There are normally a few government reviews that businesses seem to be obsessed with.
Recently, this was the government’s industrial strategy; now, it is the Taylor Review into employment practices in the modern economy. But one set to increasingly occupy the minds of businesses this year is the review being conducted on consumer protection – briefly highlighted by the chancellor in his Budget speech. It is easy to see how this might cause real headaches.
In his Budget, Philip Hammond said the government would soon be publishing a green paper on protecting the interests of consumers and that the state would be taking steps “to protect consumers from unexpected fees or unfair clauses, to simplify terms and conditions, and to give consumer bodies greater enforcement powers.”
Little else was said in the Budget or in the accompanying documents. However, according to a pre-Budget media briefing, the government has in mind banks and other financial services firms, mobile phone providers and online retailers; but many other businesses might also be affected. Ministers are said to want to crack down on complex small print and the trend of asking customers for credit card details ahead of trials for services that customers might ultimately reject. This might all be enforced by a more muscular Competition and Markets Authority, with new powers to fine offenders.
How might greater consumer protection legislation and enforcement work in practice? Australia and Canada are thought to be models for government but the United States also has the Consumer Financial Protection Bureau, created in the aftermath of the financial crisis, which ministers will surely be looking at.
Each of these countries has a different approach reflecting their structure of government and their respective political and consumer cultures. But in all cases, once created, new bodies seek both to expand their role and to aggressively enforce the powers they have been awarded. This is what new bureaucracies do.
In recent times, regulators in these countries have been involved in an array of different issues: overdraft charges; the way pay-day loan operators work; the misuse of credit card data; the use of credit score ratings; credit card protections; online banks’ loans; data security; broadband speed and performance; airport charges; the prices of medical equipment; and many others. In Australia, the ticket resale market is thought to be ripe for investigation by the consumer body, the ACCC. As the UK government suggested, financial services firms are those mainly in the firing line but any public-facing business with a web presence is clearly open to new regulation.
Under a normal Conservative government, businesses might expect ministers to go easy on them. While not always following through in practice, recent Conservative administrations have defined themselves by their friendship with businesses and their desire to foster a fast-growing tech sector. This government is different. As the Labour Party’s core electorate fractures, the Conservatives are shifting left to try to appeal to those voters looking for a new home. They are positioning themselves aggressively as the friend of ordinary workers and consumers. With that in mind, it seems highly likely that new consumer protection regulation will have serious teeth.
In business, there are always rotten apples that need to be dealt with by government – and the majority of firms should and will support action being taken to make sure the market can be trusted by all. But broad new regulations will be a problem. British people have an apparently insatiable appetite for consumer spending, particularly online, and they demand that services are delivered cheaply and quickly, reserving the right to complain if things are not perfect. Furthermore, we live in a society which is increasingly litigious.
Consumers need protection, but businesses will argue that they need protection too: knowing that customers can and will pay when the time comes and knowing they will not behave unreasonably when a transaction has been agreed. Many firms use apparently excessively long terms and conditions to protect themselves in what is becoming a difficult climate. They will need to persuade the government of the merits of their case.