(Secretary of State for
Business, Energy and Industrial Strategy): Our
competition, legal and regulatory frameworks are fundamental to
our future economic success. We have a reputation for a
world-leading competition framework and independent economic
regulators with duties to protect the interests of consumers.
However, where markets are not working for consumers, we will
ensure that they are treated fairly. Today I published the
Government’s response to the Competition and Markets Authority’s
(CMA) loyalty penalty report. It is my intention that the UK’s
competition and markets regime is firmly focused on delivering
improved outcomes for consumers. That means ensuring that
significant sources of consumer detriment, such as the loyalty
penalty, are tackled quickly and effectively.
Following concerns raised by Citizens Advice in a
‘super-complaint’, the CMA uncovered harmful business practices
by firms, which exploit consumer loyalty. The CMA investigation
looked at the five markets highlighted by the super-complaint –
cash savings, mortgages, household insurance, mobile and
broadband – and found that there is a total loyalty penalty of
around £4 billion a year in these markets. It also found that
vulnerable people, including the elderly and those on a low
income, may be more at risk of paying the loyalty penalty.
Our response to the CMA’s loyalty penalty investigation sends a
strong signal that poor practices by suppliers will not be
tolerated and sets out the following:
- our intention to establish an administrative model of
consumer enforcement for the CMA and to consult on how to do this
as part of the forthcoming Consumer White Paper
- that the CMA and the economic regulators must do more to stop
business practices that lead to the loyalty penalty, and that we
are prepared to legislate to give our enforcers new tools to do
so where necessary
- that targeted price interventions, where proportionate,
should be considered by regulators to tackle the loyalty penalty.
Although pricing interventions should be a matter of last resort,
it is vital that all potential interventions are considered to
protect those who are most vulnerable
- reiterates the commitments we set out in our Smart Data
Review, including creating an ‘Open Communications’ initiative
and establishing a Vulnerable Consumer Challenge.
This builds on our Consumer Green Paper, as part of our modern
Industrial Strategy, published in April 2018, which tackles areas
where markets are not working for consumers and businesses. We
believe that all of these measures will help create the
conditions for more effective competition and improve day to day
outcomes for consumers.
