A long-awaited report outlining recommendations designed to strengthen the UK’s competition regime has been cautiously welcomed by industry observers but described as lacking in detail.
The Power to the People report by Conservative MP John Penrose was published today (16 February) and has a heavy focus on streamlining regulatory processes and creating further competition where possible.
Speaking to Utility Week, Simon Oates, consultancy firm Fingleton’s head of infrastructure practice, described the report as a “good provocation for further debate” but said it had less concrete detail on changes than he expected.
“The direction of travel being around streamlining regulatory processes and increasing the emphasis on creating competition wherever it can be created in regulated sectors is really positive”, he added.
Among the report’s key recommendations are changes to simplify the appeals process for regulatory decisions.
Currently the appeals process is inconsistent across sectoral regulators and the Competition and Markets Authority (CMA) has previously proposed that any appeals they currently consider should instead be dealt with by the Competition Appeals Tribunal (CAT) and that it should be done at a judicial review standard.
Penrose called this a “pragmatic step” and that it should “go ahead promptly” but made no reference to what standards appeals should be held to.
Former Ofgem chief executive Dermot Nolan, now also at Fingleton, agreed the inconsistency needed to be addressed, going as far as calling the current system a “mess” but described the proposal as a “slightly ambiguous recommendation”.
“What he has not said, however, and is totally silent on, is the question of whether or not such an appeal should be a full merits appeal or indeed just a pure judicial review standard”, Nolan observed.
Oates has previously raised concerns about moving away from a merits-based review process, as courts can only consider if the method by which a regulator took a decision was robust, not if the regulator was correct.
Further recommendations in the report include sector regulators gradually handing over their consumer-facing powers over time. To do this, regulators should set out a multi-year plan to turn as much of their sector into a ‘normal’ pro-consumer, high-standards competitive market as possible, leaving a monopoly network left to regulate.
“He sees over time both (utilities) regulators losing their consumer facing function, but he does not specify a timeframe for it, he says they must make a multi-year plan and decide when to go to the CMA, the rest of the criteria are extremely vague as to how it might happen”, Nolan added.
Another key area is cutting the amount of red tape for regulators, with Penrose calling for the government to reinstate the ‘gateway’ provision, which means ministers and regulators must first remove or modernise old rules before introducing news ones.
Penrose additionally calls for actions to tackle the £3.4 billion a year ‘loyalty penalty’.
He cites the action being taken in the insurance market where the Financial Conduct Authority is consulting on a sector-specific rule requiring firms to offer the same prices to new and existing customers for home and motor insurance. This will ensure loyal customers, or those who do not switch, can enjoy the same advantages as those who do.
“We should apply it (or a close cousin of it) as a general consumer-protection regulation across the entire economy, so it provides a complete solution that covers energy and any other affected sectors of this £3.4 billion rip-off too”, he said.
Elsewhere the report calls for the CMA to publish an annual ‘State of Competition and Consumer Detriment’ report which measures and analyses progress and problems across all sectors of the economy and use the findings as part of the measures of its own success, as should the sector regulators.
Welcoming the report Andrea Coscelli, chief executive of the CMA, said: “The CMA welcomes this report and shares Mr Penrose’s ambition for the competition and consumer regime.
“We agree that new legislation could make the competition and consumer protection regime stronger, swifter and more flexible so that we can deliver even more for UK consumers and businesses.
“The CMA looks forward to working with government and others on his recommendations.”