WBRITTANY HAT the economy needs “less regulation and indeed less taxation,” Boris Johnson said in a rambling speech to the Confederation of British Industry on November 22. Since the Brexit referendum, politicians have debated EU regulations to shred and tighten. Equally important, but generally overlooked, is the future of the organizations that enforce these regulations: whether they are deep-pocketed or cash-strapped, brave or timid.
In the race to re-equip the state after Brexit, the Competition and Markets Authority (CMA), the UK competition regulator, is emerging as a winner. Ministers entrust it with new responsibilities, resources and powers; he grasps them with both hands. As a result, it will dominate Main Street and be a thorn in the side of Silicon Valley.
The most muscular arm of the European Commission is its competition department. Since the 1980s, he has brought companies and countries to heel by blocking cross-border mergers, imposing mind-boggling fines and overturning finance ministries. By comparison, the CMA suffered from “relative invisibility,” according to Andrew Tyrie, its former president. Historically, it has been criticized for being light, taking a fraction of the fines from its peers in Germany and France. Brexit is transforming it. Many UK regulators felt the divorce offered only unnecessary disruption and urged ministers to remain committed to the single market. Yet some in the CMA saw a tantalizing opportunity to emerge and shape global competition policy, alongside their peers in Australia and Japan.
The CMA takes care of complex cross-border mergers, previously the responsibility of the commission, which could increase its workload by half in the years to come. A new grants advisory unit will oversee the UK government grants regulation, and a home market office will monitor trade barriers between England, Scotland and Wales.
The agency is becoming more and more interventionist. Last year, three-quarters of merger projects submitted for in-depth reviews were either blocked or abandoned, up from a quarter five years earlier. It uses its broad discretion to investigate foreign mergers, undeterred by the lack of any direct or current link with the UK market. Not wanting to be a buffer for decisions taken elsewhere, he interrupted the agreements approved in Washington. The result is that deals that once seemed simple are now more difficult, says Sharon Malhi of Freshfields Bruckhaus Deringer, a law firm.
Greater powers are still planned. The CMA persuaded ministers to give him the task of monitoring tech giants like Google and Facebook. A new Digital Markets Unit will impose codes of conduct adapted to the largest. A stricter merger regime will aim to put an end to “murderous acquisitions” – that is, purchases by innovative rivals just to shut them down. Such codes do not deviate so much from EU like taking pioneering approaches, argues Tommaso Valletti, the commission’s former chief competition economist.
The ministers are also proposing a bill that would give CMA new ways to tackle abusive consumer practices, including fining offenders without going to court, as well as increased powers to intervene quickly in broken markets. This all adds up to a larger agency: staff and budgets (adjusted for inflation) have increased by a third since 2015, and new offices are planned in Manchester and Darlington. He can also become more politically responsive. The government is currently issuing a strategic ‘director’ for the CMA every five years, but ministers want them to become more frequent and prescriptive.
Some lawyers believe the agency is trying too hard to put its mark on global mergers and suspect it will struggle to keep up with its new workload. Companies have too few rights under the system as it is, let alone a more muscular regime, argues James Webber of Shearman & Sterling, a law firm. But the agency argues that new tools are essential to preserve competition. Andrea Coscelli, its chief executive, says regulators were too cautious for a decade until 2018, as tech giants grew. And despite its accelerated pace, the overwhelming majority of mergers remain intact. A report from CMA published last year found that competition appears to have weakened over the past 20 years, with increased profits at larger companies and low customer satisfaction. Brexit and covid risk making the problem worse by locking in or eliminating competitors. A counterweight is necessary. ■
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This article appeared in the Great Britain section of the print edition under the headline “A power in the land”