Separating Consumer Protection from Competition Enforcement: ‘if it ain’t broke, why fix it?’

(by Pinar Akman) Part of the UK government consultation on reform of the competition regime relates to whether the merged Competition and Markets Authority (CMA) should have ‘a clear principal competition focus’. As one reads on, it appears that the issue really is whether the CMA should have no consumer protection role at all and only have competition law powers. The Government believes that the scope of the activities of the CMA should not include any consumer powers or functions. It provides no substantive justification for this view.  Depriving the CMA of consumer powers and functions is alarming. Why?

The plan is that the OFT’s consumer enforcement powers and consumer advice/education role will transfer to Trading Standards (TS) and Citizens Advice (CA). The Government has separately announced a reform of these and other consumer bodies.   Why should we be concerned about divestiture of the OFT’s previous consumer functions?

First, the proposal begs the question of ‘if it ain’t broke, why fix it?’. Nowhere in the consultation is it explained why one should separate the competition and consumer functions. Nowhere is it explained what is not working with the current system and why this is a result of the competition and consumer functions being held by one authority. The only evidence in the consultation proves the contrary: the diagram (Figure 9.1) presenting the examples of consumer and competition outcomes of OFT market studies demonstrates clearly how intertwined the issues of consumer and competition protection are. Issues such as consumer contracts, payment protection insurance, local bus services, etc can at any given time be issues of pure consumer protection, pure competition protection or a mix of the two. Therefore, an ex ante separation of powers to deal with such interconnected issues needs to be properly justified and the justification is currently not there.

Second, there will be a loss of expertise. TS and CA will have to build the expertise that the OFT already has. There is no mention of any cost implications of this at all. Moreover, neither TS (funded by local councils) nor CA (a charity) has the broad expertise that results from national enforcement or the appropriate resources. It is questionable that they will ever be in a position to deal with requirements of national enforcement, including those resulting from the UK’s obligations to apply EU law.

Third, there will be a loss of synergies. A single authority when dealing with a certain market (e.g. due to competition concerns) gains valuable insights into that market which might trigger or prevent further action in consumer protection. Similarly, action in consumer protection (e.g. prohibiting certain ‘unfair’ practices) can have implications for competition on the market as a whole and might be better undertaken by a single authority responsible for both functions.

Finally, if the new authority is to have the duty to ensure ‘fair and effective competition and promote competitive markets conducive to stability, growth, innovation and consumer welfare’ (para 9.2 of consultation) and it is called the ‘Competition and Markets Authority’ then it is rather strange that it does not have any consumer functions, when consumers are clearly an integral part of most markets.

 All in all, the burden to prove that the current system is not working and therefore should be changed lies with the proposer. This burden has not been discharged in the consultation document.

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