behavioural economics @ the cma chris walters* director of economics, enforcement *the usual...

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Behavioural economics @ the CMA

Chris Walters*Director of Economics, Enforcement

*The usual disclaimer applies

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Overview● About the CMA

- Making markets work well

● Putting behavioural economics into practice at the CMA- Enforcing consumer law

- Looking at markets

● Some future priorities- The interaction of competition and behavioural economic effects,

especially online

- The behavioural economics of personal data as currency

- The behavioural economics of businesses, not consumers

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ABOUT THE CMABehavioural economics @ the CMA

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Tools for making markets work well

CO

MP

ET

ITIO

N

TO

OL

SC

ON

SU

ME

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TO

OL

S

Calls for information

Market studies

Super-complaints

MIRs

Unfair contract terms

Unfair commercial practices

Anti-competitive agreements

Abuse of dominance

Merger control

Competition advocacy

Business guidance

SOFT TOOLS

Impact

Strategic Significance Resource

Risk

Sector regulation

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When don’t markets work well?

Market concentratio

n

Barriers to entry

Supplier behaviour

Accessing information

Acting on information

Assessing information

Demand side blockages

Supply side blockages

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PUTTING BEHAVIOURAL ECONOMICS INTO PRACTICE

Behavioural economics @ the CMA

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BE and demand-side blockages

Accessing information

Acting on information

Assessing information

Narrow choice sets

Bounded rationality

Bounded self control

Bounded self interest

Anchors and heuristics

Habits and status quo

Impulsive behaviour

and procrast-ination

Sacrifice and punishment

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Business practices may exploit these

Accessing information

Acting on information

Assessing information

● Making information difficult to find● Increasing search costs● Obfuscating (e.g. partitioned or

dripped pricing)● Making choice difficult● Surprise charges, automatic renewals

and default charges● Time limited offers (e.g. bait pricing)

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● Since mid-2010, c.45 investigations, increasing focus on BE theories of harm

Some examples

Pricing practices

● Drip pricing

- Low cost airlines (2012)

● Other pricing practices

- Supermarkets (2012)

- Furniture and carpet retailing (2014)

Other practices● Gyms (2013)

- Lengthy minimum membership periods

- Penalties, not liquidated damages

- Debt collection

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Supermarket pricing: Deal or no deal

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SOME FUTURE PRIORITIESBehavioural economics @ the CMA

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What next for BE @ CMA?●Online

intermediation

●Data as currency

●BE of businesses

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20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000Total direct queries a

month, Duckduckgo.com

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Thank you

Chris WaltersDirector of Economics, Enforcement