The UK Competition and Markets Authority at (nearly) One

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The Competition and Markets Authority will celebrate its 1st birthday on 1st April 2015. It is a new independent non-ministerial department of the UK Government, which is fully operating since 1 April 2014. It took over the work of the two main national competition authorities that were responsible for investigating and enforcing decisions on competition matters in the UK. The first one was the Office of Fair Trading (OFT), which was the principal competition authority and investigated anticompetitive practices in markets and mergers as well as enforcing consumer law. The second one was the Competition Commission (CC) which conducted in-depth inquiries into mergers and markets, but only where they had been referred to it by the OFT, one of the sector regulators (e.g. Ofwat) or in exceptional circumstances the Secretary of State. Both the OFT and the CC were abolished by the Enterprise and Regulatory Reform Act 2013 (section 26) which created at the same time the CMA (section 25).

The sector regulators have survived the change. They are: the Civil Aviation Authority (CAA), the Financial Conduct Authority (FCA), the Gas and Electricity Markets Authority (Ofgem), the Office of Communications (Ofcom), the Office of Rail Regulation (ORR), the Payment Systems Regulator (PSR), the Water Services Regulation Authority (Ofwat) and the Northern Ireland Authority for Utility Regulation (NIAUR). Together with the CMA they form the UK Competition Network. The CMA is also, of course, a member of the European Competition Network and International Competition Network. In order to have a more complete picture of the bodies enforcing competition law in the UK, you need to add to the UK Competition Network the Competition Appeal Tribunal (CAT). Created in 2003, it is a judicial body whose main function is to hear appeals on or review decisions made by the CMA and the sector regulators (in the telecommunications, electricity, gas, water, railways and air traffic services). It also hears actions for damages, a topic of growing interest.

The CMA operates within the framework of the Competition Act 1998 and the Enterprise Act 2002 as amended in particular by the Enterprise Act 2002, the Competition Act 1998 and Other Enactments (Amendment) Regulations 2004 and the Enterprise and Regulatory Reform Act 2013. For a long time, the UK had no modern competition law regime, only the common law doctrine of restraint of trade. The first statutory intervention in the area came in 1948 with the passage of the Monopolies and Restrictive Practices Act (i.e. 25 years after Germany), which had a limited effect, and there were some further legislative interventions in the next decades. The main provisions of the Competition Act 1998 entered into force on 1 March 2000. This act brought extensive reform to the UK domestic law that previously governed anti-competitive practices or restrictive agreements.

In essence the Act replaced the old regime with a prohibition on restrictive agreements modelled on article 101 TFEU (known as the chapter I prohibition) and abuse of a dominant position modelled on art 102 TFEU (known as the chapter II prohibition). For example, the Chapter I prohibition provides that agreements between undertakings, decisions by associations of undertakings or concerted practices which may affect trade within the UK, and have as their object or effect the prevention, restriction or distortion of competition in the UK, are normally prohibited. The main innovation of the Enterprise Act 2002 was to create a criminal offence: the Cartel Offence. Those who dishonestly engage in hard-core cartel activity might be subject to criminal sanctions and be imprisoned for up to five years or fined. In practice, criminal cartel prosecution was mostly unsuccessful. Thus, the Enterprise and Regulatory Reform Act 2013 removed the dishonesty requirement from the criminal cartel offence (section 47). The same Act also introduced several amendments designed to boost the enforcement record, in particular a new power to ask questions to an individual in relation to an investigation (section 39), civil fines for non-compliance with the CMA's investigative powers (section 40) and relaxed criteria for the imposition of interim measures (section 43).

In its nearly first year of operation, the CMA tried to make the best of its legal tools by launching several investigations, including some high-profile and still on-going ones such as the investigation in the energy market. It should continue to do so in the foreseeable future with an emphasis on online markets and the digital economy, emerging sectors and business models (the effects of technological development), regulated sectors and infrastructure markets, markets for public services (a sensitive question in the context of the next General Election in May 2015) and markets with significant potential to affect overall economic growth (see its draft annual plan for 2015/16, section 2.3, at this link). Let’s hope in the interest of competition and the consumers that the CMA will celebrate many birthdays!

(Altalex, 16 March 2015. Article by Emmanuel Guinchard)

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