Transport for London’s attempt to put Uber out of business in the name of fairness for the consumer is cause for concern

— Frank Vibert, Senior Visiting Fellow at LSE

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Academics and practitioners examine how best to achieve fairness for consumers

12 June 2018

How can we best ensure that consumers receive fair treatment in the marketplace? Ombudsmen, economists, and regulatory experts met at Wolfson College today to discuss this question as part of an FLJS workshop on changing regulatory approaches to economic fairness.

Frank Vibert, Senior Visiting Fellow at LSE, presented his paper on Fairness and the Role of Economic Regulators to outline the shift in regulatory culture from a ‘light touch’ approach based on price regulation, to a significantly extended conduct of business focus on the terms of contracts between regulated companies and their customers.

He cautioned that this new more interventionist approach that reflects greater outsourcing and greater contractual complexity could go too far in suppressing the market. To support the view, he cited Transport for London’s decision to withdraw Uber’s operating licence: “TFL’s attempt to put Uber out of business in the name of fairness for the consumer is cause for concern.”

Emeritus Professor of Socio-Legal Studies Denis Galligan opened the workshop by describing the essential features of fairness as something that is due to or owed to one party in a social relationship, which must be proportionate, and which is restricted by fundamental standards of right treatment.

 

Transport for London’s attempt to put Uber out of business in the name of fairness for the consumer is cause for concern

 

Frank Vibert added to this framework by distinguishing between the three definitions of fairness: distributive fairness to protect the low income and socially vulnerable groups from full market forces; fairness as equality, whereby consumers have equal access to service and equal voice; and fairness as fair treatment, whereby reciprocal, cooperative, trust-based relations can occur between contracting parties.

He argued that despite the popularity of ’nudge theory’ in regulatory policymaking in recent years, approaches based on behavioural economics also encourage rule-based behaviour, and that, especially in the financial sector, legally enforced deterrence mechanisms remain of utmost importance.

Dr Christopher Decker, Economist and Research Fellow in the Faculty of Law at Oxford, focused his remarks on questions of when and under what circumstances regulators should make interventions in the market, especially in light of their role as unelected arms of the state involved in the distribution of public goods. Dr Decker argued that there was a feeling among some consumers that the regulatory drive for efficient markets and competition has not worked, especially with respect to energy prices and the railways, for example.

However, he warned against the moral hazard of ‘overprotecting consumers’ as a potential risk of regulatory intervention, since it can result in consumers failing to invest in the skills needed to make informed decisions in the marketplace.

Christopher Hodges, Professor of Civil Justice Systems at Oxford, gave an overview of how regulatory regimes may evolve in the future, including proposals to regulate the internet, and the impact of artificial intelligence in areas such as driver-assistance technologies and even in court settings to aid judicial decision-making.

 

We’re here to level the playing field and redress the imbalance between consumer and business

 

The Lead Ombudsman of the Financial Ombudsman Service Caroline Mitchell outlined the role and scope of the FOS, which included the resolution of 400,000 complaints last year, a significant proportion of which came from PPI (payment protection insurance) complaints. Describing the aims of the body, she identified the importance of both improving confidence in financial services and improving services for the consumer, noting: “We’re here to level the playing field and redress the imbalance between consumer and business.”

The workshop was brought to a close by Bettina Lange, Associate Professor of Law and Regulation at Oxford, who discussed the inherent or entrenched unfairness in water services provision, given in the degree of dependency that consumers have on the good and the existing infrastructure for its delivery. She showed that regulation of the water industry is legally obliged to help safeguard the natural environment in its decision-making, and argued that we not only need to consider current needs, but also the responsibilities toward future generations, in order to achieve procedural fairness.

The paper by Frank Vibert on which the workshop was based is available to download at the link below, and podcasts of the event will be available in the coming weeks.