The Competition and Markets Authority: a reboot for the 2020s
Think tank: Centre for Policy Studies
Author(s): Lord Andrew Tyrie
July 1, 2021
This report from UK think tank the Centre for Policy Studies looks at how to improve the accountability, transparency and effectiveness of the CMA.
Two thirds of businesses do not know that the Competition and Markets Authority (CMA) enforces competition law in the UK and two fifths have never heard of it, prejudicing the deterrence on which the effectiveness of competition and consumer protection policy depends, according to former Chairman, Andrew Tyrie. The Board needs to retake control of the decisions about which cases the CMA should investigate, as Parliament intended in legislation. And these decisions need to be supported by much more detailed analysis of the state of competition and consumer detriment. The result of both will be better targeting of resources for the benefit of consumers and the economy. Internal reform also needs to be supported by major legislative change. Competition and consumer protection law is outdated, unsuited to addressing the growth in market power and consumer detriment caused by the digital revolution. Legislation is now needed quickly, given the growth of detriment and scope for rip-offs.
Taken together, the reforms that Tyrie proposes will deliver more competitive markets and more confident consumers. Both are essential to the post-Covid recovery and to building a more dynamic economy. Two thirds of businesses do not know that the Competition and Markets Authority (CMA) enforces competition law in the UK; two fifths have never heard of it, and one in ten discuss prices with their competitors because they do not know the practice is illegal. In this report with the Policy Institute at King’s College London and Centre for Policy Studies think tank, Andrew Tyrie expresses his concern that the CMA’s effectiveness will be eroded without urgent reform. Its relative invisibility currently undermines the CMA’s capacity to deter uncompetitive and unfair trading. Consumers, and the economy as a whole, are both paying the price.
In the report, Tyrie, who chaired the watchdog from 2018 to 2020, makes many recommendations for reform of the competition watchdog, which can be taken forward without further legislation. Among his suggestions for immediate reform are greater openness to consumer complaints, through the introduction of a simple online form to alert the CMA to rip-offs in products and services; the publication of regular progress reports on its work and the state of UK markets; and far more comprehensive collection and analysis of data on the health of competition in the economy – something on which, so far, the CMA has done insufficient work. Tyrie also reveals that decisions on which cases to investigate have been delegated to a small group of senior executives, rather than being taken directly by the CMA’s Board, as originally envisaged by Parliament in legislation. He says this practice – which has meant the CMA has taken a number of cases that have little strategic justification or connection to the lives of ordinary consumers – must end. Better, and better explained, decisions can and should result.
The CMA will need to improve its capacity to serve as a repository of expertise on the micro-economy, and also to take a much more active role in offering constructive advice to the Government, devoting more of its staff time to both tasks. Arguing that the Chairman and the Chief Executive should be much more visibly and directly accountable (the former answerable for the choice on which cases to initiate; the latter for the subsequent decisions) he says both should engage much more vigorously than at present with Parliament, the media and the wider public. Major legislative reforms are also needed. Tyrie set out what may be required publicly, over two years ago. He warns that competition and consumer protection policy is currently struggling to keep pace with the growing power of online platforms, and the scope for the growth in consumer detriment in much of the economy that they make possible. The Government is likely to consult shortly on legislative change. It grasps the problem; the challenge will be to legislate quickly to address it. Taken together, these reforms could and should greatly improve the accountability, transparency and effectiveness of the CMA, hugely benefiting UK consumers, and the economy as a whole.