Competition and Markets Authority

As of 1 April 2014, the roles of the Office for Fair Trading and the Competition Commission will be amalgamated into one single body – the Competition and Markets Authority. The CMA will bring together the Competition Commission with “certain consumer functions” of OFT to work in the interests of consumers and businesses. Although receiving minimal news coverage and passing through Parliament without stirring controversy or opposition, it is hoped that this new body will transform UK competition regulation and become one of the leading competition and consumer authorities in the world.

Aims and Ambitions

Initially announced in March 2012 and launched in shadow form in October 2013, the CMA has established 5 key goals:

  • To deliver effective enforcement;
  • To extend competition frontiers;
  • To refocus consumer protection;
  • To develop integrated performance; and
  • To achieve professional excellence.

The Department for Business, Innovation and Skills has given the CMA the following strategic priorities:

  • Identify markets where competition is not working and tackle the constraints in these cases using appropriate enforcement tools;
  • Enforce antitrust rules robustly and fairly where breached;
  • Where government is creating barriers to competition, play a key role in challenging them;
  • Provide leadership and work with partner agencies to deliver positive competition outcomes.

Competition Minister Jo Swinson said of the CMA, it “is a significant step towards delivering a world-class competition regime in the UK that promotes growth and builds a stronger economy.”

So what will change?

There are three broad branches of change with the formation of the CMA. Firstly, the buzzword of the day: integration. In line with the government’s broader efficiency agenda, it is hoped that with the merging of the CC and OFT, there will be greater coherence, speed and transparency within the competition regime. In addition, there will be greater flexibility in the allocation of resources.

Secondly, stronger powers have been allocated both with regards to mergers and markets regimes, and antitrust investigations: the new CMA will have stronger powers of investigation and information gathering, such as a power to require individuals to respond to oral questioning; a power to focus Phase 2 market investigations on a particular feature spanning several markets; and stronger powers to impose interim measures in mergers and markets, for example for mergers, greater “hold separate” powers, and the power to undo previous integration where possible. In addition, there will be tighter timetables for different parts of the competition process, again ensuring efficiency in the regime.

In particular, these strengthened powers are aimed at improving antitrust and criminal cartel enforcement, speeding up the efficiency of antitrust investigations and ensuring “conscious and clandestine” participation in hardcore cartels is caught. However, in order that this increased speed does not come at a cost to fairness, there will be safeguards in the Authority’s procedural rules, notably collective decision-making and the introduction of new decision makers after the investigation to decrease the frequency of appeals. In addition, the ‘dishonesty test’ for criminal cartel prosecutions has been removed.

The third branch is to encourage the CMA to work more closely with sector regulators to promote competition. The UK Competition Network has been established to drive reforms that will require sector regulators to consider their antitrust powers before taking enforcement action, competition authorities to share more information regarding possible antitrust cases, and the CMA to report on the use of concurrent competition powers across the landscape.

Reactions

On the whole, the establishment of CMA has been welcomed amongst lawyers. However, whilst the merger and emphasis on greater efficiency has been received positively, there is some concern that the lower threshold for cartel prosecutions and the removal of the ‘dishonesty requirement’ could threaten the UK’s international reputation. Clifford Chance’s Alistair Mordaunt has referred to the move when first announced as “a big risk” as with the current regime’s reputation, many question the need for reform.

Competition and Markets Authority Guidance

The transitional arrangements will be effected through secondary legislation
The New Law will apply to ongoing market studies with the exception of the following provisions:
Requirement to publish a market study notice on commencement of a market study
Statutory time limits for the market study process that are triggered by publication of a market study notice
Investigatory powers that are triggered by publication of a market study notice
The New Law will apply to ongoing market investigations with the exception of the following provisions:
Statutory time limits for completion of the market investigation process
Revised maximum penalty amounts for non-compliance with investigatory powers will not apply were investigatory powers are exercised prior to the Effective Date
Statutory time limits for completion of the remedies implementation process will not apply to investigations that are in the remedies implementation stage as at the Effective Date
The Enterprise and Regulatory Reform Act 2013 makes changes to the reference process in certain cases, by:
Amending the process for intervention by the Secretary of State in cases raising public interest issues – The Secretary of State may intervene in markets cases that raise one or more specified public interest considerations but is expected to do so rarely. The interests of national security is currently the only specified public interest consideration in relation to the markets regime
Introducing a new power to make cross-market references – The ERRA13 gives the CMA the power to make a cross-market reference: that is, to refer a specific feature (or combination of features) existing in more than one market without also having to refer the whole of each market concerned
A market investigation must be completed and the report published within 18 months of the date of reference. The CMA may extend this period by up to a further six months if it considers that there are special reasons why the investigation cannot be completed and the report published within 18 months
The CMA must accept final undertakings or make a final order within six months of the date of publication of the market investigation report
The CMA may extend the six-month period by up to a further four months if it considers that there are special reasons why final undertakings cannot be accepted or a final order made within the statutory deadline
The process to be followed in the event of an appeal to the Competition Appeal Tribunal (CAT) will depend upon the circumstances and will, therefore, be considered on a case-by-case basis

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