Penrose review of competition policy-digital proposals form part of the recipe-book
23 February 2021
The UK Government commissioned John Penrose MP to undertake an independent review of UK competition policy last September. Penrose was specifically tasked with looking at potential reforms to the UK’s competition regime in the context of Covid-19 and, with the end of the Brexit transition period, the emergence of the UK as an independent trading nation.
Power to the People - proposals to boost competition
Published on 16 February 2021, his ‘Power to the People’ report sets out wide-ranging proposals to boost competition to benefit business and consumers across the UK. A new Competition Act to update and modernise the UK’s competition institutions for the digital age is among his key proposals. But Penrose also considers that some changes could be made more quickly, through Government policy directions to the CMA and sector regulators, changes to regulators’ internal processes and governance and by altering the Memoranda of Understanding between them.
Our Antitrust team have published an alert summarising the report’s “recipe-book” of recommendations.
The team highlight digital-specific proposals.
To counter the risk of ‘regulatory creep’ across every digital sector of the economy, Penrose strongly suggests that the CMA’s new digital unit should be called the Network & Data Monopolies Unit (NDMU) and that its “extra-strong upfront powers” are: (i) ring-fenced from the CMA’s existing competition and consumer powers so that the latter are used wherever possible; (ii) applied only to individual firms that own and run new network and data monopolies, rather than to the rest of the sector in which they operate; (iii) applied only to problems which the CMA’s existing powers cannot solve already; and (iv) only extended with Parliament’s consent.
So, for example, to add a new monopoly, the CMA should be required to undertake a market study and then write a public letter to its Government Minister explaining that a new monopoly has emerged and asking Parliament to approve an extension to its powers through secondary legislation. In contrast, the CMA should be able to abolish powers over a former monopoly without Parliament approval.
At the same time, Penrose proposes that the NDMU (and indeed every sector regulator) has a legal duty to extend and promote competition in the monopolies it regulates, by making pro-competition interventions to reinstate normal competitive conditions wherever it is possible and proportionate. For the NDMU, this should include:
− designing and enforcing a pro-competitive code of conduct to give both smaller players and incumbent platforms greater certainty;
− overseeing data portability schemes so that users can seamlessly switch providers and interoperate services; and
− allowing access to key anonymised incumbent data sets where privacy and data protection are not an issue.
Other interventions envisaged include ensuring fair and equal access to monopoly networks for all suppliers and customers, requiring interoperability between networks and making switching cheaper and more convenient.
On data and privacy, Penrose questions whether the CMA should extend its initial market study into online advertising into a market investigation. He considers that the resultant increased transparency of the price consumers pay for digital goods and services through their data would facilitate comparison and switching between platforms.
So where next?
The Government promises to consider the recommendations set out in the report and respond in due course. However, our Antitrust team note, with the CMA agreeing that Penrose’s proposals would insert strength, speed and flexibility into the UK competition and consumer regime, it will face increasing pressure to prioritise more general reforms as well as those tackling digital markets.