Competition & Markets Authority
A view from the CMA: Brexit and beyond
Keynote speech given by Michael Grenfell, CMA Executive Director – Enforcement, at the Advanced EU competition law conference.
I’m going to start by not talking about Brexit. Irrespective of our leaving the EU, there is a lot to be said about the work of the Competition and Markets Authority, a body which is now just over 4 years old.
At 4, the CMA is clearly no longer a newborn baby. Indeed, no longer a toddler – but, rather, making great strides, I think most people would say.
We have, as you know, one statutory duty - to promote competition for the benefit of consumers – and we have regard to this in all that we do.
In addition, the Government has set the CMA an ambitious target of securing £10 of measurable consumer benefit for every £1 of taxpayers’ money spent on our work. We comfortably achieved that in our first 3 years, and we expect to have done so again in our fourth year. If anything, the figures understate what we are achieving, because they count only the direct benefit of our work in a particular case, rather than the much wider deterrent effect. For example, if we make a finding of illegality about a cartel of estate agents agreeing commission fees in a small Somerset town, Burnham-on-Sea, and impose fines on participants – which is exactly what we did do in May last year - the direct benefit is that the estate agents’ fees for house sellers in Burnham are lower than they might otherwise be if the cartel continued unchecked. But the wider deterrent effect is, of course, worth much more – estate agents all across the country are reminded that they will be penalised if they engage in cartel behaviour, which ensures that estate agents’ fees are kept competitive for millions of people up and down Britain. Not to mention the even wider deterrent effect of signalling to all businesses that it is risky and costly to engage in price-fixing and other anti-competitive agreements and practices – and that the CMA is earnest in seeking to put a stop to such practices, all for the benefit of consumers.
In the area of competition law enforcement, we have upped our game. In the 5 years April 2010 to March 2015, we (or our predecessor the Office of Fair Trading) opened an average of 6.8 competition enforcement cases a year. More recently, that level of activity has materially increased. In April 2015 to March 2016, we opened 8; in April 2016 to March 2017 we opened 10; and in April 2017 to March 2018, we have opened another 10. Averaging that out, that’s an uptick these past three years of over 35% in our competition enforcement activity compared with the previous five years.
At the same time we’re endeavouring to ensure compliance with competition law by emphasising directors’ personal responsibility. In the past 18 months, and for the first time ever, we’ve secured 3 disqualifications from UK company directorships of directors of companies found to have breached competition law – 2 of these in April this year – and we will continue to use our powers in this respect.
And in last November’s Budget, the Chancellor of the Exchequer signalled the Government’s commitment to our increasing enforcement activity still further – with an additional £2.8 million of Government funding per year for the CMA for this purpose. That funding has started with effect from April this year – and it’s over and above the funding that was announced by the Chancellor in March this year to prepare for expanded work post-Brexit.
We were gratified that Global Competition Review’s most recent annual ranking of the world’s top antitrust authorities, published in July last year, referred to the CMA being ‘visibly reinvigorated’, ‘ramping up’ our activity, with ‘a real focus on getting things done’ (Global Competition Review, Rating enforcement 2017, July 2017). And that, in April this year, we won Global Competition Review’s award for European competition agency of the year.
Yet there are no grounds for complacency. Quite apart from Brexit, the ‘day job’ for the CMA is important and stretching. As a competition authority we face formidable challenges:
- There remain many examples of market failure in our economy, harming consumers
- Some of our traditional remedies of encouraging choice and switching can result in perverse outcomes for consumers in certain sectors, particularly where technology allows for personalised pricing. As the Government’s April 2018 Green Paper on ‘Modernising consumer markets’ puts it: ‘It is often those who are the most vulnerable who are least likely to be on good deals and therefore pay the most’ (Department for Business, Energy and Industrial Strategy, Modernising consumer markets: Consumer Green Paper, Cm 9595, 11 April 2018, paragraph 45)
- And the latest manifestations of digitalisation, in the form of pricing algorithms and artificial intelligence, pose fundamental, and important, questions for the detection of anti-competitive practices – as well as conceptual questions for the application of competition law more generally – questions which competition authorities around the world are having to grapple with
But in our 4 years we’ve shown a readiness to meet these challenges – whether it’s by bringing together two venerable organisations, the OFT and Competition Commission, into a unified seamless single entity; through delivering reports on two major market investigations into key sectors of the economy, energy and retail banking, whose positive results are starting to be felt in the real world, for example in the introduction of open banking; through the marked uptick in our competition enforcement activity, protecting millions of our citizens from harmful anti-competitive practices – and whether it relates to residential care homes for the elderly, or price comparison websites, or fun fairs, or medicines sold to the National Health Service. The challenges we face are indeed significant, but in our brief life we’ve shown, I believe, the ambition and the ability to rise to some pretty big challenges.
And then along comes Brexit.
So what about Brexit?
I want to focus on 4 aspects of Brexit as regards the CMA:
- What it means for the CMA’s functions and workload
- Practicalities – funding and preparation
- Scope for UK divergence from EU law precedent
- Wider implications
1. What Brexit means for the CMA
I don’t know about you, but these days I find it hard to have a conversation with competition practitioners without being deluged by worries about the effect of leaving the EU on competition law and policy.
Examples of what I’ve heard people say include concerns about: the duplication involved in parallel investigations of mergers and anti-competitive practices; the risk of an ‘enforcement gap’ for UK consumers if there are no parallel investigations; the risks to business certainty if there is divergence from EU norms in competition enforcement; the loss of effectiveness from being outside the cooperation mechanisms of the European Competition Network (especially as regards authorities sharing confidential information on suspected anti-competitive practices); the loss of UK voices in the EU institutions to influence the development of EU competition law and policy; and, at the CMA, a lack of adequate funding which might, for example, reduce our ability to conduct the full range of our activities such as market investigations when we have to divert staff to handle mergers that would previously have been examined exclusively by the European Commission.
All the concerns I’ve just listed, and possibly others too, raise important and serious issues. They are real challenges for competition law and policy in the UK, and across Europe – and they present practical problems which will need to be addressed as the United Kingdom prepares to leave the EU.
It is perhaps inevitable that the competition law community should focus on the negative in all this. The practice of competition law in the UK has, historically, been intimately bound up with our membership of the EU:
- although it is true that we have had competition laws in this country since 1948, we all know that many of the biggest competition law cases that affect UK businesses and consumers – under merger control or the prohibitions on anti-competitive agreements and abuses of dominance – are dealt with under EU law, enforced by the European Commission and arbitrated by the EU Court of Justice and General Court
- as for the cases which are already, pre-Brexit, subject to UK jurisdiction, under the UK Competition Act prohibitions – which the CMA, as the principal national competition authority, enforces, and which the Competition Appeal Tribunal arbitrates - even these domestic ‘national’ cases have had to be undertaken in conformity with EU jurisprudence
- and as many of us who have worked in law firms know, the competition or antitrust practice of the firm has often been branded as the EU competition practice
Disengaging competition law and policy from EU membership is, for many people, conceptually hard to take. And – from many discussions I have had in the period since British voters chose, by a majority, to leave the EU - it is not popular with large sections of the ‘competition specialist’ community.
But I want to suggest to you that, notwithstanding the many potential problems, there are also significant opportunities.
Let’s just spell out in basic terms what leaving the EU actually means for the application of competition law enforcement in the UK:
- in merger control: whereas previously the UK authorities were prohibited from examining the competition effects of mergers and acquisitions subject to the EU Merger Regulation – typically the biggest M&A transactions, and sometimes the most important– we will now be allowed, and empowered, to examine, and rule on, the competition aspects of all mergers and acquisitions affecting UK markets where they meet our national jurisdictional thresholds
- as for cartels, anti-competitive agreements and conduct: whereas until now the national competition authorities were prohibited from applying competition law to cases over which the European Commission chose to exercise its jurisdiction (because of Regulation 1/2003 articles 11(6) and 16(2), read with article 3) – again, typically the bigger cases – post-Brexit we in the UK will be allowed to tackle all anti-competitive practices that affect UK markets, UK consumers and UK businesses, and not just the ones that the European Commission isn’t interested in
In short, jurisdiction over many cases affecting UK markets, previously exercised exclusively by supranational institutions in Brussels and Luxembourg, will now be acquired by British authorities and courts. Post-Brexit, it will now be the UK’s own national institutions and courts that will be taking some of the bigger decisions that were previously reserved for determination elsewhere. We have discussed some of the potential difficulties, but of course there are also opportunities here, for the CMA and for the UK regime.
It’s a big and important step change. Is it beyond us? If Australia, Brazil, Canada, India, Japan, South Korea and others can apply their own competition laws – and can examine any merger or anti-competitive practice, large or small, that affects their consumers, businesses and citizens– it doesn’t seem to me so unrealistic that the UK should stand alongside them, and alongside the US and China, as among the leading independent players in the world of competition. There is much comfort to be gained – for us, for our fellow competition authorities in Europe and across the globe, for companies that do business in the UK, and (most importantly) for the UK consumers we seek to protect – in the fact that Britain’s is a pretty mature and experienced competition regime, with real expertise in our courts, enforcement authorities and institutions, and excellent contacts and relationships across the globe.
Will it be easy? No. Are there serious difficulties in getting there? Yes, but the purpose of identifying them and tackling them is to be in a position where we can make the most of the opportunities – to the overall benefit of UK consumers, UK businesses and, ultimately, the UK economy.
2. Funding and preparation
People keep asking us: ‘How is the CMA going to take on all those cases?’ ‘Do you have the staff?’ ‘Where is all the money going to come from?’ ‘How are you going to recruit enough people in time?’
These are legitimate questions – and, again, I wouldn’t want to understate the challenges. But it won’t surprise you to learn that, if you are asking these questions, we are asking them too, as are those in Government charged with responsibility for the competition regime and for delivering our exit from the EU. Asking the questions, and working on the solutions.
It is true that we can expect a significant increase in our case load –taking on the mergers, cartels, anti-competitive agreements and abuses of dominance that were previously reserved to the European Commission, which are typically the bigger cases, as well as control of state aid, which will be a new activity for us - and naturally we need more staff for that.
That in turn requires funding. You will have seen that, in the Chancellor’s ‘spring statement’ in March, the Government has already allocated an additional £23.6 million to our budget for 2018-19, so as to enable us to prepare for the UK’s exit from the EU (written statement to the House of Commons HCWS540, 13 March 2018). This is of course a significant sum, but it was costed carefully and will be prudently and appropriately spent.
With that money we need to recruit. At this stage we don’t know exactly when the CMA will acquire jurisdiction over cases (or their UK aspects) previously reserved to the European Commission. These matters are subject to negotiation between the UK and the EU. We have had to be prepared for all contingencies:
- first, for Britain as a whole, will there be an ‘implementation period’ after exit day next March, or an immediate acquisition of jurisdiction on exit? That one now looks clearer – it seems that we’ll have a 21-month implementation period, with the change of jurisdiction at the start of 2021
- second, for individual cases that are ‘in-flight’ when overall jurisdiction changes, are there to be transitional provisions, by which the European Commission retains exclusive jurisdiction over some cases that are ‘in-flight’, or rather what is sometimes called a ‘cliff edge’ whereby the European Commission’s exclusive jurisdiction over those cases ceases immediately?
Yes, we are planning to recruit substantial numbers. We cannot, and will not, compromise on quality in our recruitment; we all know that the CMA’s decisions are subject to stringent judicial scrutiny - and in any event we want to make the right decisions, rigorously and with procedural fairness.
People often ask, ‘How are you going to recruit, if your pay scales are significantly lower than those in many of the ‘talent pools’ where you fish – such as the competition practices of leading private-sector law firms, barristers’ chambers and economic consultancies?’ All I can say to that is that, although in many cases that will be true, as someone who has experienced both private-sector competition practice and working at the CMA – and as someone who has talked to many other people with experience of both – the experience of working at the CMA is superb. The quality of the work is unmatched. You are at the centre of all the important competition cases in the UK. Pre-Brexit, that excluded the bigger cases that were under European Commission jurisdiction. Now, it will mean all the important cases.
And I know that many people who have experienced both find it fulfilling that, in doing their work on these cases, they are not just advocating for particular client’s business interests (although that is, in my view, a necessary and good thing to do) – but are attempting to do the right thing for the overall public good. It is work that has a real and direct impact on the well-being of millions of ordinary people. They are also having to think of the wider commercial, economic and policy context in which their work is being done.
Funding and recruitment are challenges for us at the CMA.
But of course there are practical challenges for business and their advisers too. We do not yet know the shape of any transitional arrangements, but when they come we will all need to familiarise ourselves with them, to know which jurisdiction to contact and submit notifications to. More than that, we all need to be prepared well in advance of the date when jurisdiction transfers. A merger case typically involves early contacts and pre-notification, often 6 months or more in advance of the ‘clock starting’ by way of formal notification. For mergers which, post-Brexit, will fall to be notified to the CMA rather than (or in parallel with) the European Commission, that means that we at the CMA need to be in a good position to take on those additional cases efficiently, once we have jurisdiction, without avoidable delays - and that businesses will want to facilitate that and need to be in touch with us early in order to manage that pre-exit, pre-notification stage.
We will of course do everything we can, as the legal framework permits, to liaise with the European Commission on these cases – both merger cases and competition enforcement cases. From experience, we know that there is significant goodwill among our counterparts at the European Commission to liaise and cooperate on an interagency basis in the practical, sensible way we are all used to. We have worked well for many years with our colleagues at the European Commission, and we are confident that we will continue to do so whatever the final arrangements for future parallel investigations.
3. Scope for UK divergence from EU precedent
Moving from these procedural issues to the substance of UK competition enforcement post-Brexit, a critical question arises, about the scope for UK divergence from EU precedent in the application of the UK Competition Act prohibitions on anti-competitive agreements and abuse of dominance. To what extent will the CMA, the Competition Appeal Tribunal, and other UK competition authorities (the sector regulators with concurrent competition powers) and courts, be obliged to apply the prohibitions consistently with EU jurisprudence – as is the case at present – or, rather, be free to diverge?
It is highly relevant that the UK Competition Act prohibitions were modelled on, and mimic the wording of, the equivalent EU prohibitions in Articles 101 and 102 (save as regards territorial scope).
In legal terms, there are two main potential constraints on divergence.
First, section 60 of the Competition Act itself, which has been there ever since the Act came into force twenty years ago. This requires the UK institutions applying the prohibitions – the CMA, the CAT and so on:
- to deal with questions under the prohibition ‘in a manner which is consistent with corresponding questions arising in [EU] law’ – with the qualification that this is ‘so far as possible (having regard to any relevant differences [between the two regimes]…)’
- to secure no inconsistency with judgments of the EU Court of Justice (including the EU General Court)
- to have regard to relevant European Commission decisions, notices and other statements
There is a question of whether section 60 is to be retained, retained in modified form (for example, with a ‘softer’ duty to have regard to EU jurisprudence) or repealed altogether.
Separately, a second possible constraint on UK divergence from EU competition case law relates to the European Union (Withdrawal) Bill currently going through Parliament. The Bill is designed to establish the legislative framework for UK laws no longer being subject to the supremacy of EU law. As part of this, the Bill creates the concept of ‘EU-derived domestic legislation’. The question is what happens if the Competition Act prohibitions count as ‘unmodified’ ‘EU-derived domestic legislation’. On some readings, the effect could be that the UK Competition Act prohibitions would have to be applied in conformity with EU Court of Justice judgments made before the date of the UK’s exit from the EU, unless those EU Court judgments were superseded by subsequent judgments of the UK Supreme Court (similarly to section 60, this requirement is qualified by ‘relevance’ considerations).
If that were the correct reading, that in turn would have the consequence that pre-March 2019 jurisprudence of the EU Court of Justice could be binding on the CMA, the CAT etc for many years into the future, because cases under the competition prohibitions are very seldom heard at the Supreme Court – but EU Court judgments after exit day in March 2019 would have no such binding effect. A curious outcome of this would be that, in UK competition law, EU jurisprudence as at March 2019 would be effectively ossified. If EU jurisprudence then developed after March 2019 to reflect changing legal and economic thinking on competition issues in the UK we would still have to conform with the ‘old’ pre-March 2019 jurisprudence, whereas other European countries, and the European Commission, would be applying the law reflecting more up-to-date jurisprudence after March 2019.
It is far from certain that that curious outcome would, really, be the consequence of the European Union (Withdrawal) Bill. Whether this will in fact be the case is likely to depend on the proper construction of certain core concepts in the Bill, including in particular:
- the concept of ‘EU-derived domestic legislation’, and specifically whether the Competition Act prohibitions are within its ambit
- the concept of ‘modifying’ such EU-derived domestic legislation, and specifically whether any changes to section 60 of the Competition Act (repeal or amendment) are sufficient to count as having ‘modified’ the Competition Act prohibitions
- the ‘intention’ behind any such changes to section 60 (the Bill provides (in clause 7(6), using the numbering as at 10 May 2018) that ‘Subsection (3) [which requires consistency with EU legal interpretations] does not prevent the validity, meaning or effect of any retained EU law which has been modified on or after exit day from being decided as provided for in that subsection if doing so is consistent with the intention of the modifications)
It will therefore be important – for businesses which need to comply with the Competition Act prohibitions, and their advisers - that the Government and Parliament provide clarification on these points. Such clarification will indicate the extent to which the Competition Act prohibitions will, after the UK’s exit, need to be applied consistently with EU case law.
But, over and above these specific points, there is the bigger question of whether, and to what extent, the UK institutions should be free to diverge from EU jurisprudence, or alternatively should continue (one way or another) to be constrained by EU Court judgments.
Certainly, there are advantages in businesses being subject to competition laws that do not differ too radically from each other, particularly in the case of businesses that operate multi-nationally. But that is in any way the case – in most respects, competition law imposes the same requirements on businesses across the globe. Whether under the UK or the EU regime, the US or the Australian, the Russian or the South African, it’s unlawful for businesses to collude on price, for example, or to engage in bid-rigging when tendering for contracts.
Yet at the margins, there are issues on where there are legitimate differences – loyalty rebates, for instance, which have been the subject of intense economic and legal debate, or price discrimination.
The question is whether, for those cases at the margins, we should be bound to some degree to follow EU Court judgments.
There are arguments both ways. It is for the Government and Parliament to resolve this question. As a mere unelected official, it is certainly not my place to do so. But let me try to sketch out the arguments each way.
I think it is relatively uncontroversial that it makes sense for any competition regime (including the CMA’s) to have regard to international best practice – whether expressed in the EU Court of Justice or the US Supreme Court, or by the US Department of Justice or Australia’s ACCC or Germany’s Bundeskartellamt, or in other respected and distinguished forums. The point at issue is whether, in the UK regime post-Brexit, it is right or appropriate to privilege EU Court of Justice jurisprudence over all the rest.
On the one hand, it is argued that yes, we should conform with EU jurisprudence – continue to conform with EU jurisprudence – because that will provide business with the consistency, predictability and stability they crave. It’s what we’ve always done (for the past 18 years). EU countries are our nearest, and largest, trading partners, and so it is helpful to have the same competition laws that they have, applied and interpreted in pretty much the same way.
Alongside these arguments for conforming with EU jurisprudence, there is also the argument that it’s good for the integrity of the UK competition law regime. The point that is made on this is that it would be unfortunate if the UK competition authorities and courts had to operate in a vacuum, with no precedent basis for their decision-making, other than the relatively limited basis of 18 years of domestic precedent under the Competition Act.
But there are also powerful arguments against ‘privileging’ EU Court of Justice jurisprudence over all other international precedent and best practice, and over our own independent thinking. Again, we are talking not about the bulk of competition law (on which there is consensus across the globe –price collusion and bid-rigging are unlawful everywhere). As I’ve said we are talking only about those issues at the margins over which there is genuine and legitimate debate – fidelity rebates or price discrimination, for example. Once we are outside the EU, if the view of the UK competition authorities or courts is that the better view on one of these issues is X, why should they be constrained from applying X just because one particular foreign court, the EU Court of Justice, has case law which says Y, case law which might be outdated?
Where are we headed? We await the Government’s specific proposals on these points.The Prime Minister, in her Mansion House speech on 2 March - setting out the UK’s negotiating position for future relations with the EU - left open the possibility for at least some conformity with EU jurisprudence. She said:
we may choose to commit some areas of our regulations like state aid and competition to remaining in step with the EU’s.
More specifically, at the end of March, the Government published its response to a report on Brexit and competition that had been produced by the House of Lords EU Internal Market Sub-committee. Turning to this question, the Government said that, after exit, ‘it will no longer be appropriate to maintain the primacy of EU law over UK law’ and yet, nevertheless, the Government ‘welcomes the arguments… on the retention of some form of duty on UK courts to take account of CJEU jurisprudence’ (Government response to the House of Lords EU Internal Market Sub-committee report on the impact of Brexit on UK competition and state aid, 29 March 2018, Response to recommendation 2).
Precisely what that will entail in practice remains to be fleshed out.
These are plainly difficult issues - with, as I’ve said, powerful arguments either way. Of course it would be naïve to view them in isolation, and to fail to recognise that they are bound up with the wider political debates over our departure from the EU – about the balance between business convenience and political sovereignty, about whether we should have a ‘softer’ or a ‘harder’ Brexit. These are politically-charged matters, which it is for our political leaders, rather than unelected officials, to resolve. But I am sure that, wherever we stand, we would all welcome some clarity on these points, as soon as is reasonably practicable.
4. Wider implications
Changes in competition policy – wider public interest issues
On 11 July 2016, in the aftermath of Britain’s vote to leave the EU and as she stood on the brink of becoming Prime Minister, Theresa May said:
Make no mistake, the referendum was a vote to leave the European Union, but it was also a vote for serious change.
This is a common theme. Many commentators have viewed Brexit as being inextricably linked with a wider demand for change in the way things are run and, specifically, a challenge to the ‘market competition’ consensus that has prevailed in policy-making, at least in the advanced industrialised world, for the past three decades or so. Any such change clearly has implications for competition policy and, in practice, for us at the CMA as implementers of competition policy.
One obvious aspect is the extent to which, in merger control – and in our market investigations – we should continue to focus almost exclusively on effects on market competition or revert to the previous position of looking at wider public interest effects, such as the effects on employment, or research-and-development, or the country’s economic strength internationally, or the economic position of regions in our country. Such wider public interest considerations have in the past been part of the competition authorities’ remit. Indeed, it is already the case that, in certain sectors, other considerations can come into play, both under UK and under EU merger control - such as preserving plurality in the media, or defence and security considerations, or questions of financial regulation and stability.
But should we go further? Should we care, for example, about takeovers that increase foreign control of the economy? Or that involve asset-stripping? Or weakening our R&D base? Or threats to British jobs? Should considerations of fairness, or economic inequality, enter into the picture? Alternatively, should we focus almost exclusively on competition, and leave it to market dynamics to sort out the rest? Over the past ten years or so, and particularly since the 2008 financial crisis shook confidence in existing policy assumptions about market competition, these questions have arisen in the context of mergers – some of which actually happened, some of which were just proposed - such as Kraft/Cadbury, Pfizer/AstraZeneca, SoftBank/ARM and, this year, Melrose/GKN.
Again, these policy decisions are for elected politicians to make, rather than for technocratic officials like us. We just implement. But let me make a couple of observations.
These wider issues are linked to Brexit in two ways. One is the thought that, once we are outside the EU, the UK will be free to run its own merger control policy as it chooses. That is partly because the larger mergers affecting the UK will be for us to decide, rather than just for the European Commission, and partly because we’ll be freed from constraints on blocking such as the EU law rules on free movement of capital (which limit Member States’ ability to block acquisitions by entities in other EU Member States). But a word of caution is in order here. If we are to have effective free trading agreements with the EU, and indeed globally, how likely is it that those agreements will allow us – even if it were felt appropriate to do so - to impose significantly greater restrictions on foreign takeovers than we have now (at least without reciprocal restrictions on takeovers by UK entities of their companies)? It is far from obvious that, in practice, Brexit will, by itself, allow for this.
The second aspect is that, as I’ve said, the referendum result was seen by many people, including the Prime Minister, as part of a wider vote for change to the way we run our economy, which might entail less of a focus on market competition and more on wider public interest considerations in merger control and more generally. But, in so far as that is true, many commentators have noted that such an expression of the public mood is not peculiar to the UK and the 2016 referendum. It is arguably discernible in other democratic outcomes, such as the election of Donald Trump to the US presidency and the rise of ‘populist’ political parties, of left and right, in countries across Europe. And the policy response – to review assumptions about market competition – is not unique to Brexit Britain. Indeed in September 2017 the EU itself unveiled a proposed framework for ‘screening of foreign direct investments’ in European companies, with the view being expressed by the EU’s Commissioner for Trade that the framework ‘will allow us to respond collectively and defend our European strategic interests when they are at risk’(European Commission press release, ‘State of the Union 2017 - Trade Package: European Commission proposes framework for screening of foreign direct investments’, Brussels, 14 September 2017).
In short, the coming years may well see changes to competition policy to reflect these wider public concerns and policy trends. But the present Government has said it is not minded to move far in this direction; although it has lowered the thresholds for examining mergers that involve the acquisition of ‘critical national infrastructure’ with national security implications, and is considering further changes on this, its response to the House of Lords Sub-committee report on Brexit and competition emphasised that it
recognises the importance of not moving away from a regime driven by the economic analysis of the impact of mergers on competition.
(Government response to the House of Lords EU Internal Market Sub-committee report on the impact of Brexit on UK competition and state aid, 29 March 2018, Response to recommendation 11.)
In any event, any such changes to competition policy are neither an inevitable consequence of Brexit, nor specifically attributable to it. They are part of a much bigger, and more global, debate.
State aid rules
I want to turn to another implication, which definitely is a direct consequence of Brexit. This relates to state aid rules and the establishment of a national UK regime for controlling state aid (i.e. by governments and public bodies in the UK). In late March this year, the Government said that ‘the UK should be prepared to establish a full, UK-wide subsidy control framework’. In the same statement the Government added that this regime would be operated by the CMA as ‘an independent UK State aid authority’ (letter from Andrew Griffiths, Minister for Small Business, Consumers and Corporate Responsibility, to Lord Whitty, Chair of House of Lords EU Internal Market Sub-Committee, 28 March 2018).
This is a major new function for us at the CMA. It is one that we are determined to make a success of, building on our expertise in applying legal and economic principles in the service of effective competition. There is much to be worked out on the practical implementation of this, and it would be premature to say a great deal at this stage. But we are preparing for this new post-Brexit responsibility with vigour, just as we are for the expansion of our jurisdiction over biggest mergers, cartels and anti-competitive practices, previously reserved to the European Commission, which I have already referred to.
This new role for us presents new challenges for us – in addition to the other challenges of Brexit we’ve already discussed. Specifically, we’ll be making our decisions on questions that are often politically charged and contentious – although of course that’s not unique to state aid, given that, as many of you know, many of the mergers and markets we’ve investigated recently have been pretty politically contentious too. We will need to be sensitive to local conditions in each nation and region of our country. In these contexts, we face the challenge of ensuring, as we must, that the CMA retains its reputation for rigour, fairness, respect for the rule of law, and political impartiality and independence – and doing so in our state aid decision-making, and across all our activities.
As I say, all this adds to the challenges of Brexit that I mentioned earlier. It’s not easy. But there are huge opportunities. We are determined to address the challenges seriously, soberly and thoroughly. For if we can get it right – if we can tackle, post-Brexit, the increased caseload of mergers, cartels, anti-competitive practices and state aid effectively, rigorously and fairly - the prize, in terms of real benefits for UK consumers, businesses and the economy, is one well worth having. We are determined to do so.
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