Policy paper

Terms of Reference: John Penrose MP report on competition policy

Published 14 September 2020

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This document sets out the context, scope and key questions for a short report by John Penrose MP on competition policy for HM Treasury and BEIS.

Context

The government has stated that competition is essential to drive innovation, produce better outcomes for consumers and allow new entrants to the market to grow[footnote 1].

Promoting competition will be particularly key in the context of the recovery from COVID-19. The pandemic is the biggest threat the UK has faced in decades and overcoming it will require all the dynamism and creativity that exists across all sectors and in all regions and nations of the UK[footnote 2].

In recent years, a number of international academic and policy studies have suggested that competitive pressure across advanced economies, including the UK, may have weakened. Against this backdrop, getting competition policy right takes on even greater importance[footnote 3] [footnote 4].

The UK’s competition regime is generally well-regarded, and authorities have taken on work in a number of high-profile areas in recent years, such as pharmaceuticals, digital advertising and statutory audit. Nonetheless, there is always room for improvement, particularly in terms of adapting to current market conditions and challenges.
Work is already underway in relation to digital competition issues. The March 2019 Furman Review – a major independent review for HMG on competition in digital markets – made six strategic recommendations for changes to the UK’s competition framework, which the government accepted at Budget 2020. Work is in train to take Furman’s strategic recommendations forwards and a new cross-regulator taskforce, based in the Competition and Markets Authority (CMA), will provide detailed advice on the potential design and implementation of measures for unlocking competition in digital markets, reporting at the end of the year[footnote 5] [footnote 6].

However, further challenges remain. The Conservative Party’s 2019 Manifesto committed to level up the economy, to tackle consumer rip-offs and bad business practices and to support disruptors taking risks on new ideas and challenging incumbents.

An earlier set of reform proposals, outlined by the outgoing CMA Chairman Lord Tyrie in February 2019, considered potential changes to the competition and consumer protection regimes[footnote 7]. In June 2019, the BEIS Smart Data Review examined how to accelerate the development and use of new data-driven technologies and services to improve the consumer experience in regulated markets[footnote 8]. In February 2020, HM Treasury and the Department for Business Energy and Industrial Strategy commissioned the CMA to produce a report on the ‘State of Competition’ in the UK[footnote 9].

Scope

A short independent report building on and adding to the recent competition policy developments set out above. In particular, to look at how the UK’s competition regime can evolve to meet the government’s policy aims of promoting a dynamic, innovation-driven economy which delivers for consumers and businesses across all regions and nations of the UK, within the context of recovery from COVID-19 and the end of the transition period.

Timing

The report should be delivered by the end of the year.

Key questions

Building on the government’s existing competition policy direction, as the UK looks to forge new relationships with the EU and other international partners, how can the UK’s competition regime best:

  1. Play a central role in meeting the challenges of the post COVID-19 economy and in driving the recovery?
  2. Contribute to the government’s aim of levelling up across all nations and regions of the UK?
  3. Increase consumer trust, including by meeting the 2019 Manifesto commitment to tackle consumer rip offs and bad business practices, and by ensuring the competition regime operates in a way which is strong, swift, flexible and proportionate?
  4. Support UK disruptors taking risks on new ideas and challenging incumbents?
  5. Make best use of data, technology and digital skills which are vital to the modern economy

  1. March Budget 2020. ↩

  2. A Plan for Jobs 2020. ↩

  3. For example De Loecker and Eeckhout (2018) ‘Global Market Power’, IMF (2019) ‘The Rise of Corporate Market Power and its Macroeconomic Effects’, and Andy Haldane ‘Market Power and Monetary Policy’ (2018) ↩

  4. The government therefore in February 2020 commissioned the CMA to look into this issue through a regular state of competition report. Commission letter and BEIS initial analysis are online here. ↩

  5. The Budget stated this will include advice on potential implementation of a pro-competitive code of conduct for digital platforms with strategic market power. ↩

  6. In July 2020 the Taskforce launched a Call for Evidence, alongside the final report from the CMA’s Digital Advertising Market Study. The Taskforce will report by end 2020. ↩

  7. https://www.gov.uk/government/publications/letter-from-andrew-tyrie-to-the-secretary-of-state-for-business-energy-and-industrial-strategy ↩

  8. https://www.gov.uk/government/publications/smart-data-review ↩

  9. https://www.gov.uk/government/publications/state-of-uk-competition-report-commission-to-the-cma ↩

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