Increased consumer protection in the UK: CMA proposed reforms to existing competition and consumer protection regimes

Written on 2 May 2019

In February, the CMA published a series of proposed reforms designed to address its concerns with its abilities under the current legal framework to adequately protect consumers. The proposals to BEIS are intended to "put consumers at the heart of the UK competition regime" by deconstructing the current "analogue" system of competition and consumer law.

While the CMA is not proposing a fundamental rewrite of the statue book, the proposals could result in significant changes to the way in which the CMA conducts and prioritises its work, as well as providing the authority with a raft of additional tools to crack down effectively on abuses that harm consumers.

What happened?

As part of the CMA’s contribution to the government’s review of the competition regime and consumer regulation, Andre Tyrie, the Chairman of the CMA, wrote to the Secretary of State for Business, Energy and Industrial Strategy (BEIS) to provide advice on legislative and institutional reforms aimed at safeguarding the interests of consumers and maintaining and improving public confidence in markets.   The proposals include:

  • A new statutory duty on the CMA, and the courts, to treat the interests of consumers, and their protection from detriment as paramount.
  • A more effective and flexible regime for market studies and market investigations, potentially including the power for the CMA to utilise interim measures in the markets regime.
  • Improvement to the CMA’s powers to enforce consumer protection law, including powers to decide whether consumer protection law has been broken, declare the fact publically, direct businesses to bring infringements to an end and impose fines.
  • An increase in individual and board responsibility, by introducing new personal sanctions for competition law infringements and introducing measures to establish a “clear line” of responsibility to the board of public companies for compliance with competition and consumer law.
  • Providing greater assistance to whistle-blowers, including a more straightforward way of reporting wrongdoing and reducing the risks to whistle-blowers, through appropriate financial compensation and providing greater protections regarding confidentiality.
  • Improving the CMA’s investigatory and information-gathering powers to improve the quality of evidence on which it bases its decisions, to enable it to conclude investigations and to put a stop to consumer detriment in reasonable time. This includes the introduction of civil penalties for the provision of false or misleading information and fines for non-compliance with competition or consumer protection investigations.
  • Simplifying and expediting court scrutiny of the CMA’s decisions. The CMA’s suggestions include a move away from the current “full merits” standard, either to a judicial review standard or to a new standard of review. It also suggests amending the CAT’s rules of procedure to facilitate a faster review process.
  • Introducing changes to the UK merger control regime – in part to address the greater case load following Brexit – including the introduction of mandatory notification for mergers above a certain threshold to the CMA; the UK currently operates a voluntary regime.

What do these changes seek to achieve?

Primarily, these proposals are designed to deal with the current challenges that the CMA perceives it faces when it must approach consumer law through the lens of competition law. The CMA is concerned that its current statutory duty – to “promote competition, … within the United Kingdom, for the benefit of consumers” – does not give it a power to act to directly protect consumers, with a focus first on market distortion/failure. Mr Tyrie states that this “analogue” system of competition and consumer law in a digital age is the “central challenge”.

The CMA considers that reform is required, firstly, to deal with the “new and rapidly-emerging forms of consumer detriment” in the digital era – the CMA does not currently have the tools to act quickly enough to meet these threats – and, secondly, to act to assuage public doubt that the markets are working for their benefit.

What happens next?

The proposed changes suggested in Mr Tyrie’s letter are, at present, just proposals and it remains to be seen whether they are approved and implemented. Nevertheless, the call for greater enforcement powers will be bolstered by a similar message coming out of the Furman Review.

Mr Tyrie is clear that, given the significance of the proposed reforms, a consultation will be required to allow for “extensive” scrutiny . We should not, therefore, expect the full raft of proposed changes to be implemented in the near future – although the letter does indicate it has already started work on a number of them. Nevertheless, the letter is a clear mission statement and, alongside the Furman Review, these proposals are likely to be highly influential to the BEIS.

Osborne Clarke comment

It is not surprising that Mr Tyrie, in his letter, anticipates that the proposals could receive opposition, flagging both that they may be seen as too wide-ranging and radical, but also that they may not go far enough for some. Beyond the apparent consolidation of competition and consumer enforcement, the proposal also includes increased powers, the introduction of mandatory merger thresholds and attempts to “simplify” the appeals process.

It is clear that central to these proposals is a desire to address the concerns that are being echoed across Europe about the ability of competition law alone to adequately protect consumers in an era of increasing digitalisation. The effectiveness of competition law to regulate the e-commerce sector, deal appropriately with mergers of big data companies and acquisitions of disruptors and to intervene quickly enough to deal with abuses in fast-moving markets are among the issues being debated. Whether the proposals are seen as too far-reaching or not far-reaching enough, as a change to the UK regulatory regime, what the CMA proposes is ambitious and sets out the CMA’s stall as a regulatory force regardless of its role in Europe post-Brexit.