Consumer overhaul, UK antitrust 'Asbos' at top of Raab's Downing Street pitch

10 June 2019 11:33am

6 June 2019. By Matthew Holehouse.

All would-be British prime ministers need a backstory. They don’t often involve antitrust reform.

But for Dominic Raab, it was a six-month secondment to the Brussels office of law firm Linklaters as a trainee competition lawyer that explains his drive for high office. There, he now says, he developed a lasting dislike of the EU, and a belief in taking on broken markets on behalf of the “little guy.”

“I learned that, wherever the charge of a rigged market stuck, it was invariably the result of a poverty of proper competition,” he later said. “Too often, consumers were being ripped off, because the market was in the vice-like grip of a small number of big businesses.”

Raab left the firm after a few years for a career at the Foreign Office, and then politics. But now the former Brexit secretary is making competition reform — alongside a hard line on Brexit — a major plank of his campaign to succeed Theresa May as Conservative Party leader.

He argues that deepening the reach of the UK’s competition regulator, and ending “consumer rip-offs” inflicted by utilities and telecoms providers, are the best weapons to defeat the Labour opposition — which favors the renationalization of essential services.

Other candidates have so far had little to say on the matter, although that may change as the six-week contest unfolds. 

Raab’s pitch comes as May’s outgoing administration chews over proposals from the UK Competition and Markets Authority for legislative changes to its mandate and powers to focus on consumer markets. But without political support, that agenda risks falling victim to stalemate in Westminster, the agency’s leaders warned yesterday.

Utilities

An indication of a Raab administration's approach can be found in the submission he made to the UK government’s consultation on competition reform, “Modernising Consumer Markets,” conducted last summer. He made the submission as a constituency lawmaker, but — in a relatively unusual move — while serving as the minister for housing.

Raab put forward a number of industry-specific interventions.

The UK government’s policy of capping domestic energy prices should be abandoned, he said, and energy companies forced to break down the wholesale, distribution and administrative costs behind energy bills, helping consumers to shop around.

Plus, mobile telephone providers should be obliged to itemize bills, including the instalment cost of a handset, to deter them from continuing to charge customers long after the device has been paid off.

Raab also proposed that consumers should be able to change bank accounts while retaining their details — an approach known as “account number portability." That goes beyond the current UK switching service.

Most significantly, he called for the breakup of broadband infrastructure provider Openreach from its parent BT, a supplier of retail connectivity. In 2017, Ofcom obliged BT to separate the businesses internally and placed a duty of equal treatment of customers on the telecoms giant. But those measures “fail to resolve the problematic situation” that poses a threat to competition, he wrote.

Regulatory firepower

The CMA also needs greater firepower, he suggested. The authority's statutory mandate should be revised to include a “broader duty to investigate” anti-competitive conduct where there’s “clear evidence of practices prejudicing consumers”, he said. The agency’s staffing should be correspondingly increased.

“This reform would strengthen competition enforcement towards a ‘zero tolerance’ approach, preventing consumers being ripped off,” he wrote.

The CMA could issue "Anti-Competitive Behaviour Orders" on companies engaged in anti-competitive or unfair practices, Raab said — the term is a play on the now-defunct Antisocial Behaviour Order, a punishment for petty offenders. The binding stop-notices would allow the agency to intervene more rapidly and on a lower burden of proof than the current civil penalties regime, with “large fines” for breaches.

“The CMA is going to be an even more vital institution in post-Brexit Britain,” he remarked in a January speech. 

The agency is currently “disproportionately focused” on merger control. “If we are serious about defending the freedoms of the market, they must be properly defended, in the interests of healthy competition amongst enterprising businesses and active consumers,” he said.

In step

As far as CMA reforms are concerned, Raab is pushing at an open door.

The CMA’s leadership has proposed a far greater focus on consumer protection, made possible by shifting some of its current responsibility for regulatory appeals and criminal cartels to other agencies.

In a letter to business secretary Greg Clark in February, CMA chairman Andrew Tyrie suggested legislating to create an “overriding statutory duty to promote the consumer interest.” This would compel the CMA to handle cases faster and shape the approach of the courts.

The agency also wants to be able to hit companies with binding remedies much earlier. The current markets regime can take over three years to investigate industry-wide failings, leaving the regulator behind in fast-moving markets.

Raab’s other ideas aren’t so new.

In autumn last year, Ofcom conducted a consultation on how to stop mobile users being over-billed for their handsets. Plans are due later this year. The regulator is also due to review the effectiveness of the BT-Openreach separation in 2020-21, and has not ruled out a full breakup.

Ofgem, the energy regulator, has said it’s reviewing what further comparison data utility companies should be obliged to share.

Against the grain

Other Raab proposals would require a change in course. Account number portability is an idea that has long been toyed with by regulators, but was discounted by the CMA in a 2016 retail banking market review as too expensive and possibly redundant in an age of digital banking.

Ofcom discounted simplifying the process for consumers switching between broadband networks in 2017, a move Raab describes as a “missed opportunity”.

Raab’s paper is similarly critical of Ofcom’s cap of 37 percent on how much mobile network spectrum can be licensed by a single provider. He suggests instead a “pro-competitive” limit of 30 percent and the reservation of one lot per bidder.

Help from the top

Raab’s specific remedies are probably less important than the political thrust his premiership would bring, were he to top the Conservative Party members’ ballot in late July.

Tyrie told a hearing of lawmakers yesterday that while Greg Clark is strongly supportive of legislative reforms, the business secretary needs to win the backing of the rest of the cabinet if the measures are to get a slot in the parliamentary timetable.

“He’ll need to win over colleagues and press vigorously,” Tyrie said, adding that the response may be: “No time, no room, no space — we are far too busy.”

CMA chief executive Coscelli told the lawmakers: “Things are blocked at the moment, but there's quite a lot ready to go when the situation changes.”

An enthusiast in Downing Street may help.

Philip Marsden, a former CMA director and Raab’s old colleague at Linklaters, recalls a trainee “more suited to politics than law.”

“He was much more interested in results than process,” he told MLex. “I wouldn’t say impatient, but definitely fizzing with a sense of thwarted energy.”

Additional reporting by Lewis Crofts

Brexit Special Report