Power to the people

17th Feb 2021

If competition works in favour of consumers rather than companies (or of business customers rather than their suppliers) then our post-covid, post-Brexit economy will grow faster and our society will be both happier, fairer and more just as well.”

That’s just one of many headline comments from an independent report into the UK’s competition regime which was released on 16 February 2021. The report, which was prepared by John Penrose MP at the request of the Government, aimed to identify changes which could strengthen the UK’s competition laws and regulations in a post-Brexit world. The wide ranging report takes in areas such as red tape, government interventions and regulated markets. But it also takes a special look at digital industries as well as examining the challenge of spreading competition equally across the country.

The central theme of the review, giving consumers power and choice as a means of boosting competition and consumer outcomes, is particularly highlighted in Chapter 7, ‘Sticking up for consumers.’ Here the author identifies three gaps in legislation which are becoming amplified as the economy increasingly relies on digital platforms. These he comments require additional legislation in order to prevent consumers being ‘ripped off’.

 • Loyalty penalties and price discrimination. One key example given here relates to energy and insurance contracts, with renewing consumers being charged more than those who switch. This area is estimated to cost consumers some £3.4b per year and indeed is already the subject of a Financial Conduct Authority review. Another example looks at the problem of offering introductory discounts which might then tie consumers into long term contracts.

Rip-offs hidden in the small print, otherwise referred to as ‘when sellers know more than buyers’. One key area of concern here is the practice of burying conditions in the small print of long and complicated contracts. This can lead consumers to making uninformed choices.

‘Nudging’ people the wrong way (called ‘sludge’). Sludge techniques include practices such as offering free trials which lead people into accepting long term deals, burying opt-out options, or creating a sense of buy-urgency. Far from being isolated practices, sludge techniques appear in one out of every ten websites, leading the report’s author to call for a Competition and Markets Authority investigation to identify added consumer protections in this area.

Throughout the report John Penrose makes a number of recommendations in order to update consumer regulations for the modern era. Some require legislation, others a shift in emphasis by existing regulators. But the greatest impact of all will come when company leaders look to generate change within their own organisations. Putting consumer interests first can benefit long term organisational outcomes as consumers start to realise that they are being offered a fair deal which in turn can boost repeat business and reputation which attracts further customers and so on.  So competition working in favour of consumers will not only benefit our post-Brexit economy but also the economy of consumer-centric companies and their investors.

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