The European Antitrust Review 2015

United Kingdom: Competition and Markets Authority

Alex Chisholm

Chief executive of the Competition and Markets Authority

In April this year, the Competition and Markets Authority (CMA) became fully operational in its role as the UK’s lead competition and consumer authority. The new body was the result of a merger between some functions of the Office of Fair Trading (OFT) and the Competition Commission (CC), as set out in the Enterprise and Regulatory Reform Act of 2013.

But its creation was far more than a merger. Alongside this organisational reform went a number of adjustments to the powers and duties of the new body. These included:

  • tighter timetables for different parts of the competition process;
  • stronger powers of investigation and information gathering in competition cases;
  • a power to focus a Phase II market investigation on a particular feature spanning several markets;
  • stronger powers to impose interim measures in mergers and markets, including, for mergers, greater ‘hold separate’ powers and powers to undo previous integration if appropriate; and
  • removal of the dishonesty requirement in the criminal cartel offence, but with new exclusions and defences allowed.

These reforms represent a significant enhancement of the UK competition regime, which will enable more effective competition enforcement for the benefit of consumers, businesses and the economy.

A huge amount of work has been done to accomplish a successful transition, and a lot more is underway, both in terms of visible frontline delivery work to achieve our objectives, and in behind-the-scenes activity to take advantage of the opportunities that the move to the CMA has brought.

We have a strong board and leadership team working to deliver our agreed strategy and vision, and a talented staff with a good mix of skills and experiences for our work.

We’ve consulted on and published a full range of guidance documents across our powers and responsibilities. All of the relevant casework previously being done by the OFT and the CC has been successfully and smoothly handed on to the CMA.

Just as there was no let-up in the work of the competition authorities during the transition period, the CMA has been delivering at pace since day one, and we have already made some important announcements since launching. We put out a final decision on the investigation into the private health-care market shortly after taking on our responsibilities; and have also published a baseline assessment of competition in the regulated sectors that will be used as a benchmark for our work, and that of the sectoral regulators. In May, we announced our decision to clear a merger between two NHS Foundation Trusts, and on 12 June we set out the changes we propose to make in the private motor insurance market to increase competition and reduce the cost of premiums for motorists.

The CMA has a strong set of organisational values based around ambition, excellence, commitment, teamwork and fairness, and staff have enthusiastically taken up the challenge of putting these into practice. We aim to continuously improve the CMA, and ensure that we reflect and act on the lessons from our work.

Plans and priorities

On 26 June, Ofgem announced its decision to refer the energy market to the CMA for a full competition investigation. We will now carry out our own comprehensive, independent investigation to see if there are any features of this market that prevent, restrict or distort competition and, if so, what action might be taken to remedy them.

We are also rolling up the conclusion of the OFT’s work on small business banking into a wider assessment of competition in the retail banking sector, gathering and scrutinising evidence carefully ahead of a decision in the summer on what to do next. This is of course an issue that has occupied much of our predecessors’ attention and has been heavily scrutinised in recent years, but the significance of the market for consumers, small businesses and the economy as a whole more than justifies the continued investment of time and resources.

Following the OFT’s referral of the payday lending (also known as high-cost credit) market for investigation, it falls to the CMA to complete the work begun by the CC to consider how consumers are faring in that market and what might need to change. On 11 June, we published an interim report showing that a lack of price competition means that payday loan customers may be paying too much for their loans. The CMA will now look at potential ways to increase price competition, including the establishment of an independent price comparison website, clearer upfront disclosure of borrowing costs if a loan is not paid back in full and on time, as well as requiring greater transparency about the role played by lead generators.

Our work on merger scrutiny is expanding significantly with the economic upturn – we have around 30 currently under consideration, with sectors such as transport, health care, technology and retail markets among those where the number of deals is increasing. We also expect our role in scrutinising NHS Foundation Trust mergers to continue to generate interest and political attention, even as it becomes better understood.

Most of these pieces of work require close cooperation with partner organisations such as Ofgem, Monitor and the FCA, and that is another area where we are focusing much time and effort in our early days. In both competition and consumer work, there is much expectation on us to play important roles in ensuring that the new arrangements in these areas add up to more than the sum of their constituent parts, and to help deliver collaboration and consistency across these regimes.

The UK Competition Network (UKCN), bringing bodies with concurrent competition powers together, is now in place. As of 1 April, we are sharing information and making case allocation decisions with individual regulators, underpinned by memoranda of understanding.

On the consumer side, the Consumer Protection Partnership is bringing advice, education and enforcement bodies together, and we are refining and shaping our contribution based on our new remit to focus on market-wide issues where consumers are prevented from exercising real choice, and thus from driving competition.

We will of course be opening up new cases and projects as others close down and capacity becomes available. Some of these will be enforcement cases and thus necessarily not as visible until they reach the point where we can make them public; but we have also been able to begin some wider projects that demonstrate the range of our thinking about the issues within our domain.

For example, we are looking to better understand why some markets have not yet made the jump to online mechanisms and platforms when one might have expected them to, and whether there are barriers to entry or other unhelpful obstructions preventing this from happening.

We’re also looking to develop our knowledge of the effects of over-indebtedness on consumers, how consumers who are over-indebted interact differently with markets than those in better circumstances, and what that might mean for the many and varied bodies tasked with empowering, advising and protecting consumers. And we are putting in place an ambitious, expanded approach to compliance with competition and consumer law.

Compliance

At the CMA, we are keen to balance enforcement with compliance and awareness work, and are therefore looking to significantly broaden the reach of our compliance work.

As regards our compliance strategy, we are in a good position as the passing of the Enterprise and Regulatory Reform Act 2013 and the launch of the CMA in itself gives us an important opportunity to draw attention to the competition regime and the need for firms to consider how to comply with the law. At a time when there is an almost unprecedented level of attention focused on the competition regime, we have a platform from which to work and broadcast our messages.

We will be looking to more closely tie up the enforcement outcomes we achieve with our work on compliance by ensuring that when we complete cases from which lessons can be drawn, we bring those lessons to the attention of the firms that need to see them. We want to drive compliance onto and up the corporate board agenda.

We are also committed to conducting a programme of research to better understand business’ awareness and understanding of the law, and will use the results to improve our strategies for compliance work going forward.

Moreover we will strengthen the compliance tools and techniques that we use to help us to achieve the culture of compliance with competition and consumer law that we want to see across the UK economy.

Cartels

The Cartels and Criminal Group at the CMA has taken over the portfolio of criminal cases that were under investigation by the OFT. These include an investigation into suspected cartel conduct in respect of the supply of galvanised steel tanks for water storage in the UK. In that matter, one individual was charged by the OFT in January this year with the criminal cartel offence under the Enterprise Act 2002 and proceedings are underway; there is also a related civil investigation under the Competition Act 1998. The Group is also investigating suspected cartel activity in the supply of products to the construction industry, having conducted a number of searches at premises last year and arrested seven individuals. Two other criminal cartel cases are also in the investigation phase, bringing the total to four.

Looking forward, we expect that the amendments to the criminal cartel offence will result in a higher number of cases resulting in successful prosecution. In that regard, additional Treasury funding has been provided to the CMA to deliver a step change in competition enforcement, including by tackling cartels more effectively, and we are deploying this to enhance our capability in this area through recruitment, training and the development of our intelligence capacity.

Conclusion

We see the creation of a unified competition and consumer authority at this time as a significant step. The functioning of markets has been questioned much more since the financial crisis of the past few years. The challenge is to make markets work better for consumers, business and the wider economy. The key responsibility for that in the UK now rests with the CMA.

Chief executive of the Competition and Markets Authority

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