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

2. 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

3. ABOUT THE CMA Behavioural economics @ the CMA 3

4. 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

5. 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

6. PUTTING BEHAVIOURAL ECONOMICS INTO PRACTICE Behavioural economics @ the CMA 6

7. 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

8. 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)

9. ● 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

10. Supermarket pricing: Deal or no deal 10

11. SOME FUTURE PRIORITIES Behavioural economics @ the CMA 11

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

13. Thank you Chris Walters Director of Economics, Enforcement 13