gleedsaling

Last week I commented on John Penrose’s report on competition policy – ‘Power to the People’. Now I see that Andrew Tyre, former chairman of the Competition and Markets Authority (and prior to that, civil servant at H M Treasury and then Conservative MP) has waded into the debate with a piece in the FT – http://on.ft.com/2MzN71X.

Somewhat curiously, given their similar backgrounds, Tyrie makes no mention of ‘Power to the People’ – perhaps suggesting a degree of intra-brand competition? However, the themes are much the same, and ones that Tyrie has promoted before – the need for a more pro-active approach from competition policy to protect from ‘rip-offs’, especially via price discrimination from the privatised utilities; more powers for the CMA to protect ‘the consumer interest’ (and not just to further competition).

One particular theme is common to both reports – more direct engagement with the public. Tyrie wants the CMA to follow the Bank of England’s example of more direct engagement with the public. Penrose wants ‘a new competition and consumer champion’, to be the micro-economic equivalent of the Bank of England (both Tyrie and Penrose seem to be not so secret admirers of the Old Lady). Both want a beefed-up CMA to fulfil that role. However, as Tyrie points out, ‘six years after the Office of Fair Trading was abolished and replaced by the CMA, 62 per cent of consumers had heard of the OFT. Only 19 per cent had heard of the CMA last year.’

So was it a mistake to abolish the Office of Fair Trading – which would, in its heyday, have fulfilled the ‘competition and consumer champion’ role that Penrose wants?

A brief personal digression at this point. Many moons ago – in 1977 to be precise – I was a young government economist seconded, for my second job in government, to the OFT. Gordon Borrie (see the picture above) was the Director General, having taken up the post the previous year. As his Guardian obituary makes clear (see http://bit.ly/3sD7Ilr), he was precisely the kind of consumer champion Penrose and Tyrie are looking for. The OFT, under his leadership, also tackled big issues – the London Stock Exchange, the beer industry, estate agents and car dealers.

However, it is important to understand the two factors that allowed him to do this. First, he had established his reputation as an academic lawyer championing consumer rights; second, the 1973 Fair Trading Act gave a clear role to the Director General, which was entirely separate from that of the (then) Monopolies and Mergers Commission – the DG made references to it, and implemented their findings, but he was not judge and jury on competition policy cases. By contrast, there is a clear conflict between having a chair of the CMA who is a consumer champion – an approach which both Penrose and Tyrie seem to favour – and their duties in running an impartial quasi-judicial body.

And I find it hard to think of an equivalent figure today to Gordon Borrie – who, when I was a very junior economist, would happily say “Hallo Richard” to me if we crossed in the corridor.

You may, or may not, have seen this referred to in the press last week – it appeared in the Guardian but, as far as I can see from a quick Google search, was not reported elsewhere. The report by John Penrose MP focuses on how to improve the workings of UK competition policy, so that, as the report says on its front page, ‘markets work for people and not the other way round.’ (see http://bit.ly/3dA46fG).

As this was a report commissioned last September by the Chancellor, Rishi Sunak, the failure of the government’s publicity machine to make more noise about might seem odd, but perhaps no odder than the report itself. I was introduced to it last week via an online seminar hosted by the Regulatory Policy Institute (see rpieurope.org). John has clearly been an industrious chap. Without (it would appear) much research help, he has produced over 40 recommendations in his 70 pages.

The report shares many of the themes of Andrew Tyrie’s letter to the then Business Secretary, Greg Clark, in February 2019, although it adds its own spin on ‘cutting red tape’ (more of that anon). But unlike that report, which clearly drew on the resources of the CMA, which Tyrie then chaired, or the Furman Review on Digital Competition, it is short on its description of process. One suspects that this is because there wasn’t one – the report (and his presentation of it to the RPI) gives the impression that John has had a few chats, read the existing reports, and added a few thoughts of his own.

If that is right, it might serve as a useful ‘tract for the times’, perhaps designed to get the Tyrie letter back from the wpb and back on the agenda. The themes both raise are important ones – does competition law place enough emphasis on consumer interests?; do the competition authorities act rapidly enough with their current legislative powers in the new digital, global economy? – but it is not clear that the Penrose solutions have been fully thought through.

To focus on one example: the report correctly notes ‘too much red tape slows businesses down.’ But in the course of its 40-odd recommendations, it manages to add quite a few pieces of red tape of its own: it wants to ban price discrimination between existing and new customers; it wants ‘supercomplainers’ to be able to trigger a request to transfer sector regulator powers to the CMA; it wants an entirely new branch of the judiciary – County Competition Courts’; and it wants protection against ‘sludge’ – consumers who are exploited by ‘nudge theory’ (or plain old inertia). No cost benefit justification is offered for any of these.

Perhaps it’s less of a report, more of a nudge that the UK’s competition laws need a post-Brexit update? If government reads it and says ‘we can’t possibly do that’ perhaps it will spur them to think what they can do. If it achieves that, it will have performed a useful service.