Competition enforcement – a sector approach

23 April 2020

The Competition and Market Authority’s annual report on concurrency, published on 15 April, assesses the effectiveness of the arrangements in place between regulators in terms of competition enforcement, covering the period 1 April 2019 to 31 March 2020. A key part of the competition landscape, these arrangements are designed to play an important role in enhancing competition and making markets work more effectively in the regulated sectors.
 

The concurrency regime

The report recalls that under the Enterprise and Regulatory Reform Act 2013 (ERRA), both the Competition and Markets Authority (CMA) and the relevant sector regulators have concurrent powers to apply competition law. This covers regulators such as the Financial Conduct Authority (FCA), Gas and Electricity Markets Authority (Ofgem), Payment Systems Regulator (PSR) and Water Services Regulation Authority (Ofwat).

Since April 2014 regulators can, in the sectors for which they are responsible:

(a)  Apply the UK and EU law prohibitions (applying during the Brexit transition period) on undertakings engaging in anticompetitive agreements or on the abuse of a dominant market position; and,

(b)  Conduct market studies and, if appropriate, make a market investigation reference under which the CMA conducts an in-depth investigation into whether any feature, or combination of features, of a market in the UK for goods or services prevents, restricts, or distorts competition.

Continued progress

The conclusion is that overall there has been “continued progress in competition enforcement”. We are told that in addition to a number of new cases having been launched, good progress has been made on case delivery. A detailed table of actions is included.

Whilst the report highlights the concerns expressed by the Department for Business, Energy and Industrial Strategy (BEIS) over the number of enforcement cases and decisions reached (see below), and the impact on deterrence that this might have, it also refers to the CMA’s engagement with the regulators on the suggested proposals for reform.

Competition co-operation

The report outlines the markets work carried out both by the CMA and sector regulators and their continued co-operation concerning the competition and regulatory tools available.

The UK’s exit from the EU will have a significant impact on the UK’s state aid and competition regime - see our related blog: Brexit, the CMA and competition enforcement, and with that in mind the report confirms that the CMA and the sector regulators are working together on Brexit - both as concerns technical expertise and advice on mergers involving companies in the sectors they regulate.

Positive statements are made about information sharing and the conclusion of Memoranda of Understanding between regulators – see our related blog: Co-operation in competition – will we see more from the CMA?

Impact of COVID-19

The report recognises that the end of the reporting period brought challenges in responding to the coronavirus pandemic. Whilst the CMA’s responses are not addressed, it acknowledges that the pandemic will “challenge the way regulators work and the prioritisation choices that they make at the end of this reporting period, and potentially deep into the next”.

On 20 March 2020 the CMA launched its COVID-19 taskforce with an aim to tackle negative impacts within its remit. Amongst other things the taskforce will scrutinise market developments, issue warnings to those firms suspected of exploiting the challenges, take enforcement action where there is evidence of competition law breaches, and advise on emergency legislation, policy and any further legislative measures. Although it is early days for the taskforce and the full impact remains to be seen, at the time of its launch Andrea Coscelli, the CMA’s Chief Executive, said “our taskforce is monitoring market developments to enable us to intervene as quickly as possible,” referencing the range of options at its disposal.

The annual report reassures that the relationships established between the CMA and the regulators under the concurrency arrangements will facilitate the sharing of knowledge and information in order to assess the impact of the developing COVID-19 situation on competition. Indeed, we have already seen the FCA and the PRA express support for the CMA’s approach to business cooperation in response to COVID-19 as set out in its Guidance of 25 March 2020. This guidance, whilst underlining the CMA’s focus of protecting consumers from the adverse consequences of the COVID-19 pandemic, states that:

The CMA is conscious of concerns that competition law enforcement could impede necessary cooperation between businesses to deal with the current crisis and ensure security of supplies of essential products and services.”  

The FCA and the PRA statement echoes this recognising that:  “it is important that competition law does not impede firms from working together to provide essential services to consumers in the current coronavirus situation”. It maintains thought that, at the same time, “neither the FCA nor the PSR will tolerate conduct that seeks to exploit the situation and harms consumers.”

Regime change afoot?

With a view to the concerns expressed by BEIS over the number of enforcement cases launched and infringement decisions issued by the sector regulators, the report refers to CMA Chairman Lord Tyrie’s letter to the BEIS Secretary of State in February 2019, outlining a range of proposals for the reform of the UK’s competition and consumer protection regime. The aim of which was to make the running of competition enforcement cases more streamlined and effective. 

The letter outlined eight main areas of reform, including a more effective and flexible regime for market studies/investigations, enhancing enforcement of consumer protection law, and individual responsibility. One of these proposals related to the CMA relinquishing or sharing some of its existing powers and functions – for example, in the field of regulatory appeals and of criminal cartel enforcement – so that it can focus more effectively on its core responsibilities. Lord Tyrie suggested that:

Primary responsibility for cartel prosecutions may sit more naturally with an agency that routinely brings criminal prosecutions, such as the Serious Fraud Office, and the case for this merits reconsideration."

See our related blog: Carrying on as we are is not a prudent option: says CMA.

The report refers to the discussions between the CMA and the regulators on the proposals for reform, which it expects to continue in the coming year, in addition to working with BEIS to prepare for consultation. However, with adjusting to life after Brexit and COVID-19 it may be that the CMA and the sector regulators have quite enough on their hands.

Further information

For further information on the issues raised in this blog post, please contact a member of our criminal team.

 

About the author

Caroline Day is a Partner in our Criminal Litigation teamCaroline specialises in complex fraud and financial crime. She acts in cases of serious fraud, money laundering, corruption and cartels and has advised individuals and companies subject of investigations and prosecutions by various agencies including the Serious Fraud Office (SFO), the Financial Conduct Authority (FCA), HM Revenue and Customs (HMRC) and the Competition and Markets Authority (CMA) (formerly the OFT).

 

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