Competition Authority wants to Shoot First, Ask Questions Later

by ukcivilservant

The CMA (the UK’s principal competition authority) has clarified its earlier request for more powers.  Its Chair, Andrew Tyrie, delivered an important speech yesterday in which he argued that:

‘The evidence indicates both that competition policy is lacking in vigour, and that it is too narrowly focused on process, rather than practical outcomes for millions of consumers. … Just as the pace of change in markets in accelerating, the competition framework is taking ever longer to get results. In the time it takes to reach a decision and go through the appeals process, markets may move on. The detriment will be developing somewhere else.’

So he wants the CMA to be more assertive:

‘If we don’t contribute to finding the solution to the demise of trust in markets, we increase the danger of being cast – by populists on the left and right alike – as part of the problem. This will put at risk the foundation of an independent competition regime, and many of the welfare gains derived from it. And presage a return to the days when competition policy was subordinated to daily politics.

If  [competition authorities] are to secure legitimacy in this febrile environment, they should do one of two things. Either they should ask for the tools to address public concerns about markets, or they should have the courage to tell politicians that it is their responsibility, and say so publicly, and if appropriate – given their remit – advocate how.’

The CMA’s current processes mean that …

‘… it is slow – it can take over 3 years before the CMA is in a position to order remedies, even in cases where the failure to act urgently can cause lasting harm…. if the CMA identifies – during its markets work – a practice that is harming consumers, it should be able to order it to stop, pending an investigation, under threat of a fine for those who might flout its order.’

Accordingly, the proposals include

‘measures to increase board-level responsibility for complying with the law, so that competition and consumer protection are in the minds of company directors. And it is proposed that, for serious breaches of consumer protection law, director disqualification should be a possibility. Just as it is for competition law offences.’

On the other hand, Lord Tyrie suggests that the CMA’s powers should be rolled back in other areas:

‘These include removing the CMA’s responsibility in respect of regulatory appeals, which may be better heard by the courts. They also include transferring primary responsibility for the prosecution of criminal cartels, which may sit more naturally with a law enforcement agency that routinely brings criminal prosecutions.’

Comment

There is much to applaud in Andrew Tyrie’s speech.  The principal difficulty, however, is that the CMA is a quasi-judicial body – so it, and its predecessors, have always taken great care not to take any decisions before giving those it investigates a fair opportunity to state their case and adduce relevant evidence.

As Andrew Tyrie says in his speech “I was struck, when I took up this role, by how little [the CMA] says in public”. But there was a good reason for this, and the CMA will inevitably find its decisions judicially reviewed if they appear to have resolved in advance “to do something about” an unpopular company or industry – or if they take enforcement action “pending an investigation” – and then confirm their own suspicions.  It might be a price worth paying, of course, but the CMA will need to tread carefully.

I was also struck by Lord Tyrie’s implied belief that he can bring about more rapid change by making recommendations to the government.  He points out that Ministers have asked the CMA to “actively challenge central and local government”.  Hmmm … I wonder.  The CMA recently  called on the government to legislate to end the dominance of KPMG, PwC, EY and Deloitte and their conflicts of interest in the audit market.   But the CMA could itself have begun an 18 month Market Investigation which could have triggered very strong interventions. Politicians might move faster, but I am somewhat sceptical that they will always do so.

Finally, having worked in this area for several years, my instinct is that it will not make sense for other organisations to hear regulatory appeals or mount cartel prosecutions.  I suspect that these duties simply do not interest Lord Tyrie, but that is no reason to get rid of them.  But maybe I am being unfair.  It will be interesting to see others’ reactions.

 

Martin Stanley
Editor – Understanding Regulation

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