“Brexit is only trivially related” to the growing interest in adding public interest criteria to merger reviews, the executive director for enforcement at the UK’s Competition and Markets Authority has said. Pallavi Guniganti at GCR Live New York
Michael Grenfell pointed to changes outside the UK, including the European Commission’s own move toward restricting foreign takeovers of critical infrastructure, as indicating that the desire for a more expansive look at deals was not peculiar to Britain’s exit from the European Union. He spoke in his personal capacity at GCR Live 5th Annual New York on Thursday last week.
While saying the question of whether public interest criteria would be included in merger review is “not for humble functionaries” to answer, Grenfell said it is an issue for politicians around the world, not solely in the UK. If merger review changes, “it will not be primarily because of Brexit,” he said.
He acknowledged that outside the EU, the UK would have more leeway to impose public interest criteria, because it no longer will be subject to EU rules such as free movement of capital. But the “bigger part” is the “sea change in the political and theoretical doctrinal climate surrounding competition and economic policy.”
Grenfell framed that change as a contrast between the Reagan and Thatcher revolution – emphasising competition over state intervention to promote prosperity – and reduced faith in untrammeled market economics since the financial crisis of 2008. Before the mid-1980s, he noted, the UK competition authorities had assessed mergers based on a wide range of public interest factors, including the effects on jobs, regional development and the country’s ability to be a national champion on the world economic stage.
The increased interest in protectionism and interventionism can be seen in the UK with the replacement of David Cameron by Theresa May as prime minister, and in the US as the Democratic party moves from Clinton’s centrism to Bernie Sanders’ radicalism, Grenfell said. “That kind of mood is taking hold across the industrialised world.”
He also argued that these concerns are not partisan, as the UK’s Labour party has even more concerns about takeovers of British companies than the ruling Conservatives. Unless the UK authorities conduct merger reviews in parallel with the European Commission, he said, people will think it odd that the CMA can look at small deals but feel its “hands tied” on “the large ones, the ones that really matter, the ones that involve global conglomerates taking over British companies”.
“I think the Labour party no less than the Conservative party would be bothered by that,” Grenfell said.
He questioned whether having an enforcer move from just technocratic consideration of competition to thinking about jobs, infrastructure and other policy matters was compatible with retaining the agency’s independent, non-political status – something he said is an open question in the UK but not specifically UK-related. Decision-making in the realms of political controversy may be less acceptable for unelected officials to do, he added.
On the other hand, Grenfell said, for antitrust agencies worldwide “it is risky to be in a kind of isolated bubble, completely insulated from the economic debate and public sentiment around us. That is is a risk for the legitimacy and the public support of competition authorities.”
He noted that May had expressed belief in competitive free markets, “but unless one addresses in slightly newer ways than previously done what are seen as abuses of the competitive market system, that system will become less defensible. That’s what she said in a major speech [on Thursday morning], and that’s what I think underpins the whole thinking.”
Grenfell spoke on a panel moderated by Cleary Gottlieb Steen & Hamilton partner Nicholas Levy, where he was joined by Kirkland & Ellis partner Paula Riedel; John Fingleton, chief executive of Fingleton Associates and former head of the UK’s Office of Fair Trading; and Deirdre Taylor, of counsel at Gibson Dunn & Crutcher.
GCR Live 5th Annual New York ended last Thursday.