Behavioural economics @
the CMA
Chris Walters*
Director of Economics,
Enforcement
*The usual disclaimer applies
1
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
2
Behavioural economics @ the CMA
ABOUT THE CMA
3
Impact
Risk
Strategic Significance
Resource
Anti-competitive
agreements
Abuse of
dominance
Merger control
Business
guidance
Calls for
information
Market studies
Super-complaints
MIRs
Sector
regulation
SOFT TOOLS
Unfair contract
terms
Unfair commercial
practices
CONSUMER
TOOLS
COMPETITION
TOOLS
Tools for making markets work well
Competition
advocacy
4
When don’t markets work well?
Demand side
blockages
Supply side
blockages
Accessing
information
Market
concentration
Assessing
information
Supplier
behaviour
Acting on
information
Barriers to
entry
5
Behavioural economics @ the CMA
PUTTING BEHAVIOURAL
ECONOMICS INTO PRACTICE
6
BE and demand-side blockages
Bounded
rationality
Accessing
information
Bounded self
control
Bounded self
interest
Narrow choice
sets
Assessing
information
Anchors and
heuristics
Acting on
information
Habits and
status quo
Impulsive
behaviour
and procrastination
Sacrifice and
punishment
7
Business practices may exploit these
Accessing
information
Assessing
information
Acting on
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)
8
Some examples
● Since mid-2010, c.45 investigations, increasing
focus on BE theories of harm
Pricing practices
● Drip pricing
Other practices
● Gyms (2013)
- Low cost airlines
(2012)
- Lengthy minimum
membership periods
● Other pricing practices
- Penalties, not
liquidated damages
- Supermarkets (2012)
- Furniture and carpet
retailing (2014)
- Debt collection
9
Supermarket pricing: Deal or no deal
10
Behavioural economics @ the CMA
SOME FUTURE PRIORITIES
11
140
120
100
80
60
40
20
12
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
0
Oct-10
● BE of
businesses
160
Jul-10
● Data as
currency
Total direct queries a month,
180
Duckduckgo.com
Apr-10
● Online
intermediation
MILLIONS
What next for BE @ CMA?
Thank you
Chris Walters
Director of Economics,
Enforcement
13