#Brexit, the CMA and competition enforcement

25 July 2018

A report issued earlier this month by the National Audit Office (“NAO”) examines progress made by the Competition and Markets Authority (“CMA”) in ensuring that the UK competition regime is prepared for Brexit.

The CMA’s capacity and capability

At present, the European Commission (“EC”) and the CMA together have responsibility for enforcing competition law.  In some sectors, such as financial services, other national regulators also have concurrent powers to enforce competition rules in that particular sector. 

The EC will generally investigate suspected competition law infringements that affect three or more EU member states.  For cases that relate to anti-competitive agreements or abuse of dominance, the EC opening a case precludes national competition authorities from taking action in relation to the same conduct.  The EC typically investigates cases with EU-wide significance, the most economically important as well as those where an EC decision is needed to develop EU competition policy.  The CMA, as a national authority, is more typically focused on competition matters affecting the UK domestic market.

If the UK is removed from the EU single market, the CMA will become responsible for enforcing cases with an impact on the UK market that previously would have been part of an EU-wide investigation.  In these circumstances it expected that the CMA will need to deal with a larger number of cases, particularly those that are larger and more complex, which are currently investigated by the EC.  Such cases typically involve greater cost and complexity and require additional resources and capabilities.

In preparation for Brexit, the CMA was allocated an additional £20.3 million total budget for 2018-19 (a 29% increase).  The CMA plans to use its increased budget to grow its staffing by 240 people (a 39% increase). Most of those staff will be recruited for front-line delivery roles in competition enforcement and merger investigations.

The NAO’s assessment is that recruiting this number of additional staff will be challenging, particularly as the CMA operates in a competitive environment for specialist staff, with other regulators and the private sector often offering higher salaries.  This is also likely to be hampered by other organisational changes at the CMA, including relocating its headquarters to Canary Wharf.  The NAO therefore warns that the CMA may need to re-prioritise certain aspects of its work if it cannot recruit the numbers or skills and expertise it needs in time for the increase in caseload.

Cross-border cooperation and intelligence sharing

The UK is a member of the EU-wide European Competition Network – a framework which supports cross-border collaboration on enforcement by member states’ competition authorities.  Significantly, this is underpinned by legal commitments to exchange intelligence and confidential data.  Without these or equivalent commitments, the CMA would lose access to vital evidence gathering and information sharing tools, which greatly assist it in investigating suspected anti-competitive practices.

The UK also benefits from competition cooperation agreements between the EU and non-EU member states.  For example, the EU has an agreement with Switzerland and is currently negotiating cooperation agreements with Canada and Japan.  As the CMA takes on an increasing number of larger and more complex competition cases after Brexit, it expects the number of cases requiring cooperation with competition authorities outside the EU to increase.

The NAO reports that the CMA has plans to mitigate the potential loss of access to these enforcement and intelligence-sharing arrangements. In the absence of a substantive UK–EU agreement on data sharing, the CMA hopes to agree bilateral or multilateral arrangements with the EC, member states and non-member states to enable at least a minimum viable level of cooperation, including provisions for sharing confidential information.  This is not certain, however, as the CMA cannot unilaterally secure reciprocal information sharing with other countries, and at this stage there is no mechanism, or existing legal gateway, to oblige overseas competition authorities to share information with the CMA.  

Challenging times ahead

These new challenges present themselves at a time where some consider that increased criminal enforcement of competition law may stem from Brexit.  The Brexit Competition Law Working Group highlighted in its report from this time last year that “Post-Brexit, any constraint on prosecuting [the Enterprise Act criminal cartel offence] in order to avoid impacting the European Commission in its civil enforcement of the competition rules would fall away. The criminal cartel offence may therefore become a more prominent enforcement tool for the CMA.”

It is therefore of no surprise that cross-border enforcement and investigative cooperation (or lack thereof) is identified as a considerable risk area and a significant challenge ahead.  

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