While the talk in the EU is turning to heavyweight corporate champions that can tackle the U.S. and China, the man tasked with making Britain more competitive is not fully convinced that big is beautiful.
For John Penrose, a Conservative parliamentarian who has to write a review on how to turbocharge competition after Brexit, the answer to bouncing back from the coronavirus crisis is a laser-like focus on delivering the best value for consumers, rather than cutting more slack to big businesses.
That’s a very different tone from the political consensus emerging in continental Europe. Angered that the European Commission last year shot down a rail mega merger between Alstom and Siemens, France and Germany are arguing that it is high time to stop obsessing about consumer prices as the key factor in deciding mergers, and instead allow companies to turn into global big hitters.
In an interview with POLITICO, Penrose said Britain’s competition rules should be set up “so that, by maximizing competition, they are as consumer- and citizen-friendly as possible,” he said. “Instinctively,” he said, this implies “tilting the balance of power toward citizens and consumers, in favor of them rather than in favor of producers.”
The champions approach has flaws, he stressed. “If you end up weakening competition too far, in an attempt to protect national champions, you run the risk of making those champions much less competitive on an international basis.”
In addition to the broad questions of principle, one of the more specific problems that Penrose will have to address in his report is geographical. “Why is it in the U.K. that London and the southeast are world class in terms of productivity and competitive edge, but lots of the rest of the U.K. is below the EU average?” he asked. “One of the questions which we need to address is: Are there differences in the levels of competitive pressure?”
Penrose is one-half of a high-flying Westminster power couple. His wife, Dido Harding, was recently appointed head of the NHS’s coronavirus test and trace program and made acting chair of new public health agency, the National Institute for Health Protection.
His report is expected by the end of the year, but he already plans some changes. “Our last Competition Act in this country was 1998 … It was before Google, before Facebook, … so it’s clear that we will need to update our competition laws,” he said.
Penrose stressed the importance for U.K. institutions — such as the Competition and Markets Authority and the Competition Appeal Tribunal — to be prepared and “pick up the slack” once the U.K. is no longer covered by the EU’s antitrust regime. It’s “tremendously important” that they have the resources, he added, “in order to deliver a competitive economy.”
He explained that it was essentially a political choice whether market rules are set up to favor citizens and consumers or producers.
“Markets aren’t the law of the jungle,” Penrose said. “Markets are created by human beings, they run according to laws … That means we can change them if we want to.”
While much of the Brexit debate centers on whether the U.K. and EU will align on state aid policy — the rules for paying government subsidies into key sectors — he did not see mirroring that as part of his mandate. “I don’t think that what I’m being asked to do is to come up with some sort of regional subsidy system,” the MP said. “We don’t have to slavishly repeat what’s already being done in Brussels. We may be able to improve on” the EU state aid system, he added.
While Penrose thought competition policy had to remain focused on consumer welfare, he did acknowledge the threat posed by industrial giants elsewhere.
“The danger is that an internationally competitive firm may get undermined by unfair or subsidized competition from somewhere else,” he noted.
But he insisted this was a distinct concern from competition policy. “That’s why, for example, in the U.K., there’s been an industrial strategy developed over the last couple of years.”
This means, according to the MP, that competition policy is meant to boost competition, while industrial policy is meant to protect competitive firms from unfair competition. Not the other way around.
Want more analysis from POLITICO? POLITICO Pro is our premium intelligence service for professionals. From financial services to trade, technology, cybersecurity and more, Pro delivers real time intelligence, deep insight and breaking scoops you need to keep one step ahead. Email email@example.com to request a complimentary trial.