UK society and its economy faced three serious challenges as the 2020s developed: Climate Change, Brexit and the COVID-19 virus. This web page describes how competition policy developed in response. to those challenges, and in other ways.
The CMA responded quickly to the issues raised by the arrival of COVID-19, threatening action in response to price gouging, and announcing that no enforcement action would be taken against businesses cooperating so as to reduce damage to consumers and others. (In the case of price gouging, a Georgia (USA) man who bought 200,000 face masks for $2.50 and sold them for $5.00 was charged with committing an offence but this could not then happen not in the UK as such profit incentives were expected to rapidly increase supply of a most needed product.) Further detail is in a note by Tasneem Azad.
But the CMA's bid for 'temporary new laws' met a cool reception in Whitehall.
The CMA also - very unusually - allowed an otherwise anti-competitive merger to take place on the grounds that one of the companies would fail in the absence of a cash injection, and no other source of funds, nor any other likely purchaser, was available. The acquiring company was Amazon. The target was Deliveroo. And the special circumstances were (of course) the COVID-19 pandemic and associated recession.
(Deliveroo's argument is known as the failing firm defence - or - as cynical competition experts call it - the flailing firm defence. Competition authorities generally conclude that someone will acquire a flailing company, and so maintain competition, if the price is low enough.)
Resignation of Andrew Tyrie
The CMA's Chair, Lord Tyrie, announced his resignation in June 2020, after only around two years in the job. He made it clear that he was frustrated by the legal limits on the CMA's powers and by the Government's (so far) unenthusiastic response to his request that he be given new powers. These issues are discussed in my webpage summarising developments at the CMA and elsewhere before 2020.
In short, though, he had bid for powers to intervene decisively on behalf of the consumer - but without first carrying out a detailed investigation - which one commentator described as 'untrammeled'. At a deeper level, he wanted the CMA to work to an overriding consumer interest duty rather than its then current duty to promote competition for the benefit of consumers. As explained here, this would have been a much more far-reaching change that it first appears so it was not surprising that he hit obstacles which he found frustrating.
He had, however, suggested some interesting ways in which the CMA might more effectively regulate the digital economy and it will not be surprising if these are taken forward by the Government.
The resignation of a Chair of such a prominent and important regulator was undoubtedly unusual and striking, and became all the more so when it transpired that he had in fact been forced out by 'a rebellion' by the CMA's senior executives - presumably supported by the non-execs on the CMA's Board. The 'rebellion' included an approach to the Business Department who must have sided with the execs. There had clearly been a pretty serious personality clash between the serious-minded and 'political' Chairman and the equally serious-minded economist Chief Exec. Different characters might have found some room for compromise.
Amusingly and annoyingly (to those of us who had opposed the merger of the Competition Commission and the Office of Fair Trading to form the CMA) Lord Tyrie's letter was followed by press comment along the lines that the CMA should be broken up into its competition and consumer protection sides.
The Penrose Review
The Treasury announced on 14 September 2020 that John Penrose MP had been asked to examine UK competition policy with a view to 'cement[ing] the UK’s position as a leader in this field'. The review would 'consider ways our regime could evolve in the context of Covid-19 and the end of the [Brexit] transition period'.
It looked very likely that the conclusions of the review had already been decided as:
- the report was to be published before the end of the year,
- it was commissioned by the Treasury, not the Business Department,
- John Penrose had no obvious qualifications or experience, but
- he was married to Dido Harding, a close confidant of the Prime Minister and Dominic Cummings.
Three months before the end of the Brexit transition period was, of course, far too late to begin such an important review.
The Penrose Report itself (Power to the People) was long, wide-ranging and detailed but caused no immediate excitement or impact. It described how competition and consumer protection policies were struggling to cope with Big Tech and how everyone wanted 'faster and more predictable competition decisions' but failed to find any solutions which commanded wide agreement. It contained lots of interesting ideas, such as County Competition Courts but had been written far too quickly to be able to address the obstacles to the success of such innovations. And it was published well before the end of the Covid pandemic and well before the economic consequences of Brexit had become clear, and so could not claim to have addressed the principal concerns that had supposedly led to its requisition.
Here are its key recommendations:
- That the UK competition authority, the Competition and Markets Authority (CMA) “should become a micro-economic sibling for the Bank of England’s well-established public macro-economic role, responsible for tracking progress of UK competition, consumer rights, supply-side reforms and productivity improvements”;
- That the CMA should publish an annual ‘State of Competition and Consumer Detriment’ report that looks to identifying progress and problems across all sectors;
- That the CMA’s consumer powers ought to be strengthened and brought in line with its competition toolkit;
- That “the Government must establish a taskforce to complete an end-to-end review and redesign of procedures and case management in CMA and CAT”;
- That the government should look to cut red tape costs with a revived Better Regulation regime;
- That the CMA’s new digital market unit be “called the Network & Data Monopolies Unit (NDMU) and it’s extra-strong upfront powers must:
- Be a ring-fenced addition to the rest of CMA’s existing competition and consumer powers, so it can use the normal ones wherever possible.
- Only apply to individual firms that own and run new network and data monopolies, rather than to the rest of the sector in which they work.
- Only apply to problems which CMA’s existing competition and consumer powers can’t solve already.
- Only be extended with Parliament’s consent.”;
- That an audit be undertaken of all the sector regulators’ legal duties so that they all have a “strong, clear ‘competition for the benefit of consumers first, regulation only as a last resort’ primary legal duty”;
- That “we should independently-auction the contracts to build and upgrade the network monopoly infrastructure in each regulated industry, rather than handing them to the incumbent monopoly-owners instead”;
- That “We should create new, cheap, efficient, fast-track County Competition Courts for local and regional cases (the tier below existing CAT fast-track cases) with very tight case management”;
- That the “CMA should update its guidelines on what treating customers fairly means in practice, including ‘transactional fairness’ in its work, so it is as easy as possible for businesses, charities and public bodies to identify and avoid problems in advance, and so the guidelines keep up with changing attitudes of what society views as ‘fair’ in future too.”; and
- That “Ministers should develop new options on how to prevent fast-growing UK-based firms in fast-growing sectors (in other words, successful firms in the industries of the future) from being poached offshore for non-commercial reasons, without damaging our attractiveness for FDI by creating disproportionate political risks at the same time.”