(by David Reader) After two years at its helm, the Chief Executive of the UK’s Competition & Markets Authority (CMA), Alex Chisholm, is stepping down to become the new Permanent Secretary at the Department for Energy and Climate Change (DECC). His departure marks the end of an era for the competition watchdog which, despite only becoming fully operational in April 2014, has reached a number of key milestones during his tenure. In a recent speech reflecting on the CMA’s achievements over the last two years, Chisholm made reference to notable progress on enforcement activity, efficient merger control and, of course, some very high-profile market inquiries. His verdict, then, is that there is cause for optimism as the authority embarks on a new chapter. But the outgoing CEO is also mindful of ‘the 3 big challenges’ that lay ahead for his successor. Perhaps the most striking of these ‘harder nuts to crack’, as Chisholm puts it, is the CMA’s ability to deal with ‘challenges to the primacy of competition analysis when sensitive mergers give rise to calls for public interest interventions’. Read the rest of this entry »
(by Richard Cadman) On 20th April 2016, the European Commission (EC) sent a Statement of Objections to Google outlining its view that Google had breached EU antitrust rules by imposing restrictions on Android device manufacturers and mobile network operators (MNOs). This post briefly discusses the economics of this case and draws a parallel with the EC case against Microsoft (Case COMP/C-3/37.792), but also identifies two key differences. Read the rest of this entry »
(By David Deller) In an earlier blog post, I provided an initial reaction to the CMA’s provisional remedies for the UK energy market. This blog post considers the underlying assumptions that appear to have provided the ‘envelope’ for the remedies that the CMA considers suitable and proportionate. I critique the CMA’s reasoning in three core areas: (i) the size of interventions that could be justified by the estimates of harm; (ii) why the headline harm estimates are likely to be overestimates; and (iii) the limited evidence for concluding that smart meters are a panacea to low consumer engagement. After such a lengthy investigation it is disappointing to see such weaknesses in reasoning. Read the rest of this entry »
(by Chris Hanretty) Rankings, ratings and reviews are common in life.
They claim to tell us which are the best films, the best albums, even the best universities.
Ratings are particularly useful for credence goods — goods the quality of which we poor consumers can’t judge.
Law is a good example of a credence good. I might hire a lawyer to represent me in court. I might even attend the court hearing. But I’d have no way of telling whether the lawyer’s arguments were good or bad. If I knew which arguments were good or bad, I could probably have saved some money and represented myself.
It’s therefore no surprise to see that there are lots of rankings for lawyers in the UK. One company (Chambers & Partners) is particularly known for ranking barristers — the kind of lawyers who earn their crust standing up and arguing cases in court.
Does this mean that you should always try and get the best-ranked barrister to represent you? Read the rest of this entry »
(by Catherine Waddams) In its provisional decision on remedies for the Energy Market, the Competition and Markets Authority measures weak customer response by the amount of money which is ‘left on the table’ by customers who do not switch to cheaper tariffs. However, research at the Centre for Competition Policy shows that understanding such inertia is complex, and that consumers differ considerably in their propensity to change suppliers. This variation is found even among comparatively well informed respondents who are aware of potential gains and the time it might take them to search for and switch to a better deal, and even after accounting for observable demographic and other factors, and for consumer expectations. This matters both for designing an effective package of remedies and, in due course, for evaluating their success. Why? Read the rest of this entry »
(by Catherine Waddams) The Competition and Markets Authority (CMA) has argued that competition is the way to empower most energy customers, but that prepayment users need additional protection. The compromise highlights the tension between competition and protection, because although competition is often the best way to ensure the lowest average prices and highest service quality for consumers on average, it is a process which carries no guarantees about the outcomes, nor about which particular customers and providers may win and lose from the process. Read the rest of this entry »
The CMA’s Energy Market Provisional Remedies: Right Direction but Inadequate, and Missing an Important TrickMarch 11, 2016
(By Dr David Deller) Yesterday the CMA published its widely anticipated provisional remedies to its long-running energy market investigation. Overall there is a significant gap between the size of detriment claimed by the CMA and the scale of the provisional remedies proposed by the CMA. It is this inconsistency which is at the heart of a dissenting view regarding the provisional decision expressed by one of the decision makers. Beyond highlighting this inconsistency, the purpose of this blog is twofold: to highlight the beneficial remedies; and to raise outstanding questions that the CMA should address in its final decision and report. While the proposed remedies have limited downside risks, they are also unlikely to reset the market for the majority of consumers. A lot hangs on the (probably questionable) assumption that smart meters will solve the competition questions. Read the rest of this entry »