CMA seeks new powers to protect consumer rights

A rewriting of its duties and responsibilities to make the economic interests of consumers paramount has been proposed by the Competition & Markets Authority in response to a request by the Business and Energy Secretary.

Last August, Secretary of State Greg Clark asked CMA chairman Lord Tyrie for proposals on legislative and institutional reforms to safeguard the interests of consumers and to maintain and improve public confidence in markets. The chairman has taken the opportunity to address "the twin challenges posed by the growth of the digital economy, and declining public confidence in market competition", which he says make the current law "an analogue system of competition and consumer law in a digital age".

His proposals include changing the CMA's statutory duty so that the economic interests of consumers, and their protection from detriment, are paramount. The new duties would be backed by strengthened tools and powers to facilitate earlier and more robust intervention to address consumer detriment, and to deter wrongdoing.

It is also proposed that the CMA relinquish certain powers and functions, or its lead responsibility for them, including the review of certain decisions by economic regulators, and the prosecution of criminal cartels, enabling it to focus more effectively on its core responsibilities.

The new duties would also apply to the courts (including the Competition Appeal Tribunal) that review the CMA’s decisions, so that both operate with a shared objective to put the consumer first.

There would also be a statutory requirement on the CMA to conduct its investigations swiftly, while respecting parties’ rights of defence.

As for market studies and investigations, Lord Tyrie identifies "some significant defects" in the present framework, under which it can take over three years before the CMA is in a position to order binding remedies. He recommends more closely aligning the scope of market investigations with that of market studies, so that they both consider adverse effects on consumers; allowing the CMA to impose legally enforceable requirements to address adverse effects on consumers, without having to show that they arise from adverse effects on competition; and allowing the CMA to impose remedies on firms in a market at an earlier stage, on an interim basis, if necessary to protect consumers.

With these reforms, the CMA could be expected to engage more with businesses and with the public prior to initiating “formal” markets work. There would also be a stronger incentive for firms to listen, engage and take steps to address concerns the CMA might have about market conduct, in advance of a formal market study or investigation. 

On consumer protection, Lord Tyrie states that the CMA's current enforcement powers "provide only weak deterrence to wrongdoing", both in comparison with competition enforcement, and by international standards, as it cannot order the cessation of practices it considers to be illegal, and must instead pursue businesses through the courts. He wants the CMA to be able to decide whether consumer protection law has been broken; declare the fact publicly; direct businesses to bring infringements to an end; and impose fines, with its decisions subject to appeal, as they are in competition cases.

Changes to corporate governance are also proposed for public companies to improve board-level responsibility for compliance with the law, along with stronger protection for whistleblowers.

Investigatory and information-gathering powers would be strengthened and expanded, and the appeal process made more efficient especially in competition cases, which now take far longer than intended when the Competition Appeal Tribunal was created.

On merger control, where following Brexit the CMA will need to review a larger number of multi-jurisdictional mergers that would previously have been considered by the European Commission, proposals are made to require mandatory notifications of mergers above a certain threshold, accompanied by a “standstill obligation” designed to prevent parties from proceeding with the transaction prior to the CMA’s approval.

Click here to access the proposals.