Whatever happened to the Office of Fair Trading?

1 Mar
Lord Borrie QC pictured at his residential chambers in London Monday 25 September 2000 after he was announced as the next Chairman of the Advertising Standards Authority

Last week I commented on John Penrose’s report on competition policy – ‘Power to the People’. Now I see that Andrew Tyre, former chairman of the Competition and Markets Authority (and prior to that, civil servant at H M Treasury and then Conservative MP) has waded into the debate with a piece in the FT – http://on.ft.com/2MzN71X.

Somewhat curiously, given their similar backgrounds, Tyrie makes no mention of ‘Power to the People’ – perhaps suggesting a degree of intra-brand competition? However, the themes are much the same, and ones that Tyrie has promoted before – the need for a more pro-active approach from competition policy to protect from ‘rip-offs’, especially via price discrimination from the privatised utilities; more powers for the CMA to protect ‘the consumer interest’ (and not just to further competition).

One particular theme is common to both reports – more direct engagement with the public. Tyrie wants the CMA to follow the Bank of England’s example of more direct engagement with the public. Penrose wants ‘a new competition and consumer champion’, to be the micro-economic equivalent of the Bank of England (both Tyrie and Penrose seem to be not so secret admirers of the Old Lady). Both want a beefed-up CMA to fulfil that role. However, as Tyrie points out, ‘six years after the Office of Fair Trading was abolished and replaced by the CMA, 62 per cent of consumers had heard of the OFT. Only 19 per cent had heard of the CMA last year.’

So was it a mistake to abolish the Office of Fair Trading – which would, in its heyday, have fulfilled the ‘competition and consumer champion’ role that Penrose wants?

A brief personal digression at this point. Many moons ago – in 1977 to be precise – I was a young government economist seconded, for my second job in government, to the OFT. Gordon Borrie (see the picture above) was the Director General, having taken up the post the previous year. As his Guardian obituary makes clear (see http://bit.ly/3sD7Ilr), he was precisely the kind of consumer champion Penrose and Tyrie are looking for. The OFT, under his leadership, also tackled big issues – the London Stock Exchange, the beer industry, estate agents and car dealers.

However, it is important to understand the two factors that allowed him to do this. First, he had established his reputation as an academic lawyer championing consumer rights; second, the 1973 Fair Trading Act gave a clear role to the Director General, which was entirely separate from that of the (then) Monopolies and Mergers Commission – the DG made references to it, and implemented their findings, but he was not judge and jury on competition policy cases. By contrast, there is a clear conflict between having a chair of the CMA who is a consumer champion – an approach which both Penrose and Tyrie seem to favour – and their duties in running an impartial quasi-judicial body.

And I find it hard to think of an equivalent figure today to Gordon Borrie – who, when I was a very junior economist, would happily say “Hallo Richard” to me if we crossed in the corridor.

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