Which? debate: Promoting competitive consumer markets for sustainable growth. Speech by Richard Lloyd, Which? executive director

Good morning and welcome.

I want to start by reminding us all of the absolutely vital importance to the economy of consumer and competition policy.

A predecessor of yours, Vince, once said “the sovereignty of the consumer, which is the most important element in the operation of the free competition market, is not to be taken for granted.”

He went on to say it’s the job of the government and regulators to ensure consumers are “adequately and accurately informed”, but information alone is not sufficient. Consumers should be protected against unfair practices, abuse of market power, and “other aspects of imperfect competition”.

That was Geoffrey Howe speaking as the first Minister for Consumer Affairs in 1972. Incidentally, Ted Heath had made this a Cabinet job, and described him as ‘Minister for Keeping Prices Down’.

Geoffrey Howe was clear that getting regulation right is central to economic growth.  It’s good for consumers – for example, as he said, by keeping prices down – and good for businesses, for example when regulation levels the playing field and ensures that firms that break the rules don’t get an unfair competitive advantage.

Leading players in the food industry, for example, have been telling us in the wake of the horsemeat scandal that the enforcement of food standards in the UK is a significant competitive advantage in an export market worth nearly £13 billion last year – people trust British food.  Similarly, major retailers want BIS to improve the regulation of price marking to stop others from profiting unfairly by bending the rules and making price comparisons impossible.

And it’s good for people and the economy if policy helps drive consumer demand for the best businesses, supporting their growth, incentivising efficiency and innovation. That, obviously, is what Which? has been about since the 1950s.

So these are some of the outcomes that we need from our system of regulation. But is the present system clear enough about the outcomes it is trying to achieve and is it up to the job?

In our view, although we’ve seen big steps forward with some of the recent reforms that Vince has overseen to the landscape and legislation, for example the Consumer Rights Bill now going through Parliament, the arrangements we have today are still not what we would build if we were designing from scratch a new system for the 21st century.

While broadly we’ve welcomed the merger of the OFT with the Competition Commission, it’s too early to say whether the one month old Competition and Markets Authority is going to be strong enough to command consumer confidence and the respect of businesses.  It has a big job to do, starting with the proposed energy market investigation.

The CMA must show how its emphasis on competition will lead to better outcomes for consumers in markets where competition law enforcement has for years been neglected by sectoral regulators.  At the same time it must ensure that its leadership role in consumer protection is given the priority it deserves.

And as you know, Trading Standards services have been given greater responsibility for consumer law enforcement, including national cases that local councillors will be very wary of taking on. With the Trading Standards Institute reporting a 45 per cent reduction in capacity since 2009, we’ve called for local authorities to do more to share services and expertise, for example in food law enforcement where in the last few weeks we found that a worrying proportion of lamb takeaways don’t contain lamb.

There is a big job to do here and it is critical that they pull together.

Meanwhile some economic regulators have been too slow to raise their game.

In vital sectors such as energy, water, transport, communications, financial services and healthcare we have a landscape of regulators responsible for 20-25 per cent of GDP.  But they have a wide array of objectives and accountabilities, have at times failed to put the consumer interest first, and have made very little attempt to consider how the system as a whole affects consumer welfare or the wider economy.

At worst, they have failed to enforce competition law, given all the appearance of being captured by the businesses they regulate, and so have lost the confidence of consumers.

Frankly, this weak and disjointed approach is frightening given the Government’s planned pipeline across these sectors of at least £150 billion of infrastructure investment in the next five years that will fall onto consumer bills.

Of course, there are also more practical issues such as learning lessons and sharing best practice across the regulatory framework.

That’s why we’ve welcomed the joint BIS and Treasury review to look at how regulators could make decisions on these issues in a more coordinated and consistent manner. The creation of a UK Regulators Network, at the moment staffed by two people, is a very modest step in the right direction.

Probably more important was the CMA’s first report last month on competition law cooperation with the sectoral regulators.  More important still are signs of stronger leadership, which we hope will continue.

It’s vital for a sustainably growing economy that we have confident consumers dealing with thriving, competitive businesses.

So we need to keep thinking afresh about improving our regulatory landscape and how we achieve that: independent regulators together more closely than ever before, in the interest of consumers; a system focused on achieving clearly defined consumer outcomes; more effective enforcement of both consumer protection and competition law, nationally and locally.

Today we want to focus the discussion on what those outcomes should be as well as the institutional arrangements that will get us there.





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