The below is an interview with John by Emily Craig of Global Competition Review Journal.
The UK government announced last week that John Penrose MP will lead a review of the country’s competition policy, as it prepares to leave the European Union and tackle the economic shock brought on by the coronavirus pandemic. Penrose spoke to Emily Craig about updating the UK’s “analogue era” competition rules, whether the report will recommend changes to the consumer welfare standard and how to address the challenges of the digital economy.
Your report will examine how the UK’s competition policy can be strengthened, but on first impression, what are the weaknesses that need to be addressed?
I think everyone is concerned that it has been a long time since there has been a new Competition Act in this country. A lot of the basic legislation is pretty old and predates the digital economy. The main competition act we have is based on 1998 legislation. That’s pre-Google, pre-Facebook, pre-Uber, it’s pretty much pre-anything digital.
So, I think it is now widely acknowledged that there is a whole series of things that need to be updated about analogue-era legislation and in fact the Furman review fairly recently pointed at that. The CMA’s recent digital advertising market study pointed at facets of that and the consultation questions from the digital working party – between the CMA, the Department for Digital, Culture, Media and Sport and the information commissioner – also points to that.
I think that is what is widely acknowledged to need a refresh. But also – separately but equally important – here we are with an economy which needs to recover as fast as it can whenever we manage to pull out of the pandemic. And also an economy that needs to stand on its own two feet in terms of being a post-Brexit economy when the end of the transition period happens at the end of this year. So, there are a whole series of things coming together saying we need a refresh and we need to be as strong on supply-side reform as we can in order to make our economy as vigorous as it can be when it tries to bounce back from these various different changes.
Will you be looking to any other regimes for inspiration? Are there any other countries that you think the UK should learn from?
I am starting by asking people in the UK. We want to be an international economy and people in the UK already look abroad. For example, I was in a meeting on 24 September with a group of people saying other countries already addressing some of these issues include Germany, Australia, and the EU itself. We are going to be an independent country, so we don’t necessarily want to copy other people slavishly, but if they’ve addressed the same issues and come up with impressive answers, then we might at least want to refer to them and learn from or borrow good ideas.
You’ve previously called for “a modernised and expanded” CMA. What might that look like and how would it differ from the existing agency?
I don’t want to prejudge the results of my report. Obviously, it is still early days, but it is clear that, as we finish the transition period and come out of the EU at the end of this year, a whole series of things which have previously been done – those parts of the competition regime that have been handled by Brussels when we were full members of the EU – will no longer be handled by Brussels and will be handed in the UK. That will mean that all our competition and consumer watchdogs will need to pick up those things that have previously been handled elsewhere, which means they are going to need more muscles in order to do that.
In the 2018 paper you wrote titled A shining city upon a hill: Rebooting capitalism for the many, not the few you said the CMA and European Commission have not done enough to prevent the UK’s economy from becoming more concentrated and allowing big companies to get even bigger. What specifically do you think the CMA and European Commission have got wrong?
That’s now two years ago and I think a lot has changed since then of course. It is not just a problem of the CMA and commission – it is also more broadly a question of trying to sharpen up our overall competition regime. They are clearly part of it, but I don’t think it is fair to point the finger just at the CMA and the EU, it is a broader issue than that.
But the point I was making in that paper was that there is a broader issue about the credibility and the trust in our whole capitalist system and whether or not people – consumers, citizens, voters – feel like they are being ripped off. That’s the underlying issue that we’ve got to address and solve. We’ve got to make sure that people feel like capitalism is actually the best political and economic system for giving them a good quality of life and the rules are on their side rather than on the side of bureaucrats or anyone else other than the man or the woman on the street.
In the same paper you referenced the effect of this increased market concentration and growth of bigger companies on reduced wages and worker exploitation. For this reason, do you think the consumer welfare standard relied on by competition agencies needs updating to include a wider consideration of possible competitive harm?
I think possibly you’re tempting me there to prejudge what will be in the report. Can I say you’ll have to wait until the report comes out before I can tell you the answer to that?
This summer, US lawmakers grilled the chief executives of Google, Amazon, Facebook and Apple on a host of potential competition concerns.
Do you think antitrust rules alone can address the power of these platforms and the associated allegations of anticompetitive harm levied against them or do you think specific UK digital regulation is necessary to address their behaviour?
One of the reasons I wroteA shining city upon a hill was that actually the digital economy is marvellous and has brought all sorts of huge benefits to modern life. It is a hugely beneficial thing, but it has also brought with it some new challenges. One of the problems is, if you’ve got a bunch of companies that give away their services for zero cash upfront and get paid through harvesting data or other mechanisms, then traditional definitions of consumer harm or consumer detriment – mainly to do with are you being charged too much cash for something or are you being given something for a given price that is less good than it should be – those traditional definitions, pre-digital definitions – don’t work so well for the common digital business models.
The digital economy has brought some amazing benefits, absolutely transformed our economy and society in many ways. But where it may potentially be causing harm, it may not be delivered in the same way as we are traditionally used to in the old analogue economy. Therefore we’ve got to update that so that we understand what is going on, so where there is harm being caused we are alive to it, we understand it and we can stop it.
That’s going to require some new tools. They’ve got to reflect all these changes and we’ve got to make sure that we don’t ruin all the good stuff while we fix what we hope is a small amount of detriment. Nonetheless detriment is still detriment, you’ve got to deal with it.
Do you see those tools being added to the UK competition regime or do you think that separate digital regulation would be the best method to deal with that?
I’m not sure that I see the difference. I think that what we’re looking at is for the competition and consumer regime to remain up to date and useful. It’s got to be modernised so it still works and applies in the new digital economy as well.
The CMA is preparing its own report on the state of competition in the UK – commissioned by the government in February – to inform policy-making and business decisions. The CMA postponed the study in March 2020 in response to the coronavirus outbreak. How will your review complement this and will your report be published before it?
There is a series of things going on at the moment actually. We’ve had the Furman Review, we’ve had the CMA’s market study into digital advertising and we’ve now got the digital working party, which is part way through a follow-up to that. Also, the national infrastructures report, which touches on regulation of networks.
My review sits alongside this. What I will be aiming to do is complement and expand on what is already out there and try to make sure that the timetables match up roughly. But as of 23 September, the timetable is slightly up in the air again, because I was expecting to have to produce at least some of my recommendations in time for the Treasury’s autumn budget and that has now been postponed. So there is a question mark about the right time to publish my report and I want to make sure that that’s timed helpfully.
That needs to be rechecked in relation to that timing announcement. I will have conversations with the Treasury and Department for Business, Energy and Industrial Strategy just to confirm if we need to change it or watch this space.
You have also previously recommended creating a “specialist new network monopoly regulator” to replace the country’s existing regulators for communications, energy and water. Do you still think this is the best way forward? Should such a body retain those existing agencies’ concurrent competition enforcement powers or should they be transferred to the CMA?
That was a set of proposals that I came out with before A shining city upon a hill, so those were published three or four years ago. Clearly the world has moved on, so I don’t want to presume that I can cut and paste the previous ideas. I am doing this review under the terms of reference as asked for by the government. I do not want to cut anything automatically out or in at this stage. I want to look at a whole problem today, rather than the way things were a couple of years ago. So I’m afraid again I’ll have to be a bit coy and say you’ll have to wait and see what’s in the final report. I don’t want to count it out already at this stage because it is early days.
Your report will examine how the UK’s competition regime can contribute to a so-called wider levelling up of the UK’s regional economies, which is one of Boris Johnson’s major policy initiatives. Are you concerned your results might be viewed through a partisan lens and be seen as policitising competition policy as a result?
No, I don’t think so. It certainly isn’t intended that way. What it is intended to do is to say that Britain’s economy needs to be as strong and competitive as possible as we come out of the EU and as we try to recover from the pandemic. I hope that everybody would accept that basic premise and say it is a good thing to have as strong an economy as we can going forward. I suppose if there are people out there who fundamentally don’t agree with a market economy at all then they probably don’t agree with competition either. There will be some people who see this through a lens, but that’s not because of the report I’m writing; it’s because they thought that for a decade anyway. I wouldn’t want this to be seen as anything other than an attempt to strengthen the UK’s economy, regardless of where you are on the political spectrum.
Who decided that this review was necessary and that you should lead it?
I have been asked to do it jointly by Rishi Sunak [the UK’s chancellor of the exchequer] and Alok Sharma [the UK’s secretary of state for business, energy and industrial strategy]. You would have to ask them why they thought I was the best person. But I’m presuming its because of some of the stuff that I’ve published in the past, so they knew it was an area where I had thought in some depth already.
I’m just delighted to have the opportunity, but it was they who made the decision and approached me and said we think we’re going to need this given where the country is. I was really honoured to be asked.
Have you begun the review? How many people are working on it?
Yes, I have been working on it since the announcement [on 15 September].
I’ve been meeting with a series of people, where I was being urged to look at the thinking of some other countries. I’ve been having a series of conversations and updates ever since the announcement was made. And it is me and a small secretariat provided jointly by the Treasury and by BEIS [Department for Business, Energy & Industrial Strategy].