Companies using big data to rip off vulnerable consumers are being targeted by the competition watchdog after Greg Clark, the business secretary, said he would trigger a far-reaching review into Britain’s business practices.
Mr Clark has asked Andrew Tyrie, head of the Competition and Markets Authority, to advise him on an overhaul of business regulation, for which he said he was ready to legislate.
The business secretary said there were warning signs in the way companies had used personal data to exploit customers, such as energy groups imposing higher charges on loyal customers — especially the elderly — who failed to shop around. Last week UK regulators said they were investigating a “loyalty penalty” charged to faithful customers, which amounted to £4bn a year according to Citizens Advice.
A review is also under way by the Civil Aviation Authority into how budget airlines use algorithms to separate groups, including families with children, if they refuse to pay for allocated seating.
“There are growing concerns in this country and elsewhere that in our modern economy, while some may be prospering, others are losing out,” Mr Clark told the Financial Times at the Tory party conference in Birmingham.
There are growing concerns in this country and elsewhere that in our modern economy, while some may be prospering, others are losing out
He said that while the digital revolution offered “greater choice and competition and improvement in our living standards”, it also led to “exploitative and abusive outcomes”. He highlighted those who were “less sophisticated” online, saying they were “left behind”.
His comments reflect his view that the Conservative party must be the guardians of free market capitalism — ensuring it operates fairly and maintains public confidence — to prevent a radical Jeremy Corbyn-led Labour government overturning the system.
Lord Tyrie, former Tory chairman of the Commons Treasury committee, played a pivotal role in drawing up banking reforms after the 2008 crash and is being entrusted with coming up with proposals to reform the CMA.
Mr Clark believes Britain can lead the world in devising a new regulatory regime that moves beyond concentration of market power and looks at ways companies operate digitally.
The business secretary is obliged by law to review after five years the last reforms to the UK’s competition regime, carried out in 2014, and will report back next March. He said he had asked Lord Tyrie to “give further thought to how to address this problem, which may include further and possibly far-reaching legislative and institutional reform”.
“One of the reasons I appointed Andrew Tyrie is he’s a deep thinker, champion of consumers and someone who has the aspiration to create a system we can be proud of internationally,” Mr Clark said.
“I want to address these new challenges in a way that makes us the best place to develop these new technologies because we have a regulatory system that has already thought about the unintended consequences.”
Mr Clark believed that artificial intelligence would throw up new challenges, with computer systems identifying “vulnerable” consumers for higher charges without human intervention to squeeze every last penny out of them.
Lord Tyrie said the CMA had done “a lot of thinking” about how to reform Britain’s regulatory regime. “The most effective competition bodies will be those that respond to the rapid growth in these new markets,” he said, adding that millions of consumers would enjoy greater choice thanks to technology, while others would still be vulnerable to “exploitation”.
Last week Mr Clark asked Lord Tyrie to institute a CMA inquiry into competition in an auditing sector dominated by the so-called Big Four firms.