Behavioural the CMA Chris Walters* Director of Economics, Enforcement *The usual disclaimer applies 1

Overview 2 ●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

ABOUT THE CMA Behavioural the CMA 3

Tools for making markets work well 4 COMPETITION TOOLS CONSUMER TOOLS 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

When don’t markets work well? 5 Market concentration Barriers to entry Supplier behaviour Accessing information Acting on information Assessing information Demand side blockages Supply side blockages

PUTTING BEHAVIOURAL ECONOMICS INTO PRACTICE Behavioural the CMA 6

BE and demand-side blockages 7 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

Business practices may exploit these 8 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)

● 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 9

Supermarket pricing: Deal or no deal 10

SOME FUTURE PRIORITIES Behavioural the CMA 11

What next for CMA? ●Online intermediation ●Data as currency ●BE of businesses 12

Thank you Chris Walters Director of Economics, Enforcement 13