Summary

On 25 February 2019 the Chair of the Competition & Markets Authority (“CMA”), Lord Tyrie, announced, in a letter addressed to the Business Secretary, a set of preliminary proposals to radically revamp competition enforcement powers.  In this article, James Marshall and Graeme Thomas in Bryan Cave Leighton Paisner’s Antitrust & Competition Group, consider the background to, and key features of, the CMA’s proposed reforms and the next steps in relation to the proposals, including public consultation.

The CMA’s letter seeks to address perceived gaps in the current competition regime to “address the perception and reality of the growth in consumer detriment”.  Specifically, the CMA’s proposals aim at providing the tools needed to meet the challenges of the growth of the digital economy, and addressing an apparent decline in public confidence in market competition and economic regulation.

The CMA’s extensive reform proposals arise in the context of significant regulatory intervention across various sectors. This includes: retail price caps in the energy sector; wider criticism of shareholder returns and rising prices for privately held utilities; a general review of economic regulation by the National Infrastructure Commission; and examination of the digital economy in the shape of the Furman Review of digital markets.

What is the CMA proposing?

The CMA is seeking changes designed to strengthen its ability to tackle consumer detriment, including through: stronger consumer law enforcement tools; a move to a mandatory merger notification regime; transferring the power to bring criminal cartel cases against individuals to another authority; revising its market inquiry and market study tools; and streamlining appeals at the Competition Appeal Tribunal (“CAT”).

Key proposals include

1. Introducing a new, more consumer-focused, statutory duty – the CMA has a statutory duty to promote competition for the benefit of consumers. The Chair of the CMA considers that that this does not properly reflect what the public expects from the CMA and, as such, proposes that the CMA be given an explicit statutory duty to protect consumers. This, the CMA argues, would enable it to intervene more swiftly where it identified consumer harm. Accompanying this new duty, the CMA propose that it have stronger consumer law enforcement powers.

2. Making the markets regime more consumer-focused and powerful – the CMA proposes to align the two phases of the current market study regime: a phase 1 market study can investigate matters which “adversely affect the interests of consumers”, but a phase 2 market investigation is limited to identifying “adverse effects on competition”. The CMA’s proposals seek to:

  • align the scope of phase II investigations with market studies, meaning that the CMA can impose remedies where consumer detriment is identified (but no adverse effect on competition);
  • strengthen enforcement powers by granting the CMA the power to impose fines where firms breach binding undertakings; and
  • grant the CMA the power to impose interim measures, requiring a change in business practices across the market, pending completion of a market investigation. The use of such powers by the CMA is likely to be subject to judicial scrutiny, as businesses may consider that they are impeded for carrying out legitimate business activities  based on a provisonal anaylsis.

3. Mandatory merger control for certain ‘large’ mergers – the CMA sees the UK’s current, voluntary, merger regime as a potential weakness post-Brexit. To address the concern that UK-specific remedies for a competition problem wouldn’t be possible, the CMA has proposed a major shift to the UK’s merger regime which would involve a mix of both mandatory and voluntary notifications – all deals over a certain threshold should be notified to the CMA while deals below this threshold would remain subject to the voluntary regime. This is likely to further increase the number of transactions reviewed as deals, unlikely to raise competition concerns but which exceed the relevant threshold, will be notified.

4. Enhancements to the CMA’s consumer protection and enforcement powers to align better with competition enforcement – the CMA’s consumer enforcement powers require it to seek court approval for civil and criminal sanctions. The CMA wants to change the regime to provide it with the power to impose civil fines for infringements of consumer law. More generally, the CMA has been more heavily using its consumer law powers in recent years, carrying out consumer enforcement investigations into sectors including online gambling, social media influencers, online travel agents, and secondary ticketing websites.

5. Increased investigation powers – the CMA proposes to extend the range of its formal information gathering powers by making it mandatory for information to be provided in response to an information request, even where a formal investigation has not been opened. This would be a departure from the current situation, where undertakings are not required to respond to a non-statutory information request.

6. Expanded individual liability for breach of competition and consumer law – the CMA proposes to expand the scope of its director disqualification regime by making breach of consumer protection law a ground for seeking disqualification orders. The CMA is also considering seeking new personal civil fines for individuals involved in a serious competition law infringement.

7. Changing the standard of review for appeals of CMA Competition Act 1998 decisions – the CMA’s Competition Act 1998 decisions are currently subject to full merits review before the CAT. The CMA believes that this, combined with extensive use of oral evidence in appeals cases, has resulted in proceedings of excessive duration. The CMA proposes that appeals should be considered against a judicial review standard, such that the CMA may in practice enjoy a broader margin of discretion in its decision making.

Comment

The CMA’s proposals remain a work in progress – indeed, the CMA recognise that the “proposals will require a good deal of further work” before they can be implemented but are intended to form the basis for discussion.

While consumer bodies and sector regulators (including Ofcom and Ofgem) have praised the proposals to strengthen consumer protection powers, it is anticipated that business and legal stakeholders may raise questions about the extent of the proposed changes, particularly given the existing uncertainties raised by Brexit.

In any event, the CMA notes that the proposals will continue to be developed and will be subject to public consultation. Interested parties should take the opportunity to engage with the CMA and Department of Business, Energy & Industrial Strategy. 

Notwithstanding that the CMA’s proposals are yet to be further developed it is evident that the CMA will continue to focus its attention on consumer protection. On 28 February the CMA published its research on consumer vulnerability, aimed at informing the CMA’s approach to selecting projects, analysing problems and developing effective remedies to help consumers using its existing consumer toolkit.