Opening the On-line World to Competition: The Penrose Report

In September 2020 John Penrose MP was asked by the Chancellor to look at how the UK approach to competition and consumer could be improved after the end of the Brexit transition to help provide a springboard of recovery for an economy badly scarred by Covid. His report, drafted with the aid of officials from Treasury and BEIS, builds on work to implement the recommendations of the Furman Review.

In March a cross-regulator Digital Markets Task Force, based in the CMA, was announced to provide detailed advice on the potential design and implementation of measures for unlocking competition in digital markets, reporting at the end of the year. This gives context to the announcement, via Ofcom, of a Digital Regulation Co-operation Forum (CMA, Ofcom, ICO plus possible links to others) which will also look at issues such as Content and On-line Harms where Ofcom expects to lead.

John Penrose is known for his campaigns to reboot British capitalism so that the economy works for the many not the few. He also happens to chair the Conservative Policy Forum, the party’s in-house Think Tank, reporting direct to Number 10. As with CPF reports, this is an independent report represented to the Government. It is not a statement of Government or Conservative Party policy. Since John took over CPF most of its recommendations have made their way into Government policy.

Power to the People  was requested by Number 11. We can similarly expect most of the recommendations to make it into policy. But implementation will not be easy. This is particularly so with regard to introducing more competition to the digital industries where John calls for the new digital market unit’s up-front powers to be “ring-fenced tightly, to prevent regulatory creep, otherwise they will steadily spread to cover every digital sector of the economy”.

The Penrose Report is wide-ranging.  The main theme is the need to make markets work for people, not the other way round. It begins with the need to make regulatory mechanisms work better, with faster more predictable competition decisions Then comes to need to bring about more competition in industries burdened by red tape.

When it comes to the need for more competition in digital markets the chapter begins with the  Furman Report chart showing the “Combined indicative market shares of current leading two companies in selected UK digital markets”. This shows over 90% in on-line search, mobile operating systems and on-line advertising and 55% (and rising) for social media. The report recommendation to improve competition, into line with more traditional industries, include learning from the success of Open Banking. They will make for interesting discussion over the next few months.

Then come the recommendations to improve competition in sectors with economic regulators, including Ofcom, before we come to levelling up, (competition outside the South East), stronger consumer protection and self-denial on the part of the state (state aid, subsidies and political intervention).

The implications of subjecting the On-Line world to much more robust action to promote competition are profound and need debate.

That debate will begin on Tuesday May 11th , a week before the Westminster village re-opens for business and most MPs return physically, along with their research assistants,  journalists and most of Whitehall and its watchers.

John Penrose will open a ZOOM organised by the Digital Competition Policy Group of the Digital Policy Alliance at 3.00 PM on Tuesday May 11th to discuss the implications of his report for the “Big Tech” platforms of today.

The webinar will focus on addressing the perceived challenges of adapting the current regulatory framework to continual developments of the fast-moving digital sector and proposed effective remedies.  John will present the case for meaningful change in competition law and policy, along with his main recommendations such as the need for an independent regulator, before inviting comments and questions through the Q&A facility.

Also participating in the webinar will be the Parliamentary Chair of the DPA Group, Lord Clement-Jones CBE (Chair of the House of Lords Select Committee on Artificial Intelligence, Co-Chair of the APPG on Artificial Intelligence, Liberal Democrat spokesman for the Digital Economy), and the Industry Chair, Tim Cowen (Chair of the Antitrust Practice at City of London law firm Preiskel & Co).

This webinar (see here for details) is open to all DPA members, with guest places for those interested in joining – deadline for registration Friday May 7th .  Those interested in joining can find details at https://www.dpalliance.org.uk/join-us/  .

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