Ed Miliband’s ‘producers and predators’ speech in 2011 kicked off the responsible capitalism debate. Ed said we should ‘change the rules of the game’. To be honest, a lot of people outside Labour, and not a few inside, thought that ‘changing the rules’ must be code for having regulations to stop things happening in business and the marketplace.
But ‘changing the rules’ should and can often mean making markets work more effectively to serve the interests of consumers and challenging the way major companies can exploit their power. I hope my modest private member’s bill, being introduced on 15 January, provides an example of how this can be done.
In a tough economic climate, consumers need to know that they are getting the best possible deal. Everyone would like to be confident that they are getting the best prices and that they are not being ripped off by deals that are less good than they look. But despite the growth in online supermarket shopping, most have to shop around in much the same way they did decades ago. How much better it would be if consumers had, at their fingertips, comparative data on the price of goods, not just retailer by retailer, but shop by shop, product by product
My bill would require supermarkets to make available, with online access to their real time databases, all their pricing data.
As soon as this happens, both existing price comparison services and the coders who create smart phone apps would find innovative ways of making this data publicly available. Consumers would not only have the ability, on phone, laptop or PC, to compare the price of their weekly shopping basket across each major store, but the transparency would also force supermarkets to put an end to the kind of misleading ‘special offers’ that we see so regularly.
At present there is an enormous asymmetry of power. Supermarkets have a mass of data on how, collectively, we shop, what we respond to and which marketing and price strategies lure us in. We shoppers have little such data on them.
The supermarket business is highly competitive but, because of this imbalance of power between company and consumer, competition can incentivise marketing strategies that work against consumers. Highly publicised price cut campaigns may mask a general increase on other products; buy one get one free can cost more than two of the same item a few weeks previously; it can be hard to compare the cost of veg sold loose, packed or in different quantities. Once a brand is established, it may attract shoppers into smaller convenience stores which, despite enjoying the same branding, have much higher prices and none of the special offers. A fuller dossier on this is available here.
Making price data accessible online would undermine such strategies and enable consumers to police the market effectively. It would rebalance power a little towards shoppers.It’s worth remembering that I’m only talking about data that in principle is already publicly available. In theory this type of price comparison could be achieved already – it’s just that you would need an army of volunteers going into every store every day. New information technologies mean there is now a simpler way.
At the same time it is likely to reduce significantly the need for time-consuming, expensive and often rather ineffective investigations by the Office of Fair Trading. In other words, a simple regulation to make markets more effective may well enable a significant reduction in other forms of regulation.
From the ‘responsible capitalism’ perspective, markets would be stronger, not weaker, but would be serving consumers better. There would be innovation as, beyond doubt, new areas of competition would develop. Innovators would bring together supermarket price data with other streams of data – on sustainability, farming practice, health, nutrition and specialised diet – which in turn would open and shape new market opportunities for new producers and suppliers.
While this type of rule change can’t work in every area, it does open new space in what, in the last government, was often a sterile tussle between heavy statutory rules and regulation on one hand, and ineffective voluntary codes of conduct on the other. By focusing on really shifting power towards consumers we can hope for better results.
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John Denham MP was a cabinet minister 2007-10 and shadow business secretary from 2010-11. He is PPS to Ed Miliband but writes in a personal capacity. He tweets @JohnDenhamMP
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