassure me that that is not the de facto intention behind what we are currently doing.
My final point is about the final chapter in the report, which is on subsidy control. Subsidies are a very heady political drug, if we are not really careful. No matter the political party we belong to, it is always tempting when lobbyists come knocking. It does not matter whether a Member is in opposition or in government, nor whether it is local government or national or sub-national Government. When lobbyists come knocking, they say how terrible it is that this big, important local employer has been left behind—it did not invest in whatever it was it was doing and is now 20 years out of date, so it has been overtaken by plucky entrepreneurial upstarts from other parts of the country or, indeed, from other countries—and they say, “Isn’t it terrible that these jobs are now at risk? What we need is a just a temporary wafer-thin subsidy to tide us over for a couple of years while we fix things.” Of course, they do not fix things and then, a couple of years later, they come back and ask for more.
That is expensive for taxpayers and it reduces both the productivity of industry and the long-term security and sustainability of British jobs, which become progressively more and more vulnerable to international competition. Ultimately, it is the thing that did for us in the 1960s and 1970s, and which we had enormous pain trying to fix in the 1980s and 1990s. Subsidy control is vital. It is one of those rules that has just come back, post Brexit, from being run by Brussels. We have a Subsidy Control Bill before Parliament at the moment—it is in the Lords. It will do all sorts of really good things to speed up our subsidy control process; it is much more nimble and light-touch. If authorities are compliant with six or seven different principles—
I thank the Minister for that information. If they comply with seven different principles of good subsidy, as opposed to bad subsidy, they can just get on with it—whether that is a local council or a national Government Minister, or anybody in between.
That is fine, except that we are keeping them a secret. We are not telling anybody what the subsidies are that we are dishing out. The EU system, which is what we are trying to replace, says that it is necessary to disclose any subsidies above half a million euros, which is quite a high level, actually. It means that a lot of subsidies are never disclosed at all, particularly if they are dished out by local councils. We are saying that it is not necessary to declare any subsidies under half a million pounds. The last time I looked at the euro-pound exchange rate, that is a higher level of disclosure than the old EU system. There are some other levels that are a bit lower for other bits and pieces, about which I am sure the Minister will remind us.
However, broadly speaking, we are going to declare less in future: we will be less transparent than we were in the past. That leaves the door open to cronyism—to local authorities or national Governments dishing out money to their mates, secure in the knowledge that nobody will know because we will not be able to see. It also leaves the door open to higher levels of subsidisation, potentially of less competitive firms, and therefore to wasting taxpayers’ money in future. Given what is happening to the cost of living at the moment, none of us wants to waste a single penny of hard-won taxpayers’ money, particularly when we have to take it as taxes in the first place.
It is a curate’s egg. It is sort of two cheers, rather than three, for what has been done so far. After a year, there has been genuine progress, and I am delighted to celebrate the points on the positive side of the ledger that I started off with. However, there is quite a lot—marginally more—on the negative side of the ledger; those things have not yet happened, but they could. The advantage is that most of the reforms that I have gone through—which have not yet happened, but which could—will not cost the Treasury a bean. They will not cost the taxpayer a bean. They will mean that British jobs and companies will become more competitive, more sustainable and safer in the long term, because, ultimately, the only thing that protects us against international competition is the fact that we are better than the international firms we compete against. It is a cheap route to economic success.
I am hoping, therefore, that it is a bit of a no-brainer. It is one of those things about which we say, “Why wouldn’t you do all of this stuff? Why on earth would you not?” The only reason, I am sure, is that there are genuinely significant vested interests behind some of these things that make them difficult to shift. However, we have a doughty warrior in the shape of the Government Minister responding to this debate. I am therefore looking forward to hearing how quickly he will be able to fight and smite the various different vested interests that would otherwise slow us down.
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.
It is a pleasure to serve under your chairmanship, Mr Efford. I congratulate my hon. Friend the Member for Weston-super-Mare (John Penrose) on securing this crucial debate and on his excellent work not only on his review, but as the UK’s anti-corruption champion. His review is a vital piece of work and reveals how our competition policy can drive enterprise, productivity and growth. I am pleased to recognise that more competition and support for small businesses outside the south-east is key to our levelling-up agenda.
I speak as the Member for Truro and Falmouth in Cornwall, which has an economy built on fantastic small businesses, with three quarters of local companies employing fewer than five people. Although the terms “competition law” and “ competition policy” might seem far removed from our everyday lives, it can be argued that failing to create a better regulatory regime that fully supports small businesses, consumers and fair competition has led to higher prices and lower wages in Cornwall for much of the last decade. We must unpick the fact that Cornwall has the lowest productivity levels anywhere in the UK, and that places the region at the heart of the Government’s levelling-up agenda. I draw the House’s attention to section 6 of the report, which shows that Britain has a well-known productivity problem, especially outside the south-east.
Our geographical skew in productivity is not normal; only two other European countries, Poland and Romania, have bigger variations than we have. That difference translates into everyone’s wages. In Cornwall, one in three workers earn below the national living wage, and much of the employment in Cornwall is reliant on two low-paying industry groups, namely hospitality and retail. They are sources of pride for Cornwall and its flourishing tourism sector, but it is inescapable that both are sources of low pay and low productivity.
Against a backdrop of rapid change in the world of work and the need to increase productivity, action to improve skills in Cornwall is crucial. Investing in skills will attract more competitive and successful firms, creating a virtuous circle that attracts more high-skilled people to live and work in the area—boosting productivity, jobs and wages even further.
I am in talks with BEIS and other Government officials about the lithium that is under our feet in Cornwall. We are very lucky, geologically. Few people realise that there is enough lithium under the Cornish soil to power at least half of the electric vehicles that we will need in the future. Cornwall is very good at getting things out of the ground and sending them away, but we need to make sure that all the processing to get the lithium to a battery-ready status also happens in the county, creating long-term jobs. To do that, we will have to compete with firms in China and other overseas players. That makes it difficult, and that is why we need to work with Government to make sure that the processing happens locally.
I am pleased with recent progress, such as the news that the excellent team at Truro and Penwith College have applied to the skills accelerator programme, ushering in a new approach that ensures that all technical education and training is based on what employers actually need. That is yet another example of the principal Martin Tucker and his brilliant team at Truro and Penwith leading the way with excellence and innovation in the learning and skills sector. It adds to their strong existing offer, which includes free skills bootcamps in digital and technical careers and the higher level skills project, to support individuals looking to enhance their knowledge and develop their careers.
We must consider all the options on the table to increase the region’s productivity. The report makes several crucial recommendations to reform competition policy and put consumers at the heart of markets, and I urge the Government to consider those recommendations. In particular, the report notes that to raise productivity in areas such as Cornwall, we need to boost the “local competitive temperature” by supporting small businesses to compete with large competitors. That was what I was driving at in my earlier intervention.
I want to highlight two areas of the report: reducing the burden of red tape and supporting digital industries. Laws and regulations are a crucial part of our market economy, as we have already said. They protect staff, consumers and the environment. I have been very vocal about the need for strong regulations on water companies, which are currently responsible for much of the pollution in our rivers, including the River Fal in my constituency. I agree that we need better regulation that maintains standards but applies them in the least costly and most unbureaucratic way possible.
In particular, we must address the growing crisis in the fishing sector that is caused by complicated new export rules, a lack of clarity about fishing quotas and an increase in red tape. At this point, I have to declare an interest as a fishwife—these are issues that I hear about at the breakfast table daily. Those changes have significantly hit our shellfish producers in particular, and some businesses face the real possibility of collapse unless we take urgent action. The fishing industry plays a vital role in the Cornish economy, and I urge the Government to step in and address the issues to secure its long-term future.
We have a lot of small producers in Cornwall, and up until very recently their only option has been to take their catch to market. A couple of years ago, a fisherman might have received £1.50 for a kilo of mackerel at market. They could go into the supermarket the same day and see lesser quality, net-caught fish of the same type—fish that had been in a net for a couple of days and was not as fresh as line caught—and the consumer would be paying something like £10 or £12 a kilo for it. Somebody is making an awful lot of money out of that fish, and it is not the food producer; it is not the fisherman. I am pleased that the Government have been encouraging direct sales, but I encourage them to further reduce the red tape that these boys and girls have to put themselves through to ensure that they can sell directly to farm shops and even, if possible, directly to supermarkets.
I support the report’s proposals for a new pro-competition regime for digital markets. Digital technologies bring us many benefits, transforming our economy, society and daily lives. However, there are downsides caused by firms with enormous network and digital data monopolies, so we must ensure that digital regulation promotes competition and innovation. Digital industries are a growing part of the economy in Cornwall, which has a rapidly expanding digital and creative community that has grown by 76% since 2010. I will do all I can to support the Government to ensure that we build a pro-growth data regime that will allow the digital industry in Cornwall to thrive.
Improving productivity in areas such as Cornwall is key to levelling up in the UK, and that is why it is important that we invest in skills and reform to make better regulation in industries such as fishing and all the way to digital markets. I look forward to supporting the Government as they consider the recommendations of the report, and I will continue to champion all our small businesses, innovation and competition now and in the years to come.
It is a pleasure to serve under your chairmanship, Mr Efford. I congratulate my hon. Friend the Member for Weston-super-Mare (John Penrose) on his report and on securing this important debate. I particularly want to address his comments on the digital markets unit, which he says has been set up in shadow form. We eagerly anticipate the Queen’s Speech to see whether there is legislation in the next Session to give the unit the power that it needs.
So much of our commerce and consumer interaction takes place through digital services. We have seen that more than ever during the pandemic. They are an integral part of the economy. It is right that we question and challenge whether digital markets are truly competitive, and whether the very large players that dominate them are guilty of abuse of market power, given the great positions that they hold.
It is tempting to think, “There are a lot of big digital companies; presumably they all compete against each other, and that creates a fair market.” When we break that market down, we see a series of monopolies in each sector. Unsurprisingly, Google has 92% of the world’s search business; Chrome, which is owned by Google, has 62% of the browser market; and Facebook and Google together control about 70% of the digital display advertising market worldwide.
Mobile phones run on one of two operating systems: 70% run on the Android operating system, which is owned by Google, and 30% on iOS, which is owned by Apple. You might think, “Well, at least there is a market split there,” but they are both monopolies. Apple customers —I am one; I have an iPhone—have no choice but to purchase apps through the App Store; there is no interoperable or alternative system. I cannot use a different app store system, such as the Google app store, to download apps on to an Apple product, or the other way around. The mobile communication devices market, which is central to the world economy, is dominated by only two operating systems, both of which are monopolies for their users.
As for the messaging app market in the UK, WhatsApp has 75% market penetration. The next most popular messaging app is Facebook Messenger, which has nearly 60% market penetration—that is, 60% of people in this market use it. Of course, people have multiple messaging apps. Both are owned by the same company. Across digital markets, there are these relative monopolies.
Is there evidence of abuse of market power? There is certainly evidence of these companies treating customers differently. There is evidence that Apple has different policies on charges for selling through the App Store for different companies. It does not charge everyone the same amount. Facebook has allowed different businesses to acquire different levels of Facebook data to help them drive their business through the Facebook systems, depending on the value of the commercial relationship to Facebook. When I chaired the Digital, Culture, Media and Sport Select Committee, we published evidence that we secured from an American app developer that showed that Facebook sometimes made arbitrary determinations about whether an app developer should have access to the Facebook graph at all; it depended on whether Facebook thought that the product that the company was developing was a threat to its business.
Some people may remember from the dim and distant past the short film app called Vine, which was very popular. People uploaded very short films to it. Mark Zuckerberg personally decided that Vine was acquiring too much Facebook data, so Facebook kicked Vine off the platform. An email was published in which Mark Zuckerberg was asked to confirm that he wanted to do that, and he replied, “Yup, go for it.” In our report, the creators of Vine said they remembered that moment as though it were yesterday, because it was the moment that effectively killed their business. The chief exec of a global tech company can, like the Emperor Augustus, put their thumb up or down, and determine whether a business is allowed to succeed, based on his assessment of whether that business is a competitor to his.
We often say, “Why is it that, particularly in the tech sector, although the UK produces brilliant, thriving companies, they do not go to scale?” One of the reasons is that if they are too successful, they are squeezed out of the market by bigger, dominant players, which either deny them fair access to customers through their platform, give them the option of being acquired, or drive them out of business altogether.
There have been competition investigations into preferential ranking on Apple and Google systems, to see whether Google search results favour businesses with which Google has a commercial relationship, with to the detriment of others that it sees as competitors. Amazon can monitor whether a product is successful, who is buying it, and, if it is too successful, whether it should copy it and launch its own product. Amazon does not give customer purchase data to businesses that sell through Amazon. Amazon is both the creator of the infrastructure through which businesses sell to their customers, and sells its own products alongside them, giving it immense market power.
We need a digital markets unit that ensures not only that consumers are treated fairly, that they have fair pricing and that there is fair competition among products, but that businesses that reach their customers through other tech platforms are treated fairly. It should ensure that businesses pay a fair rate for advertising, have fair access to data relative to other businesses, and are not a victim of aggressive pricing against them by the platform, or dis-ranked or downgraded through pure prejudice. All those aspects are central to the working of the digital economy today, and that is why it is important that we have a digital markets unit with the ability to launch investigations for evidence of tech platforms abusing their market power over other businesses, to the detriment of consumer interest.
I am delighted to participate in this debate on UK competition and consumer policy in response to the Penrose review. I pay tribute to the hon. Member for Weston-super-Mare (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 the hon. Member for Makerfield (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.
It is a pleasure to serve under your chairship, Mr Efford. I thank the hon. Member for Weston-super-Mare (John Penrose) for initiating this debate, and for his work on this issue. His very important “Power to the People” report was published around a year ago. In his opening remarks, he clearly laid out the sentiments and recommendations of the report, as well as, importantly, the context of declining competitiveness, the productivity challenge we face and the importance of making sure that we can act against the non-compliance of companies that do not play their part, so that we can ensure a fair regime for all businesses and for consumers. He rightly raised points about the vested interests that distort our markets.
Competition law seeks to curb practices that undermine or restrict competition to the detriment of consumers. Those practices can include a firm’s abuse of its dominant market position, anti-competitive practices, and mergers or takeovers that, if allowed, would result in a substantial lessening of competition. There has been a rapid increase in takeovers and mergers, particularly during the pandemic lockdowns, so that is an area that needs further work. I will come back to that.
Labour welcomed the Penrose report, and also highlighted where it needed to go further. UK markets are becoming more concentrated, and that hits consumers and workers, and stops small businesses in their tracks and prevents them from progressing. are stopping small businesses in their tracks. We want a re-evaluation of the role of the Competition and Markets Authority to ensure that it has the tools to tackle the growing concentration of market power.
We may disagree on rolling back economic regulation, but the issue is not necessarily the principle; it is more about asking whether we have the regulations we need for effective regulation of markets for consumers. That may not be about quantity; I think it is about quality. That is where the debate needs to start. I am not interested in regulation for regulation’s sake. For me, regulation is about purpose; it is about making sure that it will be effective and deliver the outcomes that we believe are necessary. We need more robust competition policy; we need to crack down on tax avoidance, and challenge mergers and acquisitions that mean taking on unsustainable debt, or that are not in Britain’s long-term strategic interests.
I thank all hon. Members who have contributed; they have made important and distinct contributions highlighted different areas of the subject. We in this House have long known about the work that my hon. Friend the Member for Makerfield (Yvonne Fovargue) does on consumer protection. She raised important issues around fake reviews—reviews are part of how consumers are informed—and around how action can be taken when consumers are misinformed. She also raised the important point that consumers and businesses have a common interest in making sure that markets work effectively and fairly. She highlighted the importance of ensuring that reform is based on how consumers behave today, how the market works and how consumers receive their goods and services. Many of those issues are interconnected. She rightly alluded to the important work of Which? in this area, and I thank it for its contribution.
The hon. Member for Truro and Falmouth (Cherilyn Mackrory) shared a rich picture of her constituency, the opportunities and sectoral issues in her local economy and the challenges in taking forward some of those opportunities. The hon. Member for Folkestone and Hythe (Damian Collins) highlighted clearly the dominance of power of the social media companies, which is an important backdrop to the digital markets reform that we have discussed. The hon. Member for North Ayrshire and Arran (Patricia Gibson) talked about the importance of value for money and consumer protection. Some of the issues that she raised, like those raised by my hon. Friend the Member for Makerfield, were very powerful.
Focusing on consumer interest has never been more important given the cost of living crisis that consumers face. Inflation is out of control, with energy, food and petrol prices rocketing. It is not just about global factors; we know that poor Government economic management has left us uniquely exposed. We have a buy now, pay later loan scheme for energy bills, rather than dealing with the problems in our energy market. We are very worried about raising taxes on working people and businesses at the worst possible time. In parallel to our debate, an Opposition day debate is taking place to call on the Government, again, to stop the national insurance rise in April.
There has been a long journey of reform. Hon. Members will be aware than when Labour was in power, we argued strongly that UK regulation of anti-competitive practices was weak. That led to one of our first pieces of legislation, the Competition Act 1998. That recent journey is worth noting, because, as my hon. Friend the Member for Makerfield said, it has been four years since the Secretary of State for Business, Energy and Industrial Strategy asked the CMA for proposals to better protect consumers in the digital economy and improve public trust in markets.
The then CMA chairman, Lord Tyrie, outlined his proposals to the Secretary of State in a letter in 2019. The Penrose review followed in February 2021. Last summer, the Government published two consultation documents—the first on reforming competition and consumer policy and the second on a pro-competition regime for digital markets. Both sets of proposals would require legislation to take forward some of the challenges raised, but the Government have yet to publish their response to either of those consultations.
I recognise that both the Penrose review and the Government’s consultation represent some progress in addressing the rules governing the UK’s companies and markets, not least as they recognise that reform is necessary. They are also vehicles for reforming the UK anti-trust regime post covid and post Brexit. The Penrose review is very important in that respect. The existing system, however, is no longer serving consumers appropriately, and is not fit for purpose in a digital age. It could lead to new monopolies created at any time in new markets.
It sounds as though the hon. Lady is joining other Members in saying that we need a new competition and consumer Act to fix some of those things. Could she confirm that that is the Labour party’s position? I think that is what she is saying, but I do not want to put words in her mouth.
I will come on to that, but I think we need legislation. We hope that will be announced in the next Queen’s Speech, but I will come back to that.
There seems to be broad consensus for providing the regulators, including the CMA and the Competition Appeal Tribunal, with more powers to protect consumers and hold companies accountable if they are not found to be playing by the rules. That is a positive step. However, so far—I say this gently—the Penrose review and the Government’s consultation are a missed opportunity for a more fundamental review and reform of the UK marketplace. Even the CMA, which is now responsible for all anti-competitive practices that affect UK markets and consumers, has said that comments in the Government’s consultation on reforming competition and consumer policy amounted to
“incremental, rather than radical, change to the competition regime.”
Let me mention resources, which are needed to make any regime effective, an issue that was raised yesterday in the debate on economic crime. Powers and resources for investigation and enforcement are absolutely critical. They are the other side of the coin to policy, and are about how we make sure that any regime is implemented effectively.
I want to focus on four areas to which I hope the Minister will respond. In large part, they reflect the comments already made, with one or two extra points.
First, on digital competition and regulation, digital is changing our economy. It is changing how the economy works, the products we have, how we receive services, how consumers purchase those services and how businesses trade with each other. There is a huge concentration of power in the big digital firms, with consequences for monopolisation, consumer rights and prices, as well as access to markets for new firms, as has been mentioned already. We know that tackling these issues needs international co-operation.
The Government have embarked on the creation of a digital markets unit in the CMA, which was set up on a non-statutory basis last April. I hope we will hear when that will be moved to a statutory footing and be given the teeth it needs.
Will Bills on competition and consumer law reform and on digital markets be in the Queen’s Speech? Perhaps the Minister can share with us in this Chamber—we will take it no further; it will stay within these four walls—whether that legislation will come forward.
Secondly, on powers for the CMA and the speeding up of investigations, the Penrose review made a recommendation for a taskforce on how we can make sure that CMA investigations are more effective. It is important to get justice for consumers, as the hon. Member for Weston-super-Mare said. What more are the Government planning to do in that area? There are other instances of unfairness and questionable policy. One example really struck me before Christmas. Royal Mail highlighted 23 areas that would see a reduction in service pre-Christmas, but that came on the back of £400 million in dividends being announced the month before. It does not seem right that there is no accountability for that sort of decision making.
There is some positive news. In its response to the Penrose review, the CMA announced that it is creating a dedicated microeconomic unit, which the hon. Member for Weston-super-Mare called for, and which I understand will be based in Darlington at the Treasury campus.
Thirdly, on the public interest test, Labour has proposed the introduction of a broad public interest test for mergers and acquisitions. That would give the Government powers to review transactions, impose conditions and block transactions where they could have negative, long-term implications for the UK’s industrial strategy, economy and jobs. The Government have powers under the Enterprise Act 2002 to intervene in mergers and acquisitions where they raise issues of national security, stability of the UK financial system, media plurality or maintaining in the UK the ability to combat and mitigate the effects of public health emergencies.
We are calling for the Enterprise Act 2016 to be expanded to include a public interest test where an acquisition may have long-term implications for the UK’s industrial strategy. In our view, that goes further than the Penrose review in strengthening the interests of consumers, and we believe that we need a debate on how the CMA should move past narrow competition and consumer interests to public interest. On takeovers and mergers, that could apply to consumer interest but also to the impact on supply chains, employees and the public interest more generally, which has implications for consumer interests. As is consistent with the approach that the Minister will know we took on the Subsidy Control Bill, we need the CMA to have more diverse voices in its leadership, including reforms to the authority to make it more representative of the nations and regions of the UK.
I will just comment briefly on hollowed-out local enforcement. Our consumer protection regime has been weakened by 10 years of degradation of local authority trading standards teams. That is a serious issue. The number of LATS officers has been cut by more than 50% since 2010, while 45% of local authority trading standards teams say they do not have the resources to deal with consumer issues in their area. I note that the Penrose review has called for action on that and I would be grateful for the Minister’s confirmation that some of the recommendations in the review will form part of his package of reforms later this year.
In conclusion, Labour welcomes competition and consumer choice in the UK as a sign of a healthy, functioning market economy. We are committed to making the UK the best place in the world to start and grow a business, and we believe that that is important as part of a pro-business, pro-society, pro-worker agenda to be built for Britain. We are ready and waiting for Parliament to have the opportunity to act and to build on the Penrose review. We believe that the Government have been a little too slow, so I hope that the Minister will give us confidence that things will be speeded up. I look forward to working with him and with colleagues from across the House on this important agenda as it moves forward.
It is a pleasure to serve under your chairmanship, Mr Efford.
I congratulate my hon. Friend the Member for Weston-super-Mare (John Penrose) on securing the debate and on his report. Wolfie Smith will be turning in his Afghan coat when he sees that “Power to the People” has become the mantra for fixing broken markets to encourage good competition and free markets, but the report is an interesting read. That reference got tumbleweed from some of the younger Members, but I hope that my hon. Friend remembers Wolfie Smith.
My hon. Friend’s report is an important contribution to the debate on reforming the UK’s competition policy. It has had a significant role in shaping the Government’s thinking on the priorities for reform, and I reiterate my thanks to him for his work and for his continuing engagement with and advocacy for reform.
In the report, my hon. Friend argues that the UK’s competition and consumer regime should be one of the best in the world and the Government are absolutely four-square behind that objective. Now that the UK has left the EU, we must build on this country’s innovative foundations to create a robust and agile economy that works for everyone and that is fit for future generations.
Competition and consumer policy has a central role in creating a thriving free market economy that encourages innovation, enterprise, growth and productivity. Competition policy is crucial in creating the right conditions for healthy competition between traders in markets to win over consumers by offering the best deals and innovation. Consumer policy is vital in underpinning consumer confidence. It empowers consumers to engage in markets in an assured manner, knowing that they have a strong set of legal rights that will be respected and enforced.
That is why we committed in our manifesto to give the CMA enhanced powers to tackle consumer rip-offs and bad business practices. It is also why the Government committed in our plan for growth to the UK’s having a best in class competition regime that will raise innovation and investment across the economy.
An effective competition and consumer policy will help us to build back a better and fairer economy, giving businesses confidence that they are competing on fair terms and giving the public confidence that they are getting a good deal. The UK’s competition regime is already well regarded internationally, so we are starting from a strong foundation. However, we should always strive to be better and to go further.
Markets and the way that consumers and businesses engage with each other have changed dramatically since the current legislation was enacted. That change is particularly stark in the digital economy. The tech revolution has brought huge benefits. Recent research has shown that about 15% of all businesses have adopted at least one artificial intelligence technology. In recent years, we have also seen that some digital markets have certain characteristics that make them more prone to weak competition.
Despite the actions that the UK has taken to promote competition, there is evidence from the CMA that competition may have weakened over the last 20 years. In 2020, the Government commissioned the CMA to produce an expert state of competition assessment to improve our collective understanding of the level and nature of competition across the UK economy. In its first “State of UK Competition” report, the CMA found that mark-ups, the ratio of prices to costs, had increased by 7% from 2000 to 2018. It found that in 2018 the average combined market share of the 10 largest firms in an industry was 3% higher than in 1998. It is essential that the competition regime does more to encourage and maintain competitive markets.
The Government published two consultations on legislative reforms in July last year, building on the work of my hon. Friend the Member for Weston-super-Mare. The consultation, “Reforming Competition and Consumer Policy”, set out a vision for the future of our competition and consumer policy. The separate consultation, “A New Pro-Competition Regime for Digital Markets”, set out a vision for a new agile and flexible regime to promote competition in digital markets, something that my hon. Friends the Members for Weston-super-Mare and for Folkestone and Hythe (Damian Collins) highlighted that we need to improve.
The package of reforms in the Government’s two consultations shares the ambitions of the report by my hon. Friend the Member for Weston-super-Mare. Those proposals seek to enhance the powers of the CMA and consumers’ rights, and ensure that those rights are robustly enforced. They will work to protect consumers and help businesses thrive. In addition to sharing those ambitions, my hon. Friend’s detailed report has had a considerable influence on where Government see opportunities for reform.
Indeed. My hon. Friend is right to have used the near anniversary of his report as an opportunity to discuss the issue. Unfortunately, he has slightly missed the target of the consultation response, which we hope to bring forward very shortly. To answer my hon. Friend the Member for Truro and Falmouth (Cherilyn Mackrory), the Penrose report did not need Her Majesty to give a notification that it was coming forward. Unfortunately, I cannot pre-empt what Her Majesty will say in the Queen’s Speech about future legislation.
A central recommendation of the Penrose report, which my hon. Friend the Member for Weston-super-Mare has repeated today, is that the Government should take steps to ensure that the enforcement of competition and consumer law speeds up to keep pace with the modern digitising economy. We agree and propose a range of measures to make enforcement more efficient. For instance, we propose that the CMA should have stronger powers to penalise businesses that obstruct or slow down investigation. The Government have also proposed new ways for businesses and the CMA to reach agreements on the actions needed to resolve competition issues in market-wide investigations and merger reviews. Both those changes were recommended by my hon. Friend in his report.
He also recognised the need for UK competition regulators to work in partnership with regulators overseas, to help address competition and consumer issues that span borders. We agree that effective international co-operation is an important part of the UK’s competition and consumer regime. Promoting that co-operation is a key objective in our free trade agreements, and we have successfully secured text on that in the UK’s recent agreements with Australia and New Zealand. We have consulted on legislative proposals to ensure that the CMA and consumer authorities can work as effectively as possible with their international counterparts.
My hon. Friend’s report also emphasised the role of consumer protection law in empowering consumers and driving effective competition. We agree that our already strong consumer rights framework must continue to support consumers into the future, allowing them to benefit from new technology and business models and to feel empowered to make the best decisions available to them. We have consulted on measures to tackle subscription traps, where a consumer enters into a subscription for a product or service but has difficulty leaving. We have also consulted on measures to tackle fake reviews, as mentioned by the hon. Member for Makerfield (Yvonne Fovargue), which undermine competition and give unfair advantage to traders who are willing to use them.
In taking steps to strengthen the protections for consumers, the Government are aware of the need to consider any new burdens on businesses. We want to ensure that consumers get that fair deal and that businesses are not overburdened by regulatory barriers. My hon. Friend the Member for Weston-super-Mare is absolutely right to talk about better regulation, and I will speak a little more about that, if I have time.
My hon. Friend talked about how we can have better dispute resolution, because when consumers enforce their rights, poorly performing firms face more pressure, and consumers know they can trust the system to be on their side if they need it. That is what we need.
The Minister is being very generous. I just want to press him a bit on the point about better regulation. So far, he has not said that he wants to go back to one in, one out, or to one in, two out. Could he clarify what mechanism the Government have to ensure that better regulation happens, as opposed to being wished for with a target that will not be hit?
We consulted on reforming the better regulation framework, and the Government do not think that a one in, two out rule—or whatever number out—is consistent with delivering world-class regulation to support the economy in adapting to a new wave of the technological revolution or in achieving net zero, so we want to reduce costs to business wherever we sensibly can do so and regulate only where strictly necessary. We intend to do that by looking at the merits of each case rather than using the one in, two out system, and we plan to change the better regulation system so that it will do that. However, it is very important that we get the balance right.
The Government believe that a well-functioning alternative dispute resolution system can make markets work more effectively, increase consumer confidence in spending and generate higher trader compliance with the law. It is an important avenue to redress for consumers that more easily allows for mediated settlements and is less confrontational than a court process, which is often more costly and time intensive, so we sought views on proposals to enhance the role of ADR in resolving consumer disputes.
My hon. Friend the Member for Weston-super-Mare also recommended that the CMA’s civil consumer enforcement powers should be upgraded, which would allow it to decide cases and impose fines in the same way as it does for civil enforcement of competition law. Again, we sought views on empowering the CMA to enforce consumer law directly, and we consulted on giving the CMA new powers to decide whether consumer law has been broken. Under the proposal, the CMA could directly impose directions, remedies or monetary penalties on firms that mistreat their customers without having to go through the courts, as is currently the case. That would allow the CMA to intervene earlier and to go further.
My hon. Friend the Member for Weston-super-Mare also mentioned the CAT. I have to say that although there are plenty more things that the CAT could do, changes have been brought on by covid. I visited CAT’s virtual court the other day, when it heard the case of Newcastle United’s takeover by the Saudi buyers. It had 35,000 people tuning in, which is more than all but the top nine average gates in the premier league, so a lot of Geordies and Newcastle fans elsewhere are now experts on competition law—I am not sure whether that is a good thing or a bad thing. None the less, it really shines a light—being with the transparency tsar—on the work of the CAT and the competition regime.
Clearly, there are also challenges in some markets in the digital economy, which my hon. Friend the Member for Folkestone and Hythe talked about. That is why we looked at what we can do to have a bespoke regime in the digital consultation. Frankly, government is not particularly good at keeping up with technology—I am talking about government as an overall body, rather than any particular government—so it is right that the market looks at how we can introduce conduct requirements and how we can have pro-competitive interventions by the digital market unit to keep up with an ever-changing regime. We also consulted on a merger regime, which is exactly the point that my hon. Friend the Member for Folkestone and Hythe was talking about—the so-called killer acquisitions and other stifling of innovation. I remember the days of Netscape, Mozilla Firefox and all the other browsers that were available but have now fallen by the wayside—again, tumbleweed from my hon. Friend the Member for Bolsover (Mark Fletcher), who is far younger than me.
My hon. Friend the Member for Truro and Falmouth talked about Cornwall. She did not just talk about regulation and competition regimes and legislation to promote things such as the direct sales of fish and the secondary industries around the exciting opportunities for lithium. Actually, it is about promoting enterprise and innovation. If regulation is there, that is fantastic, but it does not always need to resort back to a constructed regime if there are businesses ready to grab opportunities. That needs to be part of a suite of measures to ensure that the UK is the best place to start, grow and scale up a business. Part of that is the strategy that BEIS is coming up with, to show that we are ready to invest in—and are investing in—and support, for the long term, those kinds of technologies, which will give businesses the confidence to invest in areas such as Truro and Falmouth in order to make the most of that.
Looking at some other areas, the hon. Member for Makerfield talked about weddings. That was an interesting point about the covid pandemic, because I think that shows the difficulty of having a consumer policy. I was the Minister charged with engaging with the wedding sector, and that was a challenge. We had brides and grooms looking forward to their special day, which costs a lot of money. The whole point about the wedding sector is that it builds up anticipation and expectation. Clearly, however, venues and organisers especially had spent a lot of money and had a lot of reservations, but they have only a single day to provide their service. When they were compelled to lock down, or when demand was stifled, if they had refunded everything in one go, they would have been out of business. The balance was hugely difficult, with a lot of arguments between them and the CMA within that. I am glad that we got through that, largely, and that we were able to navigate through it by working with the CMA and the sector to make progress.
I will conclude on the report of my hon. Friend the Member for Weston-super-Mare, because I want to give him time to respond. His report represents a significant milestone in the process of reforming competition and consumer policy. I reiterate my thanks for his work. We will continue the conversation as we bring legislation to bear, as we make the changes where primary legislation is required, despite the fact that changes are already happening. He has acknowledged the direct impact of some of his proposals, on which we have consulted, so we will bring that all together. I continue to work with stakeholders—I spoke with them only last week on this very subject—and we are carefully considering the feedback. We will come back with measures in good time.
I thank all hon. Members for their contributions to the debate. One thing that has been very clear is that everyone present wants us to go further and faster. Everyone is saying, “Get on with it. Why are we not moving more quickly?” I think it is the only time in my life that I have ever been outflanked on a competition issue by the Labour Front Bencher—I am paraphrasing the hon. Member for Feltham and Heston (Seema Malhotra)—who agreed with a great deal in the report but would like to go further in a few areas. Even without that, the clear message from everyone who spoke is that we agree with most of this and we want it to happen quickly, please, and to go further. Radicalism, not incrementalism, has been the universal message.
My hon. Friend the Minister can take away a reassuring message that, perhaps contrary to what he might have expected, there is cross-party agreement on more competition and more consumer rights, because from that comes a better and more trusting economy, and therefore a more productive and high-wage economy. At the start of the debate, I was not sure that I would get that, but it has been clear that that is where we are. However, we will need to push him a bit, because he did not mention a couple of things in his remarks, such as the stuff about whether we can further reform some of the economically regulated sectors, to normalise as much of them as we can to ensure that we do not need extra protections, because the existing ones will be enough. It looks as if he might not have got to a section of his speech, so it would be lovely if he commits to that when we get to the primary legislation.
The Minister was also clear that there will be primary legislation. I appreciate that he cannot give too many details in advance of the Queen’s Speech. However, it is clear that we cannot have the digital markets unit functioning effectively without primary legislation. Therefore, more progress will be needed. He was very clear about the shortcomings—as he sees them—of the one in, one out mechanism, or the one in, two out mechanism, for better regulation and about the fact that he has a mechanism, he thinks, for an alternative approach that will work, but when I asked him about how, we just got a repetition of what, rather than how, and there was no detail behind it. I am sure that he has that, and I hope that he will come around to describing it in detail in public shortly, because at the moment it is a bit of a mystery. Without it, we will have nothing that works.
That said, I again thank everyone for participating and the Minister for his comments. I think we are making progress. We have an awfully long way still to travel.
Question put and agreed to.
That this House has considered UK competition and consumer policy in response to the Penrose review.