The Competition and Markets Authority

(The role of the CMA, and the reasons why it was created, are summarised here. This web page summarises subsequent developments.)

The National Audit Office published a report in February 2016 on the Functioning of the UK Competition Regime, focussing in particular on the first couple of years activity of the CMA. Its overall conclusion was some improvements could be identified, but that the authority had as yet failed to address the key failings of OFT when attacking cartels and abuse of dominance. It was particularly noteworthy that the UK competition authorities had issued only £65 million of competition enforcement fines between 2012 and 2014 (in 2015 prices) compared to almost £1.4 billion of fines imposed by their German counterparts.

It was noteworthy, too, that the new regime cost £12m pa more than its predecessor, and that part of this additional cost had gone into increasing the salaries of staff so as to reduce the rate of loss to other regulators following a severe dip in morale following the OFT/CC merger. The CMA itself now cost £66m pa, of which only £36m could be attributed directly to competition work, the rest being property, IT and other administration costs. Other regulators costs brought the total cost of UK competition enforcement to £66m pa, again not including property etc.

There were some signs that the phase 1/2 distinction had indeed become slightly blurred - one of the concerns voiced by those who had opposed the OFT/CC merger. In particular, staff who had decided that there was a problem at phase 1 were now being employed to advise the phase 2 decision makers, thus risking confirmation bias. And significant effort was still being made to agree remedies at phase 1 so as to avoid a more in-depth phase 2 investigation - which might well lead to a merger being prohibited. The NAO noted that 'The CMA is expanding the practice of clearing cases with remedies in phase 1 without the need to go for a more detailed and resource-intensive phase 2 review, and is making efficiency gains from using some of the same people on both phase 1 and phase 2 investigations'. But businesses and their advisers were said to be 'positive about the quality and continuity of the CMA’s merger teams, and told us that they valued having early discussions with decision-makers'.

[The CMA separately published a summary of its merger decisions. The CC's clearance rate had been 38% between April 2004 and March 2009. This increased (following the OFT's decision to settle as many cases as possible at phase 1) to 53% between April 2009 and March 2014. And the rate increased yet further - to 60% in the first 22 months of the CMA's existence through to January 2016. These figures hardly suggest confirmation bias, but they do suggest that both the parties to the merger and the CMA were anxious to settle at phase 1 so as to avoid detailed examination, and possibly tougher remedies, at phase 2.]

The NAO also noted that 'The CMA is currently investing 16% of its front-line competition resources in two high-profile market investigations into energy and retail banking' and made the obvious point that the results had better be good if the CMA's reputation was not to be damaged.

More generally, the NAO repeated concern about the ease and length of the UK's competition appeal processes:- '... many stakeholders and legal practitioners we spoke to think there are strong incentives for businesses to litigate if they lose a case, which can lead to risk aversion in the competition authorities. One stakeholder told us that the UK was the best jurisdiction in the world to defend a competition case; this was consistent with the views of several other interviewees.'

2016 Consultation

The Business Department issued a further consultation document on 25 May 2016 with an appallingly short timetable - responses being required by 24 June. This is itself spoke of Ministers not wanting to read serious, considered comment, but instead having already decided to make further changes to the regime. The document itself was a strange thing, including a two and a bit page introduction which lauded the virtues of the current regime, as well as an assurances such as that "The UK's competition regime is rightly considered one of the world's best." But market investigations were still taking up to two years and the the separation of independent part-time decisions makers (the inquiry groups) from investigatory staff was expensive.

The Government was accordingly considering:

  • reducing the involvement of the inquiry groups in day-to-day inquiry decision-making, which would in future be the prerogative of CMA staff,
  • allowing the CMA Board to restrict the resources available to individual inquiries,
  • 'professionalising' the inquiry panel (the group from which inquiry groups are formed) by reducing it down to only 12 members who would be required to make themselves available for a minimum time each year,
  • allowing outside experts to be added to inquiry groups when demand or expertise required additional resource,
  • allowing senior CMA staff to join inquiry groups,
  • shortening the length of appointment of members of the inquiry panel,
  • allowing the CMA Board to refuse extensions of market investigation timescales beyond 18 months,
  • encouraging the CMA to 'improve' its working practices so as to reduce the burden on business.

To old hands, this all smacked of wanting to cut cost by reducing the depth and quality of the CMA's investigations, and in particular reducing the extent of external scrutiny of the CMA's inquiries (e.g. by independent part-time decision-makers) and so reducing the accountability and increasing the power of CMA staff, and the CMA's Board. Others would no doubt merely see the CMA becoming more like other competition authorities, such as the European Commission,and what is so wrong with that?

The Brexit Referendum was then held on 23 June 2016, whereupon all went very quiet!

Post-2016 Developments

There were welcome signs, from 2016 onwards, that the CMA was successfully ramping up its competition enforcement activity. Outside observers saw greatly improved focus on achieving results, and the rate of opening of new cases rose from a historic 6.8 pa to around 12pa. They were also being completed more quickly. A Hampshire estate agents/newspaper cartel investigation was completed in 15 months compared with a historic average of over three years.

Ex-Conservative politician Lord (Andrew) Tyrie was appointed CMA Chair in 2018. In August that year the Secretary of State asked him" for advice on legislative and institutional reforms to safeguard the interests of consumers and to maintain and improve public confidence in markets." Lord Tyrie replied in February 2019 suggesting considerable new powers for the CMA (particularly when carrying out (previously informal) market studies) and reduced scope for appeals against its decisions. He also asked that there should be a new statutory duty on the CMA, etc. to treat the interests and protection of consumers as paramount . In other words, consumer interest (whatever that is) would replace competition as the overriding statutory duty.

The full text of the letter is here.

Bruce Lyons' scathing commentary is here. He questions (amongst other things) the factual basis of the CMA's proposals, and notes that

"Cutting out the role of markets/ competition and fast-tracking to “the consumer interest” risks a wide-ranging and paternalistic determination of what is the consumer interest. This echoes the language and problems of previous “public interest” tests. There is a worrying absence of any discussion in the Tyrie letter of how the consumer interest will be determined. What exactly is the consumer interest other than in relation to what the market provides?"

Professor Lyons also expresses concern that there may be an unstated move further away from decision making by independent panels and towards decision making by staff.

Other Information

The CMA's Ann Pope delivered a useful review of the the CMA's post-merger performance and the future of competition enforcement in November 2018

See the cartels and abuse of dominance pages of this website for information about some of their cases.

Martin Stanley

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