Thank you for the opportunity to speak today at this event. I promise I am going to talk about the role of the CMA, and why it matters to Scottish consumers, in a few minutes.
But I decided to use the first 5 minutes of my slot to tell you a personal story of my experience as a consumer. I recently had cause to approach the Property Ombudsman. My elderly mum had moved house – something had gone wrong with the move. Random Removals Ltd offered her enough to replace half a dinner set – useful. She thought she might want occasionally to invite more than 2 people round to dinner – note that I don’t comment on whether they’d accept or decline the invitation (she is my mum and she’s only poisoned me once!). So we asked for a better offer.
Silence from Random Removals. Derek never quite had the time to return my call or emails.
It was kind of obvious that he never was going to return calls or emails. But we duly waited the 8 weeks before approaching the Ombudsman. During that period, here were the sorts of things I was thinking:
- that it was all being left too late – would the removal company have grounds to say that it wasn’t reasonable to chase them for the money after 2 months?
- should my mum not have paid up front? Were we just stupid and now were paying for it?
- were we being greedy asking for double what he’d offered? Mum would probably only use the side-plates twice a year
- that it was a bit of a pain having to send emails and keep paperwork relating to something that happened a few months ago
- that this was a small business who were probably suffering from a downturn in the property market and it wasn’t fair to go after them
- that the company would ignore the Ombudsman who I feared had no teeth
So lots of reasons for not making a stand. So why did I pursue it?
It was partly because Mum wouldn’t have bothered, if left to her own devices. Though 89, she’s not vulnerable, but she does lack confidence and knowledge of how to pursue her claim.
Thinking that, if the company was being unfair with us, it was probably being unfair on lots of other people, but not being challenged and so able to continue to be careless with other people’s property, ie had no incentive to improve their service quality.
It was also a bit of a test to see how and whether the system of redress actually worked.
And it did…
Within a week of our giving information to the Ombudsman, Derek had got in touch to offer us what we were seeking. The cheque arrived within 10 days.
Not all instances of seeking redress would be as straightforward and successful as this, but what I thought was worth sharing was the obstacles I made for myself before even approaching the Ombudsman.
What I’d like to see in Scotland going forward is active consumers expecting and demanding satisfaction of their rights across all sectors. And having confidence in the systems of protection and redress that have been established to assist with that.
Consumers exerting their influence in markets is crucial to the virtuous circle within which competition drives better consumer outcomes. There are very many reasons for not bothering, including the worthy one of not wanting to make things difficult for a struggling business. But, protecting one firm could be hampering another’s ability to compete to provide a better quality of service. And empowered consumers also contribute to the wider economy:
- if consumers trust the trader, they don’t spend hours in the queue reading all the small print – transactions can happen quickly
- if consumers trust the market, they continue to participate, rather than under consuming
In order for consumers to drive competition in this way, they need to access information about the various offers in the market, assess these offers in a well-reasoned way, and act on this information and analysis by purchasing the good or service that offers the best value to them. They need to be able to make informed decisions about who to trust and who to deal with.
So having done my bit for competition, I feel pretty virtuous because I know the extent to which effective competition can deliver direct consumer benefits. My clever colleagues in London have done the sums to show how the work that the CMA (and its predecessors) has done has delivered millions of pounds of consumer benefit. We have a target of delivering consumer benefit 10 times our costs, over a rolling 3 year period. And for the past 3 year period we exceeded it – over £700 million in benefits compared to £66 million in costs.
Not only is this a great target to have and meet – it means that always in our sight is the consumer and how they will benefit. It means that we have to be aware throughout a project what benefits we hope to see realised. And, in many cases, we will commit to an evaluation to assess whether we were right.
For example, a few weeks ago we reported on our evaluation of the BAA divestment of Edinburgh, Gatwick and Stansted airports and independent estimates indicate that £870 million of quantifiable benefits could be achieved by 2020. Edinburgh airport has been more dynamic and innovative since being in new ownership, growing its routes, attracting many more leisure as well as business customers, and improving its offer to passengers and bringing benefits to the wider economy from growing passenger numbers.
So competition can be good for business and for a productive economy. In analysis we produced last year we concluded that competition drives productivity in three ways:
- it places pressure on the managers of firms to become more efficient
- it ensures that more productive firms increase their market share at the expense of less productive firms
- it drives firms to innovate, coming up with new products and processes which can lead to step-changes in efficiency
For those unfamiliar with the CMA’s role in promoting competition, I will give a brief recap on how we make markets work well for consumers, businesses and the economy. Firstly, we have powers to enforce against breaches of competition law, to prevent anti-competitive agreements (including cartels) or abuse of dominance. We can also take action to enforce consumer protection law, although in most cases this is a job for Trading Standards services, who we work closely with. In the past year we successfully concluded 7 competition cases and 8 consumer cases with fines totalling around £47 million. We also secured 2 guilty pleas in 2 criminal cartel cases. We also investigate mergers where there may be a significant lessening of competition and can block a merger or require divestment of assets or other structural undertakings.
And then we can look into how competition is working at market level. Since 2014, we have chosen to focus our efforts on big high-value markets where we can make a difference for every consumer and every enterprise across the UK: energy, banking, transport.
We are close to completion of our work on energy and banking, and we expect the impact of our remedies will be felt for years to come. Our work on rail transport competition has been referred to in many of the recent press reports of a new FirstGroup service from Edinburgh to London. This recent announcement of the Office of Rail and Road will allow FirstGroup to compete not just with the franchisees, Virgin/Stagecoach, but also with the airlines and coach companies. We think this sort of arrangement potentially offers better choice for passengers but could also drive greater efficiencies and therefore lower fares.
For the forthcoming year we have committed to launching 2 to 4 market level projects – one, announced already, into price comparison websites. This is perhaps better described as a cross-market project. As markets become increasingly digital, we are interested in behaviours and issues affecting consumers when they don’t have sight of who is selling to them.
Helping businesses understand how to comply with consumer protection in the digital world is also a key objective – recent work on the use of consumer data and online reviews has provided a platform for increasing our compliance education effort. Our programme is particularly aimed at small firms who may, unwittingly, be breaking consumer or competition law because they don’t know very much about it. It may also help them understand when to report anti-competitive behaviour of other firms to the CMA. We are immensely grateful to the Federation of Small Businesses, in particular for helping us promote our compliance materials - and to other organisations like ICAS and the Scottish Business Resilience Centre for giving us some space through their communications channels.
So far, I haven’t said a great deal about CMA – the Scottish dimension. The simple reason for this is that almost all the markets work we do has a Scottish dimension. Scottish consumers benefit from our work on online markets. Scottish consumers and businesses will benefit from our energy and banking investigations. Our provisional decision on remedies for the energy market includes measures to address the difficulties those on restricted and prepayment meters – particularly prevalent in Scotland – have with switching tariffs. New measures targeted at unarranged overdraft charges were recently proposed in our provisional decision on remedies in retail banking. Increasing transparency, removing the barriers to switching – these are just some of the important aspects of our work that can make a real difference to Scottish consumers choosing the best deal. Even where we run a market study as we are now doing on legal services in England and Wales, lessons can be learned for how similar markets work in Scotland.
Our work reflects the fact that markets tend to work at UK level. In fact, increasingly, markets are international and online. The CMA plays an important role in the international arena, influencing the competition decisions of the European Commission (for example on the O2/Three merger recently blocked on the basis that it would be bad for UK consumers).
At the other end of the scale, there can be very localised markets in products, say, where the logistical costs prevent firms from trading more widely. Or, for convenience, the local market – the high street – really is the local market. The merger of a supermarket with another, both with branches on the same street, could lead to monopoly supply and loss of competitive tension, reducing the choice for consumers in that immediate area. Lack of choice isn’t great for anyone but it can have greater impact because of rurality or poor transport links, where shopping around just isn’t a practical possibility, particularly for the more vulnerable. These conditions can mean a market isn’t working effectively – and we are interested in this, though sometimes it is difficult to identify the right remedy for it.
There are some markets that work at Scotland level by virtue of different regulatory frameworks which require a firm to be based in Scotland to be able to operate here – examples are water, property management and legal services. The Office of Fair Trading (OFT) – CMA’s predecessor – conducted studies into some of these markets and we continue to monitor regulatory change in these and other sectors, and where appropriate offer our perspective on what the competition impact may be. Even with these markets, the boundaries are becoming blurry: we see Scottish legal firms and Scottish water companies looking to cross the border for business, and vice versa. The deals such cross-border companies offer Scottish customers could be very much influenced by a business model developed at UK level.
We can see that there are aspects of Scotland’s economic and social make-up that appear to influence how markets work here. For example, there is some evidence of brand loyalty to well-established Scottish firms in energy markets. 65% of customers in Scotland surveyed for our energy investigation were with an incumbent supplier for at least one fuel, compared to 53% in England. Lower levels of engagement in this market we think could be a result of constraints relating to metering, but nonetheless I think we’ve all heard anecdotes of loyalty to ‘the Hydro’.
Usually, when I talk to folk about ‘Scottish markets’ what comes up is ‘our other national drink’: surely, they say, people drink Irn-Bru because it’s made in Scotland from girders, not because they like the taste. Actually, I say in reply, lots of people across the UK are drinking Irn-Bru and, although there’s nothing like it, it’s not quite true to say there’s no substitute – as we found in our aborted investigation into the Barr-Britvic merger.
Remote communities too have particular issues which were looked at by the OFT in 2012:
- Weak economies of scale play a central role in pricing, especially in retail. This is likely to be more significant than distance.
- Weak competition is significant and some businesses enjoy quasi-monopoly positions. Where competition does emerge it can often be short-lived. Less mobile consumers are disproportionately disadvantaged.
- The positive effect of the internet on choice, price and quality is constrained by connectivity and take-up.
The role of my team in Scotland, working with London-based colleagues, is to identify where markets appear to be not working as effectively in the nations as they could be for consumers. We couldn’t do this without a lot of the organisations represented on this slide and in this room: for example, Citizens Advice Scotland who provide us with intelligence on concerns raised through their bureaux and ConsumerDirect helpline. And Scotland’s Trading Standards community, contributing to the picture we can build up about individual firms and sectors of systematic consumer protection failings where the CMA may be best placed to take action.
When I came into post in 2014 my priority was to get more CMA senior staff up to Scotland to see for themselves how the land lies – to listen to and share with others what we know about consumer experiences in Scotland’s cities, towns and villages. The CMA board has met in Edinburgh twice in two years, building in meetings with key partners. And members of our senior team have spoken at events in Glasgow, Aberdeen and Dundee.
Colleagues working on the rail access project, review of FirstGroup bus undertakings and the mentioned evaluation of airports all visited Scotland and met with officials from Transport Scotland, local authorities, Transport Focus and the businesses involved.
Our energy team met with Fergus Ewing as then Energy Minister, the Holyrood Committee responsible for energy, the Extra Help Unit through in Glasgow, Energy Action Scotland and Citizens Advice Scotland, as well as made site visits to the two Scottish companies – Scottish Power and SSE.
Our banking team has also been up on several occasions, meeting government officials, Scottish Enterprise, CAS and some of the Scottish based banks. We understand that the finance and energy sectors are huge for Scotland – so this extra effort to understand the challenge of strengthening competition in these sectors was crucial.
I make no apology for listing out fully the extent to which the CMA has engaged with Scottish stakeholders in the first two years of its life. We are really proud of the fact that we have made ourselves part of the landscape up here. One of the real privileges of my job is being able to participate in so many different sectoral discussions – from offgrid energy to legal services, from smart ticketing to non-domestic water supply, and from taxi licensing to the supply of drugs. It’s truly fascinating.
But, never one for resting on laurels, and recognising there are still many parts of the Scottish business and consumer community that we may not have reached, today I am offering the auspices of the CMA office in Scotland to initiate a series of topical seminars over the year ahead. We think we’re in a good position to stimulate debate on markets in Scotland – bringing together expertise from across the UK to share ideas and thinking about competition that, if I’m honest, aren’t often at the fore of policy debate up here. We will be looking for partners to work with us on this – so please see me afterwards if you want to get involved.
Looking forward to other things to come, our quick analysis of the SNP manifesto suggests that we will continue to contribute to debates about taxi licensing and funeral costs, but the key development for the months ahead are the proposals that Rick and Sheena have set out already today.
The CMA very much welcomes the increasing focus of the Scottish government on consumer detriment and how to tackle it – and their support for the value of effective competition in delivering better outcomes for consumers. The Scotland Act includes a new power that would allow Scottish ministers to refer a market, acting jointly with the Secretary of State for BIS, to the CMA.
We will work with both Scottish and UK governments to give effect to this power in the circumstances that the law provides for, but we also hope that Scottish ministers have the confidence that, where there is evidence of consumer detriment and where the CMA is the right authority to lead, the CMA will make appropriate use of its tools to remedy that detriment swiftly and decisively.
We encourage the Scottish government to give its views on consumer and competition issues in Scotland which we can consider when determining the CMA’s priorities. Events like this are also good ways for Scottish stakeholders to inform the CMA of markets that appear not to be working well. We also look forward to working with Sheena and her teams in ensuring that competition impacts of different policy options are considered early in the policy development process.
In the proposals, too, are some really strong commitments to creating confident and knowledgeable consumers, which the CMA welcomes. Embedding consumer rights education into children’s learning would be a major step. This feels particularly important as young people are increasingly buying online or transacting in a way that feels unfamiliar to some of us (perhaps exchanging data rather than spending money).
But they’re not the only ones learning to purchase online. On receipt of her cheque from Random Removals, Mum is straight onto the internet. I’d like to report that she set up a search to find exactly what she was looking for at the best price and with the best review ratings. More likely, she picked the first dinner set that she clicked on at a price that looked acceptable. And maybe that’s OK – it’s not so different from her behaviour on the high street. The question is, do I feel confident that I’d know what to do this time if something goes wrong?
Thank you for listening.