Britain’s confidence in the markets economy is undermined by the belief that companies rip off their consumers and must be rebuilt by tougher economic regulators using better data, a think-tank says today.
The Social Market Foundation said that regulators such as the Competition and Markets Authority should be given a clear new mission to restore public trust in markets and act as consumer champions by “naming and shaming” suppliers who behave badly.
The SMF also said that the Office for National Statistics should launch a new British Markets Survey – modelled on the British Crime Survey – to monitor voters’ overall views of the markets where they buy goods and services. Regulators should have the job of increasing the public’s “trust and confidence” in the market economy.
The SMF paper, Better Regulators, Fairer Markets, is being published as ministers consider overhauling consumer rules and the CMA itself asks the Government for new powers. In an SMF speech earlier this week, Nick Gibb, a minister, said the Government should consider asking the CMA to investigate companies making excessive profits in uncompetitive markets. (See Note 4)
The new paper was supported by Citizens Advice, which last year brought a legal “super-complaint” to the CMA about suppliers in the telecoms and financial services sectors imposing a “loyalty penalty” of higher prices on long-standing customers. The SMF said that such practices are “corrosive” of public trust in the market economy.
The SMF argued that the current system of independent economic regulators following mandates set by politicians should continue, since giving politicians direct involvement in day-to-day regulation might hurt investors’ trust in the UK economy.
But the paper said that regulators should be given a broad new mission to ensure “trust and confidence” in British consumer markets, a mandate that would require them to take a more active role in those markets by forcing companies to be more transparent about their prices and by helping consumers punish poor behaviour.
The ONS should create a major new British Markets Survey to monitor the public’s view of markets, helping alert regulators and policymakers to perceptions that markets are not working fairly for consumers.
The paper also recommends that:
- Regulators should issue regular star-ratings for suppliers to show how deserving of consumers’ trust they are.
- Companies should be required to publish consumer satisfaction data for “loyal” customers to highlight cases where long-standing consumers are unhappy.
- The legal basis for challenging regulators’ decisions should be reviewed, to make it harder for big companies to overturn decisions that they dislike.
James Kirkup, the SMF Director and author of the paper said:
“Fair markets create wealth, innovation and happiness, but poor behaviour by some suppliers threatens to undermine the very idea of a market economy, by leaving some people feeling ripped off and powerless.
“Independent regulators should do much more to address that loss of trust, with a clear new mandate from politicians to ensure trust and confidence in markets. They should be quicker to name and shame suppliers who do not deserve customers’ trust. They should also require companies to be much more transparent about how happy their consumers are.”
“Saving the market economy means accepting its failings and addressing them. We must save the market economy by making it fair. Better regulators are a vital part of that.”
Gillian Guy, Chief Executive of Citizens Advice, said:
“Consumers are paying over the odds across a range of essential markets. It’s unsurprising then that people don’t feel they’re getting a fair deal and that public trust is being undermined.
“We issued our super-complaint because loyal customers are losing out by over £4 billion per year.
“Regulators now recognise the loyalty penalty as a problem and that action needs to be taken. But if regulators are to deliver fair markets and restore public trust, they need the right tools. As the CMA made clear, where regulators don’t have the right powers, the government should introduce legislation as soon as possible.”
Notes:
- The paper will be published at https://www.smf.co.uk at 7am on Thursday.
- For more information, to see a full copy of the report, or to arrange an interview, contact James Kirkup on james@smf.co.uk
- This paper was supported by Citizens Advice and draws on a Chatham House-terms seminar held at the SMF with senior regulators, politicians and civil servants. The views expressed are the those of the author alone. The SMF retains complete editorial independence of its publications.
- Speaking at the SMF on Tuesday 30th April, Nick Gibb, minister of state for schools, said that a tougher approach to economic regulation was necessary to address public concern about capitalism. He said: “That might mean that making sure that our CMA looks at the existence of super profits in our system and why thy have not been competed away by the market and competition.” Source: https://twitter.com/SMFthinktank/status/1123150280197984256
About the SMF:
The Social Market Foundation (SMF) is a non-partisan think tank. We believe that fair markets, complemented by open public services, increase prosperity and help people to live well. We conduct research and run events looking at a wide range of economic and social policy areas, focusing on economic prosperity, public services and consumer markets. The SMF is resolutely independent, and the range of backgrounds and opinions among our staff, trustees and advisory board reflects this.
