The Competition and Market Authority’s (CMA) Business Plan 2019-20 was presented as necessarily high level with a work programme and priorities contingent on the outcome of Brexit (see related blog: Brexit uncertainty pervades Competition and Markets Authority Annual Plan 2019-20).
That said, it seems that the reform of the CMA might be on the cards in the longer term, according to a recent letter from the CMA Chairman, Lord Tyrie, to the Secretary of State for Business Energy and Industrial Strategy. This sets out a number of legislative and institutional reforms which aim to safeguard the interests of consumers and maintain and improve public confidence in markets.
“An analogue system of competition and consumer law in a digital age”
Lord Tyrie insists that whilst “the legal framework is not broken, and the CMA is effective”, for the CMA to carry on roughly as it is “not a prudent option”. There are two reasons for this. Firstly the new and rapidly-emerging forms of consumer detriment require rapid intervention and probably new types of intervention. This is in part caused by the increasing digitalisation of the economy, a view shared by other competition authorities. Secondly, the signs are that the public (possibly rightly so) doubt whether markets work for their benefit. This is due to a growth in market power and technology which may have helped business to target and segment consumers according to their willingness to pay.
So, what can be done? Back to the statute book to rewrite and overhaul legislation or amend and improve the current framework? Tyrie plumps for the latter option because any major overhaul would take at least two years and be difficult, if not near impossible, in the light of the ever-looming uncertainty of competition law post-Brexit.
Areas of reform
There are eight suggested areas of reform. The ability of the CMA to follow through on these would be significantly hindered in the event of a “no deal” Brexit rather than a smooth transition.
The 8 areas of reform are:
1. An overriding “consumer interest” duty
This would be placed on the CMA and the courts to create a primary duty to protect consumers, giving clear legislative authority to the CMA to address consumer detriment.
2. A more effective and flexible regime for market studies and market investigations
This would enable the CMA to influence the conduct of those businesses whose practices raise concerns without the need for formal work in the form of market studies / market investigations.
3. Enhancing enforcement of consumer protection law
It is suggested that the CMA itself be empowered to decide whether consumer protection law has been broken, declare facts publicly, direct businesses to end infringements and impose fines.
4. Incentivising whistleblowers
One suggestion is to increase the financial compensation offered to whistleblowers/other sources of information to cover the typical loss a whistleblower would incur from losing his / her job.
5. Investigating and information-gathering power
Introduction of penalties for non-compliance in producing information (changing the regime to a fine based on turnover), penalties for provision of false/misleading information to include civil fines, and extending the scope of the CMA’s formal information-gathering powers to include a general power to require information and an explicit duty by the CMA to conduct investigations swiftly.
6. Court review of CMA decisions
Suggested reforms include changing the standard for appeals away from the current “full merits” standard to the judicial review standard or to a new standard of review; to reduce the time taken for the protracted appeal process to delay rectification of anti-competitive behaviour.
7. Merger control after Brexit
The CMA is concerned by the increased number of mergers it will have to review post-Brexit which would previously have been reviewed by the European Commission. One of the suggested changes would be to require mandatory notification to the CMA of mergers above a threshold set at a level to catch larger mergers that are typically reviewed by multiple international competition authorities. This would be accompanied by a “standstill obligation” designed to prevent parties from proceeding with the transaction prior to the CMA’s approval.
8. Individual responsibility
This could include: personal sanctions for serious competition law infringements, disqualification of directors under the consumer protection law regime and requiring companies to appoint a board director responsible for assessing and reporting on risks to competition and consumer law compliance and also a requirement for auditors to report to a company if they identify practices which may raise competition / consumer law compliance risks.
Criminal cartel enforcement
In terms of holding individuals to account, as stated in the CMA 2019-20 Business Plan that though it continues to see “robust enforcement of the law as central to its purpose and it intends to maintain a significant volume of enforcement investigations”, it has stated that the type of new work which can be launched will be heavily influenced by the outcome of EU exit negotiations. A no deal scenario will require the CMA to “divert staff to casework returning to the UK from Brussels.”
Perhaps this has caused the CMA to consider whether it is best placed to undertake hard-core cartel enforcement in any event. The Tyrie letter includes the suggestion that the CMA relinquishes or shares some of its existing powers and functions. The example he gives is in the regulatory appeals arena and criminal cartel enforcement which would enable the CMA to focus on its core responsibilities. The letter and annex make it clear that hard-core cartel prosecutions where individual criminal responsibility exists within competition law is a very small part of its overall enforcement work. Indeed, the CMA Annual Report 2017-18 sets out that at the end of 2017/18 it had no continuing criminal investigations under the cartel offence in the Enterprise Act 2002. This is perhaps not surprising given the change in regime and removal of the dishonesty requirement. However the report also states that in terms of the objective to “open new criminal investigations and pursue prosecutions as appropriate, having regard to lessons from our most recent cases as well as the change in the law in respect of cartel activity occurring from April 2014: “None opened”.
Importantly the letter also acknowledges that the CMA does not maintain the scale of specialist expertise to deal with such work. Therefore it is suggested that primary responsibility for hard-core criminal prosecutions may be better dealt with by agencies which routinely deal with criminal prosecutions for instance, the Serious Fraud Office. This is something which deserves further consideration. Even though the SFO would have to build its expertise in relation to anti-trust policy, centralising this work within an agency already dealing with investigation and prosecution of serious and economic crime would seem to make sense.
The demise of the CMA?
As to what next, the letter underlines that wider consultation will be required: “the package as a whole – and indeed any fundamental reform of the regime – should be submitted to open and rigorous external scrutiny” but cautions that “a failure to act could ultimately lead to the demise of the CMA.”